IAS 27 Consolidations and IAS 31 Joint ventures

IAS 27 Consolidations and IAS 31 Joint ventures

Typical coverage of US GAAP
Consolidation model Presentation of consolidated financial statements Non-controlling interest (minority interest) Variable interest entities and special purpose entities Joint ventures Disclosures

Executive summary IFRS and US GAAP are fairly well converged with respect to business consolidations. The general consolidation model is basically the same under IFRS and US GAAP, with some differences related to the determination of control. In certain circumstances, both IFRS and US GAAP allow up to a three-month difference between the reporting dates of a parent and a subsidiary. Significant events during this gap period require adjustment under IFRS, while US GAAP only requires disclosure. IFRS requires that accounting policies be conformed between a parent and its subsidiaries, while differences are permitted under US GAAP. Upon initially obtaining control, IFRS provides two options for the parent in valuing non-controlling interests (NCI) (full fair value or fair value of identifiable assets), while under US GAAP, only the full fair-value method is allowed.

Executive summary Special-purpose entities (SPEs) under IFRS and variable-interest-entities (VIEs) under US GAAP are evaluated for consolidation. For these entities, IFRS is focused more on control, while US GAAP is focused principally on determining the primary beneficiary based on both the power to direct the activities of the VIE and the obligation to absorb losses or the right to receive benefits. The accounting guidance for jointly controlled entities is generally similar under IFRS and US GAAP when the equity method of accounting is used. IFRS, however, provides a choice of the equity method of accounting or proportionate consolidation for jointly controlled operations. US GAAP only allows the proportionate consolidation when it is industry practice.

Primary pronouncements
US GAAP ASC , Consolidations IFRS IAS 27 (amended), Consolidated and Separate Financial Statements SIC 12, Consolidation – Special Purpose Entities IAS 31, Interests in Joint Ventures IFRS 9, Financial Instruments (issued November 2009 – effective January 1, 2013, earlier adoption permitted). IFRS 9 has not been integrated into this module.

Progress on convergence
The IASB is working on a consolidation project that would replace the amended IAS 27 and SIC 12. The IASB has issued: ED 10, Consolidated Financial Statements, in December 2008, which proposes to replace the amended IAS 27 and SIC 12 and provide a single-standard consolidation model as well as revise the definition of control and enhance disclosures. In February 2010, the IASB tentatively decided to combine the disclosure requirements for subsidiaries, JVs and associates within a comprehensive disclosure standard that will address a reporting entity's involvement with other entities. This comprehensive disclosure standard will also include disclosures related to risks associated with structured entities that the reporting entity does not control. The current project plan envisages the issue of the comprehensive disclosure standard in the second quarter of 2010 in response to the current global financial crisis and a revised consolidation standard in the fourth quarter of 2010. ED 9, Joint Arrangements, in September 2007, which proposes to replace IAS 31 and eliminate the proportionate consolidation option for JVs due to be issued in the second quarter of 2010.

Progress on convergence
In June 2009, the FASB issued: SFAS No. 166, Accounting for Transfers of Financial Assets, an amendment of SFAS No. 140, which eliminated the concept of qualified SPEs. SFAS No. 167, Amendments to FASB Interpretation No. 46(R), which requires ongoing reassessments of whether an enterprise is the primary beneficiary of a VIE. In February 2010, ASU No , Consolidation (Topic 810): Amendments for Certain Investment Funds, was issued, which defers the effective date of SFAS No. 167 for certain investment funds. As part of their joint project on business consolidations, the Board’s objectives are to develop one consolidation model that can be applied to voting interests and VIEs. The Boards have set a goal that during the second quarter of 2010 the FASB will issue an exposure draft on consolidations. After considering comments on the exposure draft, the Boards currently plan to issue a final standard in the second half of 2010. It is currently likely these projects will result in additional convergence, however, future developments should be monitored.

Consolidation model US GAAP IFRS
An entity is generally required to consolidate entities it controls. Similar Control is presumed to exist if the parent owns more than 50% of the voting stock. Similar Similar – when an entity has the ability to govern the financial and operating policies of another entity, such as an SPE, to obtain benefits, control exists and consolidation should occur. A risks-and-rewards model is used to evaluate the need to consolidate VIEs.

