Second try at tough issue.

The FASB tried to get a handle on consolidated financial statements back in October 1995, when it released an exposure draft, Consolidated Financial Statements: Policy and Procedures. Although the comment period ended 90 days later, no final statement was issued even after the board examined the 162 comment letters and held a public hearing. In August 1997, FASB decided to suspend the "procedures" portion until a later date and focus its attention on "policy." The result is a new ED, Consolidated Financial Statements: Purpose and Policy, that attempts to determine when both profit-making businesses and not-for-profits should include entities in consolidated financial statements.

Much is the same as before: The ED says a parent company--a "controlling entity"--should consolidate all subsidiaries unless control is "temporary" at the time an entity becomes a subsidiary. The trick is in defining "control" because businesses involve themselves in complex relationships where the issue isn't clear. The revised ED clarifies this definition and presents additional implementation guidance. The statement itself, in fact, is only about 30 paragraphs; the implementation guidance runs more than 130 paragraphs.

The board is especially interested in comments on three issues:

* Its modified definition of "control," which had focused on decisionmaking powers for another entity's individual assets but now concentrates on policies and management used to direct use of assets and other activities.

* Its inclusion in the implementation guidance of several examples of when control does in fact exist.

* The proposed effective day of the statement--for financial statements for annual periods beginning after December 15, 1999, and all interim periods in the year of adoption. The board specifically requests comments on interim statements guidance.

The comment period runs until May 24. The FASB will send one free copy of the ED (product code no. E149) to any individual or organization requesting it in writing. The board has made the ED available online at www.fasb.org. It also now accepts e-mail comments sent to [e-mail].