The International Accounting Standards Board (IASB) today completed its improvements to the accounting requirements for off balance sheet activities and joint arrangements by issuing IFRS 10 Consolidated Financial Statements, IFRS 11 Joint Arrangements and IFRS 12 Disclosure of Interests in Other Entities.
The completion of this review brings the accounting treatment for off balance sheet activities in International Financial Reporting Standards (IFRSs) and US generally accepted accounting principles (GAAP) broadly into alignment, and concludes an important element of the IASB’s comprehensive response to the financial crisis.
Commenting on the announcement, Sir David Tweedie, Chairman of the IASB, said:
These improvements tighten up the reporting requirements for the consolidation of subsidiaries and special purpose vehicles, and require the substance of joint arrangements to be revealed. The comprehensive disclosure requirements will help investors to understand better risks associated with the creation or management of special purpose vehicles.
As a package, these changes will provide a check on off balance sheet activities and give investors a much clearer picture of the nature and extent of a company’s involvement with other entities.
IFRS 10 Consolidated Financial Statements replaces SIC-12 Consolidation—Special Purpose Entities and parts of IAS 27 Consolidated and Separate Financial Statements.
IFRS 11 supersedes IAS 31 Interests in Joint Ventures and SIC-13 Jointly Controlled Entities—Non-monetary Contributions by Venturers.
IFRS 10 Consolidated Financial Statements, IFRS 11 Joint Arrangements and IFRS 12 Disclosure of Interests in Other Entities are effective from 1 January 2013. Earlier application is permitted.