Consolidation model Under US GAAP, all entities are first evaluated for consolidation as potential VIEs. An entity is considered to be VIE if: (1) it has insufficient equity to carry on its operations without additional financial support; (2) as a group, the equity holders are unable to make decisions about the entity’s activities; or (3) the entity has equity that does not absorb the entity’s losses or receive its benefits. The primary beneficiary (determined based on the consideration of both the power to direct the activities of the VIE and the obligation to absorb losses or the right to receive benefits) is required to consolidate the VIE. If the entity is not a VIE, then it is evaluated for consolidation based on voting control. In 2009, US GAAP eliminated the concept of a qualifying SPE.

Requires full elimination of revenues, expenses and asset transfers between companies of a consolidated group. Similar

Consolidation model US GAAP
Currently potential voting rights are generally not considered when assessing control of non-VIEs. (Note: the FASB has tentatively decided to consider voting rights when assessing control.) Does not currently have a de facto control model. ASC 810 may also result in the significant shareholder consolidating an entity. IFRS Potential voting rights are considered if they are currently exercisable, regardless of intent and ability to exercise those rights. Considers de facto control. De facto control may occur when there is only one significant shareholder that owns less than 50% of the voting stock and other shareholders are disbursed and generally don’t exercise their voting rights at annual meetings.

Because the IFRS definition of control is much broader than US GAAP, it is possible to reach different conclusions as to control. However, for public companies, the SEC has a much broader notion of control, which is more similar to IFRS. Under the SEC’s definition, control exists when one entity possesses the power to direct policies of another entity, either by ownership of voting shares, by contract or by other means. (Note: the FASB has tentatively decided to adopt a de facto control concept. The FASB currently believes a company must have demonstrated de facto control before it consolidates an entity for which it has less than 50% voting control. The IASB would not require demonstration of the ability to exert de facto control before consolidating an entity.)

Consolidation model US GAAP
Combined financial statements are permitted if the entities being combined are under common control or management. IFRS Combined financial statements are generally not acceptable as general purpose financial statements, except under rare circumstances requiring a true and fair override.

Consolidation considerations – voting rights example
Company A owns 49% of the voting stock of Company B. Company A has a currently exercisable option to purchase an additional 2% of the voting stock at a cost of $50 per share. The shares are currently valued at $30. Would Company A consolidate Company B under US GAAP or IFRS? Explain your answer.

Consolidation considerations – voting rights example
Example 1 solution: US GAAP: Company A would not have to consolidate Company B since under US GAAP potential voting rights are not considered. IFRS: Company A would have to consolidate Company B under IFRS because potential voting rights must be considered if they are exercisable, regardless of the intent or ability to exercise those rights.

Consolidation considerations – de facto control example
The Rich family started a local bank in The family still owns 40% of the stock of the local bank through its Rich Holding Company (RHC). RHC prepares it financial statements under US GAAP. RHC may need to consolidate the local bank because of the de facto control rules. Is this statement true or false under US GAAP?

Consolidation considerations – de facto control example
Example 2 solution: False. The de facto control concept is an IFRS concept that doesn’t exist under US GAAP.

Consolidation considerations example – combined financial statements
The Summer family owns and operates a ball bearing company and a drug store. The family is seeking a bank loan. The bank has requested combined financial statements be prepared. Is this presentation acceptable under US GAAP and/or IFRS? Explain your answer.

Consolidation considerations example – combined financial statements
Example 3 solution: US GAAP: Yes. Combined financial statements would be acceptable under US GAAP since the ball bearing company and the drug store are under common control and common management. IFRS: No. Combined financial statements are generally not acceptable as general purpose financial statements under IFRS, except under rare circumstances requiring a true and fair override.

Presentation of consolidated financial statements
US GAAP IFRS Generally requires the preparation of consolidated financial statements when consolidation criteria are met. Similar In certain instances, up to a three-month difference is allowed between the reporting dates of a parent and a subsidiary. Similar

US GAAP If consolidation criteria are met, consolidation generally is required. US GAAP does provide for certain industry-specific exceptions from consolidation (e.g., investment companies). IFRS Also generally requires consolidation if the consolidation criteria are met. However, IFRS provides for limited circumstances when a parent does not have to present consolidated financial statements, if all the following criteria are met: The shareholders of the parent do not object. The parent does not have any debt or equity instruments traded in public markets, and it is not in the process of registering public debt or equity. The immediate or ultimate parent must prepare and publish consolidated IFRS financials.

