Subsidiaries and Investments

BACKGROUND

The accounting for a subsidiary that uses the cost or the equity method will be clarified.

(Read more)

Section 1591, Subsidiaries, provides an accounting policy option for private enterprises to either consolidate its subsidiaries or account for its subsidiaries using the equity method or the cost method. This project will examine whether the requirements of Section 1582, Business Combinations, should apply when a private enterprise chooses to account for its subsidiaries using the cost or the equity methods of accounting.

(Hide)


PROJECT NEWS

FYI Article – Accounting for Investments: Are You Ready For the Changes?
April 28, 2017. This article provides an overview of the changes, and links to resource materials for private enterprises applying the new guidance for the first time.

Basis for Conclusions – Subsidiaries and Investments – Sections 1591 and 3051
December 8, 2016. This document sets out how the AcSB reached its conclusions. As well, it sets out significant matters arising from comments received in response to its Exposure Draft and indicates how the Board dealt with the issues raised.

AcSB Decision Summary – May 18, 2016
The AcSB approved the issuance of amendments to Section 1591, Subsidiaries, and Section 3051, Investments, subject to final drafting and a written ballot.  This approval occurred after reviewing feedback from its Private Enterprise Advisory Committee.

The AcSB decided not to add a requirement to Section 3051 to expense acquisition-related costs for investments subject to significant influence when the equity method is applied because this change is beyond the scope of the current project.  The AcSB will consider whether to propose this change at a future meeting.

The AcSB decided to:

  • further clarify the scope out of common control transactions;
  • amend Section 1591 to clarify the requirements when there is contingent consideration outstanding or the initial accounting for the subsidiary is incomplete;
  • amend Section 1500, First-time Adoption, to clarify that the amendments apply from the date of transition; and
  • amend Sections 1506, Accounting Changes, and 1582, Business Combinations, to prohibit prospective application of the consequential amendments to these Sections. 

The AcSB also agreed that, other than drafting improvements, no other changes to the Exposure Draft proposals are required as a result of the feedback received from stakeholders. 

The AcSB expects to issue the amendments to Sections 1591 and 3051 in the fourth quarter of 2016.  The amendments will be effective for fiscal years beginning on or after January 1, 2018, with earlier application permitted.

Private Enterprise Advisory Committee Notes – April 14, 2016
Committee members continued their discussion of the responses received on the AcSB’s Exposure Draft, “Subsidiaries and Investments,” issued in September 2015, and agreed to recommend the following to the AcSB:

  • A requirement to expense acquisition-related costs for investments subject to significant influence when the equity method is applied should be added to Section 3051, Investments, consistent with the Exposure Draft proposal to expense acquisition-related costs when the cost method is used.
  • The transition provisions in Section 1591, Subsidiaries, should be amended to clarify the requirements when there is contingent consideration outstanding or the initial accounting for the subsidiary is incomplete.
  • The transition provisions in Section 1500, First-time Adoption, should be amended to clarify that the amendments apply from the date of transition.
  • The transition provisions in Sections 1506, Accounting Changes, and 1582, Business Combinations, should be amended to not permit prospective application of the consequential amendments to these Sections.

The Committee also discussed a proposal to provide additional clarity to the scope out of common control transactions, and agreed to recommend to the AcSB that the drafting of these amendments be revisited by staff in light of that discussion.

The AcSB will deliberate the Committee’s recommendations at its May 2016 meeting.

AcSB Decision Summary – March 22-23, 2016
The AcSB considered responses from stakeholders to its Exposure Draft, “Subsidiaries and Investments,” and advice from its Private Enterprise Advisory Committee on what changes should be made to the proposals based on that feedback.

The AcSB decided to make some limited changes to improve the clarity of the proposals, which include:

  • adding references to Section 1582, Business Combinations, in Section 1591, Subsidiaries, when doing so provides beneficial guidance;
  • removing paragraph 1591.26A(h), which states that Section 1582 shall be applied for any other aspects of the initial measurement of an interest in a subsidiary not otherwise addressed in paragraph 1591.26A; and
  • adding disclosure requirements in respect of the initial and subsequent measurement of provisional amounts.

The AcSB also decided that:

  • an accounting policy choice for the recognition of bargain purchase gains and the accounting for step acquisitions should not be permitted;
  • the amendments should apply to all subsidiaries regardless of whether the subsidiary meets the definition of a business; and 
  • the rationale for these decisions could be better explained in the forthcoming Basis for Conclusions document.  

