MyCIMA

The Reporting Entity

Posted: Friday 12 March 2010 by Nick Topazio
Replies : 2
Keywords: Conceptual Framework, IASB

The IASB have released a new exposure draft as part of an ongoing review of its conceptual framework.  The ED concentrates on three issues relating to the Reporting Entity:

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 consultation response deadline is 16 July 2010.  If you have any comments on this project I would be happy to receive them via this discussion thread.

Um ... could we have this in English, please?

Posted by Adrian Rutter on Monday 15 March 2010 17:49

If this is the "taster" for the IASB's latest tome, think I'll pass on the exposure draft itself until I'm next at the dentist and find he's run out of Temazepam .... 

Are these people paid by the syllable?

Seriously, I know accountancy is a technical subject, but surely it's about time that clarity and readability counted at least for something? Never thought I'd feel sorry for Microsoft's irritating little paperclip, but even the spellchecker was probably comatose by the end of the exposure-draft summary. If the IASB would write in language that you can understand without a supply of aspirin to hand, then maybe they'd get some responses. Otherwise, their postbag is likely to remain rather light. 

Made me smile

Posted by Nick Topazio on Monday 22 March 2010 11:09

I liked your reply - it brought a smile to my face.  Unfortunately the IASB postbag isn't light but there is a shortage of responses from preparers willing to offer practical insight into the issues being debated.

In my view the project to revise the conceptual framework is far too detailed; would you believe that it is scheduled to last about 7 years from start to finish.  As a consequence the IASB have got themselves in the position of having to issue new standards in fundamental areas of accounting with a conceptual framework that should underpin the standard only partly revised.