The IASB and the FASB continued their discussion about how an entity would determine whether it is an investment entity. At the May 2012 joint board meeting, they tentatively decided that an entity would be required to meet specific criteria to be an investment entity. At this meeting, the boards tentatively decided to provide additional guidance to describe the typical characteristics of an investment entity, which an entity would be required to consider when determining whether it is an investment entity.
The boards tentatively decided that if an entity did not meet one or more of the typical characteristics it would not necessarily be precluded from being an investment entity. The boards also tentatively decided that when an entity does not meet one or more of the typical characteristics, it would be required to justify how its activities continue to be consistent with that of an investment entity.
The boards tentatively decided that an investment entity should have all of the following typical characteristics:
- multiple investments;
- multiple investors;
- investors that are not related to the parent entity or the investment manager; and
- ownership interests in the form of equity or partnership interests.
All IASB and FASB members present agreed. One IASB member was absent.
At the May 2012 joint board meeting, the FASB had tentatively decided that the fair value management of investments would be a typical characteristic rather than a required characteristic to be an investment entity. At the same joint board meeting, the IASB tentatively decided that an investment entity would be required to manage its investments on a fair value basis to be an investment entity.