The AcSB requested the Committee to provide further input on whether to:

  • add a requirement to expense acquisition-related costs for investments subject to significant influence when the equity method is applied;
  • provide additional clarity to the scope out of common control transactions;
  • amend the transition provisions to provide clarity on how the amendments apply when there is outstanding contingent consideration or the initial accounting for the subsidiary is incomplete at the end of the reporting period;
  • amend the transition provisions in Section 1500, First-time Adoption, so that the amendments  apply from the date of transition; and
  • amend the transition provisions in Sections 1506, Accounting Changes, and 1582 to not permit prospective treatment of the consequential amendments to those Sections.

The Private Enterprise Advisory Committee will discuss these issues at its April 2016 meeting.  The AcSB’s discussion will continue at its May 2016 meeting.  The AcSB plans to issue the final amendments in the fourth quarter of 2016.  The amendments will be effective for years beginning on or after January 1, 2018, with earlier application permitted.

Private Enterprise Advisory Committee Notes – February 17, 2016
The Committee discussed the responses received on the Exposure Draft, “Subsidiaries and Investments,” issued by the AcSB in September 2015. Respondents generally agreed with the proposed amendments. The Committee discussed the issues raised by respondents and roundtable participants to the Exposure Draft with a view to recommending to the AcSB what changes should be considered when finalizing the amendments. In addition to recommendations relating to a number of minor issues, the Committee agreed to recommend the following to the AcSB:

  • References to Section 1582, Business Combinations, should be included in Section 1591, Subsidiaries, when doing so provides better clarity and beneficial guidance. This recommendation underscores the underlying principle that initial measurement of a subsidiary accounted for using the cost method should be determined on a basis similar to other business combinations.   Following this approach, additional references to Section 1582 should be included in Section 1591.
  • Proposed paragraph 1591.26A makes it clear that initial measurement is on a basis similar to other business combinations. Accordingly, paragraph 1591.26A (h), which states that Section 1582 shall be applied for any other aspects of the initial measurement of an interest in a subsidiary not otherwise addressed in paragraph 1591.26A, should be removed.
  • No changes should be made to the amendments for subsidiaries that do not constitute a business. Accordingly, the amendments should apply to all subsidiaries regardless of whether the subsidiary meets the definition of a business.
  • An accounting policy choice for the recognition of bargain purchase gains and the accounting for step acquisitions should not be permitted.
  • Disclosure requirements in respect of the initial and subsequent measurement of provisional amounts should be added to Section 1591.

The Committee also discussed the comments raised by respondents and roundtable participants regarding the accounting for acquisition-related costs for investments subject to significant influence when the investment is accounted for using the equity method. The Committee did not make a recommendation to the AcSB on this issue and will continue discussions on the issue at its April 2016 meeting.

The Committee noted that several additional issues raised were beyond the scope of the current project. The Committee agreed to recommend to the AcSB that these issues be further analyzed by staff for consideration at a future meeting.

The AcSB will deliberate the feedback received on its Exposure Draft and the Committee’s recommendations at its March 2016 meeting.

FYI Article – Clarifying the Cost Method: Subsidiaries and Investments
November 17, 2015. Do you use the cost method to account for an interest in a subsidiary or an investment subject to significant influence? Get an overview of the AcSB’s recent Exposure Draft on this topic.

Webinar – AcSB Exposure Draft: Subsidiaries and Investments – Accounting Standards for Private Enterprises
September  28, 2015. Tune in to this webinar on October 19, 2015 (French) or October 21, 2015 (English) to understand how the proposals in the Exposure Draft clarify the accounting for a subsidiary and an investment subject to significant influence when the cost method is used.  

Exposure Draft – Subsidiaries and Investments
September 24, 2015. The AcSB has issued an Exposure Draft that proposes to clarify the accounting for a subsidiary and an investment subject to significant influence when the cost method is used. Stakeholders are encouraged to submit their comments, on the form provided, by January 6, 2016.

AcSB Decision Summary – September 17, 2015 
The AcSB expects to publish the exposure draft, “Subsidiaries and Investments” in September 2015 with a comment deadline of January 6, 2016. The AcSB agreed on a plan for seeking feedback on its forthcoming exposure draft. The plan consists primarily of holding targeted meetings with stakeholders and webinars.

