The German Accounting Standards Board (GASB) is opposed to the
proposals in the International Accounting Standards Board’s (IASB)
Exposure Draft 9 Joint Arrangements (ED9). The ED9 project is part
of the conversion process between IFRS and US GAAP, and ED9
involves suggested improvements to IAS 39 Interests in Joint

In a comment letter to the IASB, the GASB said its primary concern
is the proposed elimination of proportionate consolidation. The
IASB proposed the removal of proportionate consolidation as a
choice of accounting treatment for interests in jointly controlled
entities, because IAS 31 gives an entity a choice between that and
equity method. According to the standard setter, the choice makes
it difficult to compare financial reports.

Susann Pochop, the GASB’s project manager responsible for ED9, told
TA the GASB is opposed to accounting choices. “It is
better to say the preparer has to use one accounting method,” she
said. “However, we think that the IASB does not give enough
compelling arguments that the equity method is the better one of
the two methods, or perhaps another method would be best.”

The GASB is also concerned that the core principle of ED9, which
leads to splitting up assets into rights, could change underlying
accounting concepts and principles regarding the definition of an
asset and its boundaries. The GASB claims this prejudges the
outcome of Phase B of the IASB and US Financial Accounting
Standards Board’s conceptual framework project – Elements and
Recognition of the Framework Project. Pochop said the GASB believes
that as long as Phase B has not been finalised, the principles of
ED9 lack a sound foundation and will cause unavoidable problems in
their application.

The German committee suggests that concepts and principles
regarding the definition of an asset and its boundaries should be
codified in the framework rather than at a standard level. The
committee also questioned to what extent the IASB has considered
the effects that changes to ED9 would have on other projects.

The GASB’s final concern is that ED9 does not achieve convergence
between IFRS and US GAAP as US GAAP allows exceptions that are not
allowed in ED9.

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