FASB Consolidation Policy Project Tabled.

• Position: Financial Accounting Standards Board

If you're a CFO and have an SPE that you're not consolidating, you're at risk. The SEC might challenge that treatment and say you need to consolidate it.

Don't expect a final statement or another exposure draft on the FASB's Consolidation Policy project in the second quarter, as previously announced. The project, which focused on developing new standards to determine which affiliates would be included in consolidated financial statements, has been put on an indefinite hold.

In January, the board announced it had determined that "there is not sufficient board member support to proceed with either a final statement on consolidation policy, or an exposure draft on entities with specific limits on their powers (SPEs)."

"Several dynamics are going on," says Ronald Bossio, the FASB senior project manager. The delay, he says, is due to timing and support. He explains that with terms expiring on June 30 for two board members who were part of the majority support and deadlines looming to complete other projects, "it just makes sense to shelve this for a few months." And, with two new board members beginning, Bossio notes, "Some refashioning and rethinking may be required of what we have in the document at this moment to regain sufficient support; whether that might be fine-tuning or considerable rethinking is yet to be seen.

Financial Executive asked Paul Munter to analyze the decision. Munter is a CPA and KPMG Professor and Chairman of the Department of Accounting at the University of Miami, and a developer of continuing education programs for financial and accounting executives. He spoke with FE Managing Editor Ellen M. Heffes.

Q What issues are involved in the Business Consolidation Policy project?

A The Consolidation Project has been on the FASB agenda for almost two decades, the genesis being accounting in financial statements for the different kinds of business arrangements and investments. Historically, the consolidation model has been driven by ownership and control -- controlling financial interest being the operational words.

With today's wider range of structures -- in terms of the investment in companies, businesses or activities beyond just ownership -- the nature of control is not so clear, for the present or future.

For example, instead of direct ownership, options, when exercised, give ownership; or convertible securities or contractual relationships, etc. Other issues make the decision to consolidate even more complicated. It might...