January 16, 2023
Technical Director, File Reference No. 2022-002
Submitted via email to: [email protected]
RE: Proposed Statement of Financial Accounting Concepts No. 8 — Conceptual Framework for Financial Reporting — Chapter 2: The Reporting Entity
Dear Board Members:
The Virginia Society of CPAs (VSCPA) Accounting & Auditing Advisory Committee has reviewed the proposed Exposure Draft (ED) 2022 — ED 200 — Proposed Statement of Financial Accounting Concepts No. 8 - Conceptual Framework for Financial Reporting — Chapter 2: The Reporting Entity, issued by the Financial Accounting Standards Board.
The VSCPA is the leading professional association in Virginia dedicated to enhancing the success of all CPAs and their profession by communicating information and vision, promoting professionalism, and advocating members’ interests. The VSCPA membership consists of more than 13,000 individual members who actively work in public accounting, private industry, government and education.
The Committee generally agrees with the objectives and the requirements of the ED.
We are submitting the following specific responses and comments on questions 1–5 of the ED.
Questions & Responses
Question 1: Do you agree with the proposed description and features of a reporting entity in paragraphs RE4 and RE5? If not, why?
Yes, we agree with the proposed description and features of a reporting entity in paragraphs RE4 and RE5.
Question 2: Do you agree that a full set of consolidated financial statements is necessary to achieve the objective of general-purpose financial reporting in circumstances in which a circumscribed area of economic activities represents a parent-subsidiary relationship? If not, why? (See paragraphs RE8 and RE9.)
Yes, we agree that a full set of consolidated financial statements is necessary to achieve the objective of general-purpose financial reporting in circumstances in which a circumscribed area of economic activities represents a parent-subsidiary relationship. The objective of general-purpose financial statements is to provide existing and potential investors as well as others with useful information that would aid them in making investment, credit and other types of relevant decisions. Further, Chapter 3, Qualitative Characteristics of Useful Financial Information, of FASB Concepts Statement No. 8, Conceptual Framework for Financial Reporting, states that the usefulness of financial reporting information is rooted in relevance and faithful representation of such information. Based on this, a full set of consolidated financial statements would be necessary to provide useful financial reporting information.
Question 3: Do you agree that parent-only financial statements do not represent a full set of financial statements and, consequently, are not sufficient to achieve the objective of general-purpose financial reporting? If not, why? (See paragraphs RE10 and RE11.)
Yes, we agree that parent-only financial statements do not represent a full set of financial statements, and consequently, are not sufficient to achieve the objective of general-purpose financial reporting. Per ASC 810-10-45-11, parent-entity financial statements may be needed in some cases, in addition to consolidated financial statements. However, parent-entity financial statements should not be substituted for consolidated financial statements.
Question 4: Do you agree that a portion of an entity can represent a reporting entity? If not, why? (See paragraphs RE12–RE14.)
Yes, we agree that a portion of an entity can represent a reporting entity.
Question 5: Do you agree that combined financial statements appropriately depict two or more entities that are under common control, including circumstances in which a parent-subsidiary relationship does not exist? If not, why? (See paragraph RE15.)
Yes, we agree that combined financial statements appropriately depict two or more entities that are under common control, including circumstances in which a parent-subsidiary relationship does not exist.
The VSCPA appreciates the opportunity to respond to this ED. Please direct any questions or concerns to VSCPA Vice President, Advocacy Emily Walker, CAE, at [email protected] or (804) 612- 9428.
Sincerely,
George Crowell, CPA
2022–2023 Chair
VSCPA Accounting & Auditing Advisory Committee
2022–23 VSCPA Accounting & Auditing Advisory Committee
George Crowell, CPA — Chair
Zach Borgerding, CPA — Vice Chair
Scott Davis, CPA
Tamara Greear, CPA
Josh Keene, CPA
Nick Kinsler, CPA
Daniel Martin, CPA
Michael Phillips, CPA
Chris Smith-Christian, CPA
Charles Valadez, CPA
Natalya Yashina, CPA