The current IFRS provides guidance on how areporting entity should report financial information but the definition ofreporting entity is not provided.

Therefore, the IASB has proposed thedefinition of a reporting entity in Chapter 3 of the ED. In paragraph 3.11 ofthe ED, it has described reporting entity as an entity that chooses, or isrequired, to prepare general purpose financial statements. However, thedefinition just uses entity as a reference, it did not give a clear explanationof an entity.

Paragraph 3.12 has further explained reporting entity is notnecessarily a legal entity. The ED does not clarify what is a legal entity. Asthere are many types of entities a reporting entity may be, such as acorporation, trust, general partnership, limited partnership, branches andunlimited companies, it may confuse the stakeholders if no clear clarificationis given. The boundary and control of the reporting entity are discussed in theED as well. Paragraph 3.13 to 3.25 are based on control, there are no conceptsthat help to identify control of an entity.

This would matter becauseconsolidated financial statements will be presenting assets that are held inother entities and liabilities for which the parent does not have primaryresponsibility. The issue of faithful representation will arise.

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