AcSB Decision Summary – May 25-26, 2015
The AcSB debated and agreed with the recommendations from its Private Enterprise Advisory Committee on the remaining issues when using the cost method to account for subsidiaries, including presentation and disclosure requirements.  The AcSB also decided that the proposed amendments to Sections 1591, Subsidiaries, and 3051, Investments, relating to the application of the cost method, as well as consequential amendments, should be applied prospectively to new acquisitions of subsidiaries from the date the amendments become effective.  Earlier application would be permitted.

The AcSB expects to publish an exposure draft in the third quarter of 2015.

Private Enterprise Advisory Committee Notes – April 1, 2015
The Committee discussed the following issues regarding the accounting for a subsidiary and an investment using the cost method:

Accounting for a Subsidiary Using the Cost Method
Overall Principle
The Committee noted that the AcSB had decided at its February 2015 meeting that the overall principle should be that the cost of a subsidiary at the date of acquisition is determined in the same manner, regardless of how the subsidiary is accounted for subsequently. Consequently, the determination of the initial carrying amount of a subsidiary should be consistent with Section 1582, Business Combinations, when the subsidiary is subsequently accounted for using the cost method in accordance with Section 1591, Subsidiaries. The Committee agreed to recommend to the AcSB that this overall principle, together with a description of what comprises cost, should be included in Section 1591. (The Committee also noted that the AcSB had decided, for cost/benefit reasons, that the previously held investment in the acquiree should not be remeasured in a step acquisition and that bargain purchase gains should not be recognized.)

Impairment of a Subsidiary
The Committee agreed to recommend to the AcSB that a cross-reference to the impairment provisions in Section 3051, Investments, should be included in Section 1591.

Accounting for Acquisition-related Costs on a Step Acquisition
The Committee noted that the AcSB had decided that when a step acquisition occurs, the new cost of the subsidiary should be the sum of the carrying amount of the previously owned investment and the cost of the incremental investment. The Committee discussed how transaction costs that were previously capitalized in accordance with Section 3856, Financial Instruments, should be accounted for when an investment becomes a subsidiary, given that acquisition-related costs incurred when acquiring a subsidiary are required to be expensed. The Committee agreed to recommend to the AcSB that these previously capitalized transaction costs should not be required to be expensed but should continue to be included in the carrying amount of the subsidiary.

Presentation
The Committee agreed to recommend to the AcSB that the presentation guidance in Section 3051 relating to subsidiaries and investments in other entities accounted for using the cost or the equity method should be included in Section 1591.

Disclosure
The Committee agreed to recommend to the AcSB that certain disclosure requirements in Sections 1582 and 1591 should be amended based upon the AcSB’s decisions regarding the accounting for a subsidiary using the cost method.

Accounting for an Investment Using the Cost Method
Inclusion of a Description of Cost
The Committee agreed to recommend to the AcSB that a description of what comprises cost should be included in Section 3051.

Acquisition-related Costs on a Step Acquisition
The Committee agreed to recommend to the AcSB that previously capitalized transaction costs should not be required to be expensed but should continue to be included in the carrying amount of the investment when a step acquisition of an investee subject to significant influence occurs. This would be consistent with the accounting for the step acquisition of a subsidiary outlined above.

Transition provisions

The Committee agreed to recommend to the AcSB that the proposed amendments relating to the application of the cost method should be applied prospectively to new acquisitions of subsidiaries and investments accounted for using the cost method in accordance with Section 3051.

AcSB Decision Summary – February 11, 2015
The AcSB considered various options with regard to accounting for a subsidiary using the cost and equity methods, and accounting for changes in ownership interests. The discussion included consideration of recommendations from its Private Enterprise Advisory Committee.

Accounting for a Subsidiary Using the Cost Method
The AcSB reconfirmed its decision from the 2012 annual improvements that the cost of a subsidiary at the date of acquisition should be determined in the same manner, regardless of how the subsidiary is accounted for subsequently. Consequently, the determination of the initial carrying amount of a subsidiary should be consistent with Section 1582, Business Combinations, when the subsidiary is subsequently accounted for using the cost method in accordance with Section 1591, Subsidiaries. The guidance in Section 1582 on acquisition-related costs, contingent consideration, pre-existing relationships and subsequent accounting for contingent consideration should be applied. 

The AcSB noted that the accounting policy choice to account for a subsidiary using the cost method was included in Section 1591 based on cost/benefit considerations. Therefore, the AcSB decided that the previously held investment in the acquiree should not be remeasured in a step acquisition and that bargain purchase gains should not be recognized.

