FASB issues ED on consolidations.

The Financial Accounting Standards Board issued an exposure draft of a statement on consolidation policy in mid-October and called for comments by January 15, 1996.

The primary FASB decision on consolidation policy was that a controlling entity should consolidate all its entities, unless control is temporary when the entity becomes a subsidiary, according to Ron Bossio, FASB project manager.

Among the more significant provisions of the ED, Consolidated Financial Statements: Policy and Procedures, which would be effective for financial statements for fiscal years beginning after December 15, 1996:

* The proposed definition of control of an entity would be power to use or direct the use of its individual assets in essentially the same ways the controlling entity can use its own assets.

* Control of a subsidiary may be considered temporary if at the acquisition date management has decided to dispose of it and has a plan to do so and a reasonable expectation of success within one year.

* A noncontrolling interest in a subsidiary would be displayed and appropriately labeled in the consolidated balance sheet as a separate component of equity (or net assets).

* Income attributable to the noncontrolling interest is not an expense or a loss but a deduction from consolidated net income to compute income attributable to the controlling interest. Both components of consolidated net income of a business enterprise or change in net assets of a not-for-profit organization (net income attributable to both the controlling and the noncontrolling interest) should be disclosed.

The ED also addresses accounting for the acquisition and sale of a subsidiary and changes in a parent's interest in a subsidiary that do not involve loss of control, among other issues.

Copies of the ED may be obtained at no charge during the comment period by writing to the FASB order department, 401 Merritt 7, P.O. Box 5116, Norwalk, Connecticut 06856-5116, or by calling [phone], ext. 555.