Conceptual Framework: The Reporting Entity
Last updated on March 29, 2023. Please refer to the Current Technical Plan for information about the expected release dates of exposure documents and final standards.
(Sections updated on the date above are indicated with an asterisk *)
See meeting minutes.
Features of a Reporting Entity
The Board affirmed its decision that a reporting entity has three features: (1) economic activities have been conducted, (2) those economic activities can be distinguished from those of other entities, and (3) the financial information in general purpose financial reporting faithfully represents the economic activities conducted within the circumscribed area and is useful in making decisions about providing resources to the entity.
Consolidated Financial Statements
The Board affirmed its decision that if a circumscribed area of economic activities includes a parent-subsidiary relationship, a full set of consolidated financial statements that faithfully represents the circumscribed area’s economic activities is necessary to meet the objective of general purpose financial reporting.
Parent-Only Financial Statements
The Board affirmed its decision that parent-only financial statements depicting a circumscribed area of economic activities in which a parent-subsidiary relationship exists do not represent a full set of financial statements as defined in Chapter 7, Presentation, of FASB Concepts Statement No. 8, Conceptual Framework for Financial Reporting, and, therefore, are not sufficient to meet the objective of general purpose financial reporting. Portion of a Larger Entity
The Board affirmed its decision that a portion of a larger entity, such as a subsidiary, branch, or division, can represent a circumscribed area of economic activities and, consequently, meet the description of a reporting entity in paragraph RE5 of the Exposure Draft.
Combined Financial Statements
The Board decided that combined financial statements can appropriately depict two or more entities that are under common control or common management if the two or more commonly controlled or commonly managed entities are combined to represent a circumscribed area of economic activities.
Permission to Ballot
The Board directed the staff to draft final Chapter 2, The Reporting Entity, of Concepts Statement 8 for vote by written ballot.
Last updated on March 29, 2023. Please refer to the Current Technical Plan for information about the expected release dates of exposure documents and final standards.
(Sections updated on the date above are indicated with an asterisk *)
Objective:
The objective of the Conceptual Framework project is to develop an improved Conceptual Framework that provides a sound foundation for developing future accounting standards. Such a framework is essential to fulfilling the Board’s goal of developing standards that are principles based, internally consistent, and that lead to financial reporting that provides the information capital providers need to make decisions in their capacity as capital providers.Background:
While the objective of general purpose financial reporting references the term reporting entity, the Conceptual Framework does not describe a reporting entity. Additionally, the term reporting entity is used multiple times in existing Concepts Statements, and paragraph OB1 in Chapter 1, The Objective of General Purpose Financial Reporting, of FASB Concepts Statement No. 8, Conceptual Framework for Financial Reporting, references a concept of the reporting entity. Because the Conceptual Framework is intended to be a coherent system of interrelated objectives and fundamental concepts, there is a need to develop a concept of the reporting entity.Exposure Draft:
On October 18, 2022, the Board issued proposed FASB Concepts Statement No. 8, Conceptual Framework for Financial Reporting—Chapter 2: The Reporting Entity. The comment letter deadline was January 16, 2023.- Download the proposed Concepts Statement Chapter.
- Read the comment letters on the proposed Concepts Statement Chapter.
- Read the comment letter summary on the proposed Concepts Statement Chapter.
- Read the press release on the proposed Concepts Statement Chapter.
Decisions Reached at Last Meeting:
See meeting minutes.
Tentative Board Decisions:
Features of a Reporting Entity
The Board affirmed its decision that a reporting entity has three features: (1) economic activities have been conducted, (2) those economic activities can be distinguished from those of other entities, and (3) the financial information in general purpose financial reporting faithfully represents the economic activities conducted within the circumscribed area and is useful in making decisions about providing resources to the entity.
Consolidated Financial Statements
The Board affirmed its decision that if a circumscribed area of economic activities includes a parent-subsidiary relationship, a full set of consolidated financial statements that faithfully represents the circumscribed area’s economic activities is necessary to meet the objective of general purpose financial reporting.
Parent-Only Financial Statements
The Board affirmed its decision that parent-only financial statements depicting a circumscribed area of economic activities in which a parent-subsidiary relationship exists do not represent a full set of financial statements as defined in Chapter 7, Presentation, of FASB Concepts Statement No. 8, Conceptual Framework for Financial Reporting, and, therefore, are not sufficient to meet the objective of general purpose financial reporting. Portion of a Larger Entity
The Board affirmed its decision that a portion of a larger entity, such as a subsidiary, branch, or division, can represent a circumscribed area of economic activities and, consequently, meet the description of a reporting entity in paragraph RE5 of the Exposure Draft.
Combined Financial Statements
The Board decided that combined financial statements can appropriately depict two or more entities that are under common control or common management if the two or more commonly controlled or commonly managed entities are combined to represent a circumscribed area of economic activities.
Permission to Ballot
The Board directed the staff to draft final Chapter 2, The Reporting Entity, of Concepts Statement 8 for vote by written ballot.
The Board meeting minutes, handouts, and videos are provided for the information and convenience of constituents who want to follow the Board’s deliberations. All of the conclusions reported are tentative and may be changed at future Board meetings. Decisions become final only after a formal written ballot to issue a final standard.
The following are links to the minutes for each meeting. To view Board meetings and handouts from the past 90 days, click here.
The following are links to the minutes for each meeting. To view Board meetings and handouts from the past 90 days, click here.
| March 29, 2023* | Board Meeting—The Board deliberated issues identified by comment letter respondents and directed the staff to draft the final Chapter. |
| July 20, 2022 | Board Meeting—The Board decided on a comment period for the proposed Chapter. |
| June 15, 2022 | Board Meeting—The Board began initial deliberations on the reporting entity phase of the Conceptual Framework project. |
The Board will begin drafting the final Chapter.
Jill Switter
Senior Project Manager
jmswitter@fasb.org
Jim Leisenring
Senior Advisor
jjleisenring@fasb.org
Cassie Mongold
Post-Doctoral Fellow
cmongold@fasb.org
Emma Little
Postgraduate Technical Assistant
elittle@fasb.org
Charley Heyd
Postgraduate Technical Assistant
cheyd@fasb.org
Senior Project Manager
jmswitter@fasb.org
Jim Leisenring
Senior Advisor
jjleisenring@fasb.org
Cassie Mongold
Post-Doctoral Fellow
cmongold@fasb.org
Emma Little
Postgraduate Technical Assistant
elittle@fasb.org
Charley Heyd
Postgraduate Technical Assistant
cheyd@fasb.org
The staff has prepared this summary for information purposes only. Any Board decisions are tentative and do not change current accounting. Official positions of the FASB are determined only after extensive due process and deliberations.