NEWS RELEASE 1/11/01
FASB Reports Change In Approach To Its Consolidation Policy Project
Norwalk, CT, January 11, 2001—The Financial Accounting Standards Board's (FASB's) Consolidation Policy project has been focused on developing new standards that would determine which affiliates would be included in consolidated financial statements. The FASB had previously planned to issue both a final statement and an exposure draft on different aspects of this project in the second quarter of 2001.
After careful consideration by all FASB Board members, the FASB has determined that, at this time, there is not sufficient Board member support to proceed with either a final statement on consolidation policy, or an exposure draft on entities with specific limits on their powers (SPEs). However, the Board continues to believe that improved guidance in the area of consolidation policy is desirable and has asked the FASB staff to reassess the approach for providing that guidance.
Several FASB Board members are concerned about the appropriateness of determining that nonshared decision-making ability can exist based on the anticipated nonaction by other holders of voting rights. They also are concerned about whether the proposed treatment of convertible and option instruments that give the ability to obtain voting rights is effective as well as the operationality of certain other provisions. However, the Board believes its effort to deal with consolidation policy issues should continue. Those efforts should include the need to develop effective guidance for SPEs, to deal with situations where control exists but is not apparent based on the form of the arrangement and to provide guidance on partnership and other noncorporate structures. It also believes that the work to define "control" has been useful and that this effort should continue.
Because of the impending change in the Board's membership on
July 1, 2001, the staff is expected to present its assessment of and proposal about the Consolidation project for Board consideration in the third quarter of 2001.
About the Financial Accounting Standards Board
Since 1973, the Financial Accounting Standards Board has been the designated organization in the private sector for establishing standards of financial accounting and reporting. Those standards govern the preparation of financial reports and are officially recognized as authoritative by the Securities and Exchange Commission. Such standards are essential to the efficient functioning of the economy because investors, creditors, auditors, and others rely heavily on credible, transparent, and comparable financial information. For more information about the FASB, visit our Web site at www.fasb.org.