US GAAP Allows up to a three-month difference between the year-end of the parent and the subsidiary. IFRS Permits up to a three-month lag if it is impractical to prepare subsidiary financial statements as of the same date. IAS 1.7 states, “… a requirement is impracticable when the entity cannot apply it after making every reasonable effort to do so.” Possible examples of impractical situations might arise when a subsidiary’s accounting systems are manual, or there are significant estimation processes that require additional time to prepare and evaluate.

US GAAP If a subsidiary has a year-end that precedes the parent’s year-end, significant events during this time period must be disclosed in the financial statements of the parent, but adjustments are not typically made to the financial statements. A parent and a subsidiary are permitted to have different accounting policies. This is most likely to occur when the subsidiary is following some specialized industry guide. IFRS Requires adjustment of the financial statements to reflect the impact of significant events during this period. The accounting policies of the subsidiary must be the same as its parent. When they differ, it will result in the need for top-side adjustments in consolidation to conform the subsidiary’s accounting policies to those of its parent.

Difference in year-end example
Low Tech, a US-based company, has a June year-end. It acquired Company B in the Amazon Basin in August. Company B lacks a sophisticated accounting system and requires 60 to 70 days to close its books at the end of each quarter. Part of the reason for the delay in closing the books is there are several complex accounting estimates that must be re-evaluated each quarter. Low Tech has evaluated the accounting systems and the estimation processes, but has not been able to find a way to expedite the quarterly closing process. Can Low Tech consolidate Company B based on a May year-end under either US GAAP or IFRS? Explain your answer.

Difference in year-end example
Example 4 solution: US GAAP: US GAAP allows up to three months difference between the year-end of the parent and the subsidiary. IFRS: IFRS permits up to a three-month lag if it is impractical to prepare subsidiary statements as of the same date. IAS 1.7 states, “... a requirement is impracticable when the entity cannot apply it after making every reasonable effort to do so.” It appears the impractical requirement has been met so a May year-end for Company B would be acceptable.

Significant events during a difference in year-end example
The Parent Company has a June 30 year-end and its wholly owned subsidiary has a May 31 year-end. Assume all the requirements for different reporting dates have been met. On June 15, a competitor introduces a new technology-enhanced product which makes obsolete $10.0 million of Parent Company’s inventory and $2.0 million of the subsidiary’s inventory. What would be the impact on the consolidated June 30 financial statements under US GAAP and IFRS? Show any required journal entries as of June 30.

Example 5 solution: US GAAP: US GAAP requires significant events during this time period to be disclosed in the financial statements of the parent. Adjustments for significant events that occur in the gap period generally are not recorded under US GAAP. Cost of sales of parent $10,000,000 Inventory of parent $10,000,000

Example 5 solution (continued): IFRS: IFRS requires adjustment of the financial statements to reflect the impact of significant events during the gap period. Cost of sales of parent $10,000,000 Inventory of parent $10,000,000 Cost of sales of subsidiary $2,000,000 Inventory of subsidiary $2,000,000

Minority interest (NCI)
Both US GAAP and IFRS utilize the concept of a non-controlling interest (NCI) ASC defines this concept as: “A non-controlling interest, sometimes called a minority interest, is the portion of equity in a subsidiary not attributable, directly or indirectly, to a parent.” US GAAP and IFRS generally are converged as it relates to NCI. US GAAP IFRS Changes in the ownership interest of a subsidiary (that does not result in loss of control) will generally be accounted for as an equity transaction (paid-in capital) and will have no impact on goodwill, nor will they give rise to a gain or loss. Similar

US GAAP IFRS Upon a loss of control of a subsidiary, a new basis recognition event occurs, where essentially a gain or loss is recognized on 100% of the interest held. The retained NCI will be remeasured to fair value and will impact the gain or loss recognized upon disposal. The gain or loss is calculated as follows: proceeds plus the fair value of any retained interest plus the carrying amount of NCI in the former subsidiary minus the carrying amount of the former subsidiary’s net assets, plus or minus components of equity reclassified to profit or loss. Similar

US GAAP IFRS Losses applicable to NCI are allocated to those interests even if that results in a deficit position. Similar NCIs are generally classified on the balance sheet as equity, separate from the equity of the parent, and both present income from NCIs as an allocation of that period’s comprehensive income. Similar

US GAAP Upon obtaining control, the acquisition of NCI must be measured at fair value, including goodwill. IFRS Upon obtaining control, there is a choice to initially measure NCI at fair value, including goodwill, on the date of acquisition (fair value method) or at the fair value of the NCI’s proportionate share of the acquiree’s identifiable net assets as measured at the acquisition date (without goodwill) (proportionate method). This choice is to be made for each business combination.