Accounting for Changes in Ownership Interests Using the Cost Method
The AcSB decided that when an entity increases its investment in an investee that is accounted for using the cost method, the new cost should be the sum of the carrying amount of the previously owned investment and the cost of the incremental investment as described above. The AcSB also decided that when a decrease in ownership occurs, the retained interest should be a pro rata portion of the carrying amount of the investment prior to the reduction in interest. The resulting gain or loss should be recognized in net income.

Accounting for a Subsidiary Using the Equity Method
The AcSB decided not to develop guidance on the use of the equity method when accounting for subsidiaries as part of the current project. The AcSB was concerned that any such guidance would result in an interpretation of how to apply the equity method. Reconsideration of the equity method is beyond the scope of the current project. The AcSB understands that the use of the equity method to account for subsidiaries is less common than the cost method.

The AcSB will continue to address accounting for subsidiaries using the cost method at a future meeting and expects to publish an exposure draft in the third quarter of 2015.

Private Enterprise Advisory Committee Notes – December 17, 2014
Accounting for Changes in Ownership Interests Using the Cost Method
The Committee discussed the accounting for an investment using the cost method as the ownership interest changes. An example would be when the ownership interest in an investment increases from a small interest to one that provides significant influence and then control, and the investment is accounted for at cost at each stage.

Increases in Ownership Interests
The Committee considered whether an increase in the ownership interest in an investment, accounted for in accordance with the cost method, should result in the previously held investment being remeasured at its acquisition-date fair value, similar to the accounting for a business combination achieved in stages required by Section 1582, Business Combinations.

The Committee agreed to recommend to the AcSB that the cost of an additional acquisition that results in an investment subject to significant influence should be added to the carrying amount of the pre-existing investment without remeasurement because this accounting would be consistent with a cost method. The Committee also considered whether to provide guidance on a change in ownership interest that results in an interest in a jointly controlled enterprise. The Committee noted that, in their experience, these types of transactions are not common. Some Committee members thought that the principles in Section 3051, Investments, could be applied without providing specific guidance for a jointly controlled enterprise. However, other Committee members thought that providing guidance may be useful. The Committee agreed to recommend to the AcSB that a question should be asked in the Exposure Draft on whether specific guidance should be included in the standards regarding the accounting for an investment that changes from passive or significant influence to a jointly controlled enterprise when the cost method is used.

The majority of the Committee members thought that when an increase in ownership interest results in control, the cost of that additional acquisition should be added to the carrying amount of the pre-existing investment without remeasurement when the cost method is used. Those Committee members thought that remeasurement of the pre-existing investment would add complexity and cost without providing significant additional benefits to users. The Committee also agreed to recommend to the AcSB that when an interest in a subsidiary is increased, the cost of the additional acquisition should be added to the pre-existing investment, without remeasurement. This accounting treatment would be consistent with the accounting for a change in ownership interest in a subsidiary that is consolidated, as required by Section 1602, Non-controlling Interests.

Decreases in Ownership Interests
The Committee agreed to recommend to the AcSB that when a decrease in ownership occurs, the retained interest should be a pro rata portion of the carrying amount on the investment prior to the reduction in interest, consistent with the requirements in Sections 1602 and 3051. The resulting gain or loss should be recognized in net income.

Accounting for a Subsidiary Using the Cost Method
Issues relating to a subsidiary accounted for using the cost method were discussed by the Committee at its September 2014 meeting. In December 2014, the Committee had further discussions on the following:

Acquisition-related Costs
The majority of Committee members agreed to recommend to the AcSB that acquisition-related costs for a subsidiary accounted for using the cost method should be capitalized and not expensed (as is currently required), in order to be consistent with the application of the cost method in Section 3856, Financial Instruments, and elsewhere in Part II of the Handbook.

Initial Accounting for an Acquisition of a Subsidiary Is Incomplete
The Committee agreed to recommend to the AcSB that any subsequent change in the consideration (other than contingent consideration) should be accounted for by adjusting the carrying amount of the investment when the issue is resolved.

Subsequent Accounting for Contingent Consideration
The Committee reconsidered how a change to contingent consideration should be recognized. The Committee agreed to recommend to the AcSB that any change to contingent consideration subsequent to the acquisition date should be recognized when the contingency is resolved by adjusting the carrying amount of the investment, rather than recognizing the gain or loss in net income. This accounting treatment would apply to changes to contingent consideration due to completion of the accounting and to the resolution of the contingency.

