International Accounting
Standards Board
30, Cannon Street, London EC4M 6XH, United Kingdom
20 March 2009
On the Exposure Draft
ED10 Consolidated Financial
Statements
The Bank of Russia has considered the Exposure Draft ED10 Consolidated Financial
Statements proposed by the International Accounting Standards Board and informs the following
(hereafter - ED10).
Question 1
We consider that proposed control definition could be applied to all entities within the
scope of IAS 27 Consolidated and Separate Financial Statements and SIC 12. On the one hand
proposed definition retains the concept in IAS 27 that control conveys the right to obtain benefits
from another entity, on the other hand it extends it’s scope.
Question 2
In our opinion control principle as articulated in ED10 is an appropriate basis for
consolidation. We suppose to add paragraph 2 of ED 10 with the information that this draft of
IFRS isn’t applied to national (central) banks in view of the fact that objectives of national
(central) bank activities are protection and supporting monetary stability, development and
strengthening of banking system, maintenance of effective and continuous operation of payment
system, and also taking into account that making profit is not the goal of their activity.
Generally national (central) banks don’t have any subsidiaries or if they have any
subsidiaries they don’t have any power to govern the strategic financial and operating policies of
these subsidiaries and therefore don’t meet the requirements of paragraph 22 of ED 10.
Subsidiaries don’t create for them any returns (paragraph 11 of ED10) except for dividends that
are available for non-controlling interests (minority shareholders). We suppose that requirements
of paragraph 4 of ED 10 shouldn’t cover relationships between national (central) banks and their
subsidiaries.
Question 3
We consider that requirements and guidance in paragraphs 26-29 ED 10 regarding the
assessment of control are sufficient to enable the consistent application of the control definition
by a reporting entity relating to assessment of power to direct the activities of another entity even
if it holds less than half of the voting rights of that entity.
Question 4
We agree with the International Accounting Standards Board’s proposals regarding
options and convertible instruments while assessing control of an entity. (paragraphs 29, B13 of
ED10).
Question 5
We agree with the International Accounting Standards Board’s proposals in respect to
practicability of considering additional factors for situations in which a party holds voting right
both directly and on behalf of other parties as an agent. We consider that proposals would not
lead to an inappropriate consolidation outcome. We suppose to add paragraphs B14-B16 of ED
10 Application guidance with information from paragraphs BC88-95 of ED 10 Basis for
conclusions with stating of necessity for considering additional factors regarding the assessment
of control by a reporting entity for situations in which a party holds voting right both directly and
on behalf of other parties as an agent.
Question 6
We agree with the definition of a structured entity in paragraph 30 of the ED 10. We
think that special purpose entities referred to in SIC-12 have characteristics similar to structured
entities. Identifying this class of entities is important because many of the disclosure
requirements in the Exposure draft relate to structured entities with which a reporting entity is, or
was, involved.
Question 7
We consider that the requirements and guidance regarding the assessment of control of a
structured entity in paragraphs 30-38 of ED 10 are sufficient to enable consistent application of
the control definition.
Question 8
We think that ED 10 shouldn’t include a risks and rewards ‘fall back’ test because the
concept of control of ED 10 must be the same for all companies including structured entities
(paragraph 30 ED10) and must be based on the power to govern and obtain benefits. Ability of a
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reporting entity to obtain benefits from activity of structured entities confirms presence of power
to govern.
Question 9
We are of the opinion that disclosure of information by a reporting entity in consolidated
financial statements in accordance with requirements of paragraph 48 of ED 10 is useful for
users of such statements for decision making.
Question 10
We consider that a reporting entity will have available information to meet the disclosure
requirements in accordance with paragraph 48 ED 10 because if a reporting entity has control
over a subsidiary it must have access to information compliant with disclosure requirements.
Absence of ability to obtain information needed to meet the disclosure requirements will be the
evidence of the absence of control.
Question 11
(a) We think that reputation risk isn’t an appropriate basis for consolidation.
(b) Disclosure requirements in paragraph B47 of ED 10 about situation when a reporting
entity should disclose information that it has provided support to unconsolidated
structured entities despite not having a contractual or constructive obligation to do so
are sufficient.
Question 12
Equity approach of accounting of associated entities also include requirements for
making adjustments (exclusion profit or loss in proportion of share of investor in associated
entity). That’s why we consider that ED 10 should contain special section for deciding of tasks
provided by IAS 28 Investments in Associates which allow to develop general requirements for
strategic investments of a reporting entity. We also consider possible to include in ED 10 a
special section for deciding of tasks provided by IAS 31 Investments in Joint Ventures.
L. Gudenko
Chief Accountant of the Bank of Russia –
Director of Accounting and Reporting Department
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