Consolidation considerations – general example
Under both US GAAP and IFRS, which of the following is not a consideration related to consolidations? SPEs Focus on control Restrictions on NCIs being negative Elimination of revenues and expenses between members on a consolidated group None of the above

Consolidation considerations – general example
Example 6 solution: There is no restriction on NCI (minority interest) being negative under US GAAP or IFRS.

NCI – fair-value method example
A parent owns 70% of a subsidiary. The carrying amount of the NCI of 30% is $150 million under the full fair-value method. There are no amounts accumulated in other comprehensive income for this subsidiary. The parent acquires an additional 10% from the NCI for $60 million in cash. Assume the parent used the full fair-value method to initially measure the NCI upon obtaining control of the subsidiary. Prepare the required journal entries to record the acquisition of the additional 10% interest in the subsidiary under US GAAP and IFRS.

NCI – fair-value method example
Example 7 solution: In recording the acquisition of the additional 10% interest in the subsidiary, under US GAAP and IFRS, the carrying amount of the NCI is adjusted to reflect the change in ownership interests in the subsidiary’s net assets since the transaction does not result in a change in control. Any difference between the amount by which the NCI is adjusted and the fair value of the consideration paid is attributed to the parent. The journal entry to record the additional 10% interest in the subsidiary under both US GAAP and IFRS would be as follows: NCI $ 50,000,000(1) Additional paid-in capital ,000,000 Cash $60,000,000 (1) (10%/30% = 33.33%) x $150,000,000 (rounded)

NCI – fair-value and proportionate methods example
In 2010, Company A acquires 70% of the voting stock of Company S for $770,000 in cash. At the date of acquisition by Company A, the fair value the identifiable net assets of Company S is $900,000. The fair value of the 30% NCI is $300,000. Company A paid a $70,000 control premium to obtain control over Company S. Show the calculations and journal entries to record Company A’s investment in Company S under the fair-value method and the proportionate method.

Example 8 solution: Proportionate method: Cash $770,000 Company A’s portion of the fair value of the identifiable net assets in Company S (630,000)(1) Goodwill $140,000 (1) $900,000 x 70% = $630,000 Journal entry: Fair value of identifiable net assets $900,000 Goodwill 140,000 Cash $770,000 NCI 270,000(2) (2) $900,000 x 30% = $270,000

Example 8 solution (continued): Fair-value method: Cash $770,000 Fair value of the NCI ,000 Fair value of the identifiable net assets of Company S (900,000) Goodwill $170,000 Journal entry: Fair value of identifiable net assets $900,000 Goodwill 170,000 Cash $770,000 NCI 300,000

VIEs and SPEs Background
Under US GAAP: All entities are first evaluated for consolidation as potential VIEs. An entity is considered a VIE if any of the following criteria exist: It has insufficient equity to carry on its operations without additional financial support. As a group the equity holders are unable to make decisions about the entity’s activities. The entity has equity that does not absorb the entity’s losses or receive its benefits. The primary beneficiary (determined based on the consideration of both the power to direct the activities of the VIE and the obligation to absorb losses or the right to receive benefits) is required to consolidate a VIE. In 2009, US GAAP eliminated the concept of a qualifying SPE.

VIEs and SPEs Background
Under IFRS, SPEs (entities created to accomplish a narrow and well-defined objective) are consolidated when the substance of the relationship indicates that an entity controls the SPE. Under SIC 12, control is presumed if any of the following criteria exist: The SPE performs activities on behalf of the reporting entity. The reporting entity has decision-making powers. The reporting entity has the right to obtain a majority of the benefits of the SPE. The reporting entity retains the majority of the residual or ownership risks related to the SPE or its assets.

VIEs and SPEs US GAAP IFRS VIEs are evaluated for consolidation.
Similar, although they are called SPEs. Includes consideration of whether the reporting entity has the power to control the VIE. Similar, although they are called SPEs.

VIEs and SPEs US GAAP Under US GAAP, upon the initial consolidation of an entity that is not a business a gain or loss is recognized for the difference between: (1) The fair value of the consideration paid, the fair value of any NCI and the reported amount of any previously held interests. (2) The VIE’s net assets. No goodwill is recognized if the VIE is not a business. IFRS Under IFRS, the cost of the entity is allocated to identifiable assets and liabilities (no goodwill is recorded) on the basis of their fair value at the date of purchase. Therefore, under IFRS, there is no gain or loss.