Accounting Policy Options
The Committee considered whether a parent and its subsidiaries have to apply the same accounting policy choice when accounting for their subsidiaries. Section 1591, Subsidiaries, requires all subsidiaries to be accounted for using the same method. The Committee noted that the parent has to account for all its subsidiaries using the same method, including subsidiaries held by its own subsidiaries. However, in its own GAAP financial statements, the subsidiary itself is not required to account for its subsidiaries using the same method as its parent. Consequently, the Committee recommended that the AcSB should not consider providing additional guidance on the application of the accounting policy choice.

Accounting for a Subsidiary and Changes in Ownership Interests Using the Equity Method
In September 2014, the Committee considered a potential simplified alternative to the equity method for accounting for a subsidiary, which it referred to as the “cost plus adjusted earnings” method. In considering this method further, the Committee noted that if the “cost plus adjusted earnings” method was only used for subsidiaries, then an investment subject to significant influence would continue to be accounted for using the full (non-simplified) equity method. The simplified method could be permitted for all investments that are currently eligible to use the equity method. However, the Committee recognized that replacing the equity method for investments subject to significant influence was not within the scope of the Subsidiaries project. The Committee was also concerned that the implications of replacing the equity method with a different method for investments subject to significant influence had not been considered thoroughly by the Committee and replacing the equity method for all investments could have unintended consequences. As a result, the Committee agreed not to recommend that the use of the equity method for subsidiaries should be replaced by the cost plus adjusted earnings method.

The Committee also considered whether guidance should be provided on the accounting for an investment using the equity method as an entity’s ownership interest changes. The Committee was concerned that providing guidance on this topic may be seen as providing guidance on the application of the equity method in general. Some Committee members noted that the use of the method is not common for private enterprises and thought that the application of the equity method is not an urgent issue in practice. The Committee noted that the equity method starts with the investment initially being recorded at “cost” and, therefore, describing how cost is determined for the cost method and providing guidance may alleviate some of the need for specific guidance on the equity method. Consequently, the Committee agreed to recommend to the AcSB that guidance not be developed on the accounting for a subsidiary using the equity method and the accounting for a change in ownership interest when the equity method is used to account for an investment.

Private Enterprise Advisory Committee Notes – September 16, 2014
The Committee continued its discussion of the accounting for a subsidiary when the cost or equity method is used. Members noted that stakeholders had expressed concerns that applying the equity method in accordance with Section 3051, Investments, to account for a subsidiary often did not result in a significant simplification. Consequently, the Committee considered a potential alternative to the equity method, which it referred to as the “cost plus adjusted earnings” method. Under this method, the subsidiary would be accounted for at the cost to the investor plus the investor’s share of the subsidiary’s earnings, net of dividends received, since the date of acquisition. The Committee agreed that the cost plus adjusted earnings method would achieve a key objective of the equity method by reflecting the performance of the subsidiary in the parent entity’s financial statements, while being simpler to apply than the equity method or consolidation.  

The following issues relating to a subsidiary accounted for under the cost or the cost plus adjusted earnings method were also discussed by the Committee:

Acquisition-related Costs and Contingent Consideration
The Committee reaffirmed its recommendation from its April 2014 meeting that the current treatment of acquisition-related costs and contingent consideration for subsidiaries accounted for using the cost method should not be reconsidered and that this treatment should be applied to the cost plus adjusted earnings method.

Acquisition in a Subsidiary that Is Incomplete
The Committee considered whether there was a need to provide guidance on how to account for an acquisition of a subsidiary when the determination of the consideration to be paid by the investor is incomplete by the end of the reporting period. The Committee noted that guidance would be useful and agreed to recommend to the AcSB that any subsequent change in the consideration to be paid or paid for the acquisition would be accounted for by either an increase or decrease to the investment in the subsidiary on the balance sheet, with the offset applied to either the liability to pay for the acquisition or the cash paid.

Recognition of Pre-existing Relationships
The Committee noted that there may be a pre-existing relationship, such as a lawsuit, between the investor and the investee. In that situation, the consideration paid by the investor is for a combination of the acquisition of the investee’s business and the settlement of the lawsuit. Most members agreed that the consideration should be split between these two elements of the transaction so that the cost of the investee is recognized as the fair value of the consideration paid for the investee and the amount paid in respect of settling the lawsuit would be expensed. Recording the full amount of the consideration paid as the cost of the investee would overstate the cost and result in the subsequent impairment of the investee. As a result, the Committee agreed to recommend to the AcSB that pre-existing relationships should be required to be identified under the cost and the cost plus adjusted earnings method.

