In a unanimous decision last week, Financial Accounting Standards Board (“FASB”) members agreed to propose splitting its consolidation guidance in two. The FASB wants to remove the guidance regarding voting interest entities and variable interest entities under Topic 810, Consolidation, and add it to a new standard called Topic 812. FASB members noted that the separation would make consolidation guidance easier for companies to follow and would conform to how Big Four firms produce their own manuals for accountants to consult.
The March 8 decision was part of the board’s work to simplify certain aspects of Topic 810, which defines when a company is required to consolidate, or disclose on balance sheets, holdings it possesses in other companies. In addition to the vote, the FASB approved moving its guidance regarding consolidations by contract to its nonprofit accounting standard, Topic 958, Not-for-Profit Entities.