VIEs and SPEs US GAAP Under US GAAP, they are focused principally on the primary beneficiary (determined based on the consideration of both the power to direct the activities of the VIE and the obligation to absorb losses or the right to receive benefits). IFRS In general, the criteria used to determine whether or not to consolidate the entity are somewhat different under US GAAP and IFRS. Under IFRS, the consolidation criteria are focused more on control.

Voting control versus primary at-risk example
A franchisor invests money in the preferred stock of a franchisee that is in financial difficulty. The franchisee is in a deficit position and has no other source of equity. The franchisor has no voting interest in the franchisee. Should the franchisor consolidate this franchisee under US GAAP and/or IFRS? Explain your answer.

Voting control versus primary at-risk example
Example 9 solution: US GAAP: The franchisee would appear to be a VIE since it has insufficient equity to carry on its operations. A determination of whether the franchisor is the primary beneficiary (determined based on the consideration of both the power to direct the activities of the VIE and the obligation to absorb losses or the right to receive benefits) needs to be made. The franchisor, as an equity owner of non-voting preferred stock is unable to make decisions about the entity’s activities. There may be control of some sort through the franchisee agreement, which will need to be evaluated. The franchisor likely receives some benefits from the franchisee (either from selling its products or from fees). Additionally, it could be argued the franchisor is absorbing losses because it is investing money in a financially troubled franchisee. It would appear that there may be an argument for consolidating this franchisee. The particular facts and circumstances would need to be carefully evaluated.

Voting control versus primary at risk example
Example 9 solution (continued): IFRS: Under IFRS, whether the franchisee should be consolidated is less clear. There is no voting control so, from that perspective, one might conclude that consolidation is not required. If there is control of some sort through the franchisee agreement and the franchisor receives some benefits from the franchisee (either from selling its products or from fees), there may be an argument for consolidating this franchisee. The particular facts and circumstances would need to be carefully evaluated.

VIE that is not a business example
Company A makes an initial $100,000 cash investment in a VIE that is not a business. It is determined that Company A should consolidate this VIE. At the time of the initial investment, the fair value of the VIE’s assets is $120,000 and the fair value of its liabilities is $40,000. The fair value of the NCI is $10,000. Show the accounting entries to record the consolidation of this VIE on Company A’s books under both US GAAP and IFRS.

Example 10 solution: US GAAP: Company A recognizes a gain or loss for the difference between: (1) the sum of the fair value of the consideration paid, the fair value of any NCI and the reported amount of any previously held interests; and (2) the VIE’s net assets. No goodwill is recognized if the VIE is not a business. VIE assets $120,000 Loss ,000 VIE liabilities $ 40,000 Cash ,000 NCI ,000

Example 10 solution (continued): IFRS: Under IFRS, the cost of the entity is allocated to identifiable assets and liabilities (no goodwill is recorded) on the basis of their fair value at the date of purchase. Therefore, under IFRS, there is no gain or loss. VIE assets $150,000 VIE liabilities $ 50,000 Cash ,000 Note: cash paid of $100,000/(net assets $120,000 - $40,000) = This 1.25 x $120,000 = $150,000 and 1.25 x $40,000 = $50,000.

Joint ventures US GAAP IFRS
The equity method of accounting for joint ventures is allowed. Similar

Joint ventures Categories of joint ventures
US GAAP Does not specifically address the accounting for jointly controlled operations or for jointly controlled assets. IFRS Addresses the accounting for three categories of joint ventures: Jointly controlled operations. Jointly controlled assets. Jointly controlled entities.

US GAAP IFRS For jointly controlled operations and for jointly controlled assets, a separate legal entity is not generally established. These joint ventures are governed by a contractual agreement between the venture parties. An example of a jointly controlled operation would be when two companies agree to develop a new garbage disposal unit. One company is developing the motor and the other company is developing the rest of the unit. Each company would pay its own costs and they would share the revenue, based on a contractual agreement. An example of a jointly controlled asset would be a gas pipeline owned by several gas companies where each company pays its share of the costs to operate the pipeline. Does not specifically address the accounting for jointly controlled operations or for jointly controlled assets.