Gains or Losses on Intercompany Transactions
The Committee noted that gains or losses could occur when the investor makes a sale to the subsidiary or the subsidiary makes a sale to the investor. When an entity applies the cost or the equity method to account for its subsidiaries, Section 1591, Subsidiaries, requires Section 3840, Related Party Transactions, to be applied to intercompany transactions that would otherwise have been eliminated on consolidation. The Committee noted that Section 3840 requires a related party transaction to be measured at carrying amount unless certain conditions apply. To be measured at exchange amount, the transaction must either:

  • be in the normal course of operations and have commercial substance; or
  • not be in the normal course of operations but have commercial substance and the change in ownership interests in the item transferred must be substantive and the exchange amount supported by independent evidence.

Consequently, a gain or loss would only be recognized when the transaction is measured at exchange amount.  

An entity that accounts for a subsidiary under the cost method is required by Section 3840 to disclose information about its transactions with related parties but it is not required to eliminate any gain or loss that may be recognized as a result of measuring a related party transaction at exchange amount. The Committee agreed to recommend to the AcSB that the current treatment for a subsidiary accounted for under the cost method in Section 3840 should not be reconsidered.

The Committee noted that Section 3840 requires gains or losses on intercompany transactions to be eliminated when the equity method is used and the information disclosed in the notes to the financial statements. For the cost plus adjusted earnings method, the Committee agreed to recommend to the AcSB that any gains or losses on intercompany transactions made as a result of measuring the transaction at exchange amount should be eliminated and information about its transactions with related parties to be disclosed. The Committee was concerned that an entity could manipulate its earnings if the gains or losses are not eliminated because the investor recognizes its share of the subsidiary’s earnings.

The Committee will continue its discussions on this topic at a subsequent meeting.

AcSB Decision Summary – July 16, 2014
In November 2013, the AcSB approved a project to clarify certain issues in accounting for subsidiaries under the cost method and the equity method. In this meeting, the AcSB amended the scope of the project to include the accounting for an investment using the cost or equity method as the ownership interest changes. An example would be when the ownership interest in an investment increases from a small interest to one that provides significant influence and then control, and the investment is accounted for at cost at each stage. The AcSB expects to issue an exposure draft in the second quarter of 2015.

Private Enterprise Advisory Committee Notes – June 16, 2014
The Committee discussed accounting for subsidiaries using the equity method. The Committee noted that if the equity method is viewed as a one-line consolidation, then many of the consolidation procedures might be required. This would negate the intent of the accounting policy choice, which was to provide a simplification compared to consolidation accounting.  Members discussed an alternative whereby the subsidiary would be accounted for at the cost to the investor plus the investor’s share of the subsidiary’s earnings since the date of acquisition.  The staff was requested to consider this alternative method in more detail for discussion at a future meeting.

Private Enterprise Advisory Committee Notes – April 3, 2014
The Committee continued its discussion and analysis of the accounting for a subsidiary when a private enterprise chooses to account for it using either the cost or equity method.

The Committee recommended that the current treatment of acquisition-related costs and contingent consideration for subsidiaries accounted for using the cost or equity method should not be reconsidered. The Committee agreed to recommend to the AcSB that “cost” be defined as the fair value of the consideration paid by the acquirer (excluding acquisition-related costs), when a private enterprise chooses to use the cost or equity method to account for a subsidiary. The Committee will continue its discussion on this topic at a subsequent meeting.

Private Enterprise Advisory Committee Notes – December 10, 2013
The Committee commenced a discussion and an analysis of the accounting for a subsidiary when a private enterprise chooses to account for it using either the cost or equity method. The Committee will continue its discussions on this topic at a subsequent meeting.

AcSB Decision Summary – November 6-7, 2013
The AcSB approved a project to clarify certain issues in accounting for subsidiaries under the cost method and the equity method.

Private Enterprise Advisory Committee Meeting Notes – September 17, 2013
The Committee discussed and recommended that the AcSB should approve a project to clarify the accounting for subsidiaries that are accounted for using the cost or the equity method.  The existing guidance in Section 1582, Business Combinations, Section 1590, Subsidiaries, and Section 3051, Investments, has resulted in uncertainty regarding if or when Section 1582 should be applied when an entity accounts for a subsidiary using either the cost method or the equity method.

 

Disclaimer: This project summary has been prepared for information purposes only. Decisions reported are tentative and reflect only the current status of discussions on this project, which may change after further Board deliberations. Decisions to publish Handbook material are final only after a formal ballot process.