The IASB framework for preparing and presenting financial statements defines assets as resources controlled by an enterprise as a result of past events from which future economic benefits are expected to flow to the enterprise. This definition is similar to that found in the FASB’s conceptual framework.
As discussed in Chapter 15, the IASB requires consolidation of a subsidiary when the parent has the ability to control the subsidiary. In these cases, the subsidiary’s assets are added to those of the parent company, and the total is reported in the balance sheet of the parent company. Under SFAS No. 94 , consolidation is required only for those subsidiaries when the parent company has a majority ownership. The FASB has proposed that U. S. GAAP be changed to require consolidation for subsidiaries when the parent company controls the use of subsidiary assets. One goal of this proposal is harmonization of accounting standards among countries.
Team Debate:
Team 1: Assume that you do not believe that control of subsidiary assets implies that those assets are, in substance, parent company assets. Argue for the FASB proposal based on the premise that harmonization of accounting standards among countries should be the paramount consideration. Cite relevant aspects of the U. S. and IASB conceptual frameworks in your argument.
Team 2: Assume that you do not believe that control of subsidiary assets implies that those assets are, in substance, parent company assets. Argue against the FASB proposal based on the premise that harmonization of accounting standards among countries should not be the paramount consideration. Cite relevant aspects of the U. S. and IASB conceptual frameworks.