US GAAP Does not specifically address the accounting for jointly controlled operations or for jointly controlled assets. IFRS For a jointly controlled entity, a separate legal entity is generally established. An example of a jointly controlled entity would be when two companies set up a separate legal entity to manufacture fan blades. Each company would contribute assets to the joint venture. The jointly controlled entity would have its own accounting records.

Joint ventures Joint venture contribution
US GAAP A venturer generally records its contribution to a joint venture at cost. There are some exceptions to this general rule (such as when the other venturers contribute cash or commonly considered cash equivalents). IFRS The contribution of non-monetary assets is recognized at fair value, except when the significant risks and rewards of ownership have not been transferred to the joint venture, the gain or loss on the transaction cannot be reliably measured or the transition lacks commercial substance. Any gain on the contribution of separable non-monetary net assets may be limited to the amount realized, if the other joint venture partners do not contribute cash or cash equivalents.

Joint ventures Method of accounting for jointly controlled entities
US GAAP Generally requires using the equity method of accounting for jointly controlled entities. Proportionate consolidation is only allowed where it is industry practice (for example, in the extractive and construction industries). (Note: the IASB issued ED 9, Joint Ventures, in September 2007, which would eliminate proportionate consolidation of jointly controlled entities.) IFRS Provides a choice between proportionate consolidation or equity method accounting for jointly controlled entities. Proportionate consolidation involves taking the percentage ownership of each line item in the financial statements and either including that amount in the appropriate line items of the entity’s financial statements or presenting these as separate line items in the financial statements (for example, “share of property, plant and equipment of joint venture”).

SPE example Example 11 Three companies form a manufacturing joint venture. Company A owns 40%, Company B owns 30% and Company C owns 30% of the voting shares of the joint venture. Income and losses of the joint venture are shared equally. Any resolutions require approval of at least 60% of the shareholders. Each company can appoint one member to the board of directors. Discuss how the joint venture should be accounted for on each company’s books under both US GAAP and IFRS.

SPE example Example 11 solution: US GAAP:
Under US GAAP, the equity method of accounting for the joint venture should be used by each company. IFRS: Under SIC 12, SPEs (entities created to accomplish a narrow and well-defined objective) are consolidated when the substance of the relationship indicates that an entity controls the SPE. No single company can control this joint venture. Under IFRS, either the equity method or proportionate consolidation should be used by each company to account for its interest in the joint venture.

Joint venture example Example 12
Company A and Company B form a joint venture. Company A contributes a subsidiary with separable net assets with a book value of $50.0 million (fair value of $60.0 million). Company B contributes a subsidiary with separable net assets with a book value of $70.0 million (fair value of $90.0 million). Company A will own 40% of the joint venture and Company B will own 60% of the joint venture. How should this transaction be accounted for by Company A under US GAAP and IFRS? Show all required journal entries.

Joint venture example Example 12 solution: US GAAP:
Under US GAAP, no gain would be recorded and the investment in the joint venture would be recorded at the cost of the assets given up. Investment in joint venture $50,000,000 Net assets of subsidiary $50,000,000

Joint venture example Example 12 solution (continued): IFRS:
Under IFRS, the contribution of non-monetary assets is recognized at fair value. However, the gain recognized by Company A is limited to the realized gain. Company A now owns 40% of the joint venture with a fair value of $150.0 million ($60.0 million plus $90.0 million), worth $60 million. From this amount, you must eliminate that portion of the gain on Company A’s subsidiary which has not been realized (40% of difference between fair value of $60.0 million less cost of $50.0 million, which equals $4.0 million). Investment in joint venture $56,000,000 Net assets of subsidiary $50,000,000 Gain on disposal ,000,000

Disclosures US GAAP IFRS
Disclosure of the general consolidation policy is required. Similar If a consolidated subsidiary has a different year-end than the parent, a disclosure is required. The reason for the different year-end also should be disclosed. Similar Disclosure of any changes in the subsidiaries being consolidated is required. Similar

Disclosures US GAAP If a subsidiary has a year-end that precedes the parent’s year-end, significant events during this time period must be disclosed in the financial statements of the parent, but adjustments typically are not made to the financial statements. Does not have this option. IFRS Requires adjustment of the financial statements to reflect the impact of significant events during this period. Provides for limited circumstances when a parent does not have to present consolidated financial statements, if certain criteria are met. Disclosure that the financial statements reflect the exemption from consolidation is required.

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IAS 27 Consolidations and IAS 31 Joint ventures

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