Academic journal article Journal of Accountancy

FASB Issues ED on Consolidations

Academic journal article Journal of Accountancy

FASB Issues ED on Consolidations

Article excerpt

The Financial Accounting Standards Board issued an exposure draft of a statement on consolidation policy in mid-October and called for comments by January 15, 1996.

The primary FASB decision on consolidation policy was that a controlling entity should consolidate all its entities, unless control is temporary when the entity becomes a subsidiary, according to Ron Bossio, FASB project manager.

Among the more significant provisions of the ED, Consolidated Financial Statements: Policy and Procedures, which would be effective for financial statements for fiscal years beginning after December 15, 1996:

* The proposed definition of control of an entity would be power to use or direct the use of its individual assets in essentially the same ways the controlling entity can use its own assets.

* Control of a subsidiary may be considered temporary if at the acquisition date management has decided to dispose of it and has a plan to do so and a reasonable expectation of success within one year. …

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