The Reporting Entity exposure draft is one phase of FASB and the IASB's Conceptual Framework (CF) project. Other phases address the objectives of financial reporting, qualitative characteristics of financial reporting, and more. (See IASB Summary of CF project; FASB Summary of CF project.) The comment deadline on the Reporting Entity ED is July 16.
As noted in the Preface to FASB's Reporting Entity ED:
In a separate project, the two Boards are reconsidering the existing requirements for preparing consolidated financial statements. The Boards believe that the reporting entity concept in this Exposure Draft is consistent with the approaches they areKey points in the ED, as highlighted by the AICPA's Journal of Accountancy, include:
likely to pursue in the standards-level project.
In preparing responses to this Exposure Draft, respondents should consider the differences in status of the Concepts Statements and the Accounting Standards Codification, as well as the possibility that the FASB Concepts Statements could be
elevated to authoritative status in the future.
The ED discusses what constitutes a reporting entity, which in different situations could be a group of entities, a single entity or only a portion of an entity.
Under the proposal, a reporting entity is a circumscribed area of economic activities whose financial information has the potential to be useful to existing and potential equity investors, lenders, and other creditors who cannot directly obtain the information they need in making decisions about providing resources to the entity and in assessing whether the management and the governing board of that entity have made efficient and effective use of the resources provided.
An entity controls another entity when it has the power to direct the activities of that other entity to generate benefits for (or limit losses to) itself. If an entity that controls one or more entities prepares financial reports, it should present
consolidated financial statements.
A portion of an entity could qualify as a reporting entity if the economic activities of that portion can be distinguished objectively from the rest of the entity and financial information about that portion of the entity has the potential to be useful in making
decisions about providing resources to that portion of the entity.
The comment deadline on the Reporting Entity ED is July 16, 2010.
Learn More About The Reporting Entity ED, Other Hot Topics
Learn more about the FASB-IASB Reporting Entity ED, and other hot topics in financial reporting, at upcoming conferences offered by Executive Enterprise Institute (EEI): see course entitled: "FASB Update" (course leader: Ray G. Stephens, DBA, CPA, CMA, Professor of Accountancy, Ohio University; Director, Ohio Center for Professional Accountancy).
See also the courses entitled: SEC Accounting and Financial Reporting Course, and Advanced SEC-FASB Reporting & Compliance (course leaders: New York session: Tom Selling, CPA, PH.D.Emeritus Professor, Thunderbird School of Global Management, Former Academic Accounting Fellow at the SEC, and Publisher and Author of “The Accounting Onion”. Chicago session: Walter R. Teets, Associate Professor, Gonzaga University, Former Academic Accounting Fellow at the SEC, Former Professor in Residence, KPMG’s Department of Professional Practice). In addition to the course leaders, guest speakers provided targeted information on specific topics.
I can speak from experience in attending the SEC-FASB course led by Tom Selling a couple of years ago, it was very informative, and there was ample opportunity to ask questions of the speakers and network with other attendees at the program. (Tom is also a good sport, he played a cameo role in a certain music video about accounting.)
Discounts available: FEI members, and nonmembers who read about these EEI programs in the FEI blog, can receive a discount in registering for the above courses on EEI's website, by entering one of the following discount codes: FEI members, use discount code FEI-MB. Nonmembers who read about the program in the FEI blog, enter code FEI-NB.
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