An accounting standard FASB issued in 2007 to address ownership interests within a company's subsidiary achieves its purpose but does have areas that might be improved, a review found.
A Financial Accounting Foundation (FAF) post-implementation review team examined FASB Statement No. 160, Noncontrolling Interests in Consolidated Financial Statements, an amendment of ARB No. 51. FAF is FASB's parent organization.
The review report found that Statement No. 160 adequately resolved the issues underlying its stated need. Based on input from financial statement users, preparers, auditors, and regulators, the review team found that the standard:
- Eliminated diversity in the financial statements.
- Improved the relevance of reported financial information on noncontrolling interests.
- Converged the accounting for noncontrolling interests with International Accounting Standard 27, Consolidated and Separate Financial Statements.
- Generally provides investors with useful information.
- Is generally understandable and can be applied as intended.
But several practitioners and preparers reported that Statement No. 160's requirements for allocating net income or loss between the parent and the noncontrolling interest holders are vague, insufficient, and difficult to apply when the equity structure of the subsidiary is complex and does not allow for proportional sharing of net income or loss.