International-Accounting-Standards-Board, by sdaferv

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									                                                 AIB Group
                                                 Group Financial Control
                                                 Bankcentre,
                                                 Ballsbridge,
                                                 Dublin 4,
                                                 Ireland




Sir David Tweedie
International Accounting Standards Board
30 Cannon Street
LONDON EC4M 6XH
United Kingdom

20 March 2009

                                    Exposure Draft 10
                             Consolidated Financial Statements

Dear Sirs,

Allied Irish Banks, p.l.c. welcomes the opportunity to respond to the above Exposure
Draft. We are in agreement with the proposal for a single definition of control for all
entities. This should lead to consistency in consolidation between companies and
make the financial statements of various companies more comparable.

We do however have issues with the proposal as it stands. The proposal would
benefit from having additional definitions, guidance and examples particularly around
but not limited to the topic of structured entities.

In the current economic environment we agree that there should be additional
disclosures in the area of structured entities. However, some of the proposed
disclosures for non consolidated structured entities could prove difficult to obtain and
would provide little benefit to users.

We have outlined our responses to the questions posed below:

   1. Q: Do you think that the proposed control definition could be applied to all
      entities within the scope of IAS 27 as well as those within the cope of SIC
      12. If not, what are the application difficulties?
      A: We are in agreement that one approach should be used for all types of
      entities to determine whether they are controlled or not. It could be difficult to
      apply this definition to an SPE where no returns may actually be generated for
      the entity. The SPE could have been set up with its activities predetermined
      by the entity, for a separate purpose than generating a return. In our opinion
      the definition needs to be revamped to better encompass SIC 12.



Allied Irish Banks, p.l.c.                                                  page 1 of 4
   2. Q: Is the control principle as articulated in the draft IFRS an appropriate
      basis for consolidation?
      A: In general the control principle is an appropriate basis for consolidation.
      However, power to direct may not always be linked with receipt of returns, for
      example in the case of an SPE.
              We also note in this ED the word “benefits” has been replaced with
      “returns”, this was done as it was considered that the word “benefits”
      insinuated only positive returns. We think that the definition should be
      amended to make it clear that the returns could be both positive and negative.

   3. Q: Are the requirements and guidance regarding the assessment of
      control sufficient to enable the consistent application of the control
      definition? If not, why not?
      A: No we do not believe the requirements are sufficient to enable consistent
      approach. Within the section of the ED devoted to “assessing power to direct
      activities”, there are different sections devoted to structured entities and other
      entities. This is not ideal considering that the ED is attempting to replace SIC
      12 and IAS 27 and apply the control definition to all entities. There is even a
      suggestion at the beginning of the section devoted to structured entities that
      these are entities that simply do not fall into the scope of the paragraphs
      devoted to other entities further up. The paragraphs devoted to structured
      entities are not clear and could be open to interpretation which would lead to
      inconsistency between entities.

   4. Q: Do you agree with the Board’s proposals regarding options and
      convertible instruments when assessing control of an entity? If not, please
      describe in what situations, if any, you think the options or convertible
      instruments would give the option holder the power to direct the activities of
      an entity.
      A: The proposals in the ED around options and convertible instruments are
      difficult to interpret. It seems from the ED that control may exist even if the
      options are not exercisable at the present time, this does not seem reasonable.
      It could be possible that the options may not be exercisable for five years in
      which case control would not exist until that time.

   5. Q: Do you agree with the Board’s proposals for situations in which a party
      holds voting rights both directly and on behalf of other parties as an agent?
      If not, please describe the circumstances in which the proposals would lead
      to an inappropriate consolidation outcome.
      In general we agree with the Board’s proposals. We agree that if an agent is
      truly acting as an agent they are acting in the best interest of their client and do
      not have control and should not consolidate the entity. The application
      guidance should give more guidance on factors that identify an entity as an
      agent, and should include other considerations other than, rights to remove the
      agent and remuneration.




Allied Irish Banks, p.l.c.                                                    page 2 of 4
   6. Q: Do you agree with the definition of a structured entity in paragraph 30 of
      the draft IFRS? If not, how would you describe or define such and entity?
      A: No we do not agree with this definition as it is not actually a definition as
      such. More guidance needs to be given with useful examples as regards
      special purpose entities. A distinction should not be made between structured
      entities and other entities, the key issue is whether control exists.

   7. Q: Are the requirements and guidance regarding the assessment of control
      of a structured entity in paragraphs 30-38 of the draft IFRS sufficient to
      enable consistent application of the control definition? If not, why not?
      What additional guidance is needed?
      A: The guidance in the above paragraphs should be included as part of the
      earlier paragraphs and not given a section of its own considering that the same
      control definition should be applicable to all entities. As mentioned earlier the
      linking of control and returns could cause confusion as regards SPEs. More
      useful examples are required here to avoid confusion and to avoid two
      separate entities feeling they control the same SPE.

   8. Q: Should the IFRS on consolidated financial statements include a risks
      and rewards “fall back” test? If so, what level of variability of returns
      should be the basis for the test and why? Please state how you would
      calculate the variability of returns and why you believe it is appropriate to
      have an exception to the principle that consolidation is on the basis of
      control.
      A: No we do not agree that there should be a “fall back” test based on risks
      and rewards. Consolidation should be on the basis of control alone in order to
      encourage consistency.

   9. Q: Do the proposed disclosure requirements described in paragraph 23
       provide decision-useful information? Please identify any disclosure
       requirements that you think should be removed from, or added to, the draft
       IFRS.
   10. Do you think that reporting entities will, or should, have available the
       information to meet the disclosure requirements? Please identify those
       requirements with which you believe it will be difficult for reporting entities
       to comply, or that are likely to impose significant costs on reporting entities.
       A 9 & A 10 – While these disclosure requirements seem reasonable in the
       current economic environment, it could be very difficult to get adequate
       information about entities that are not under control of the reporting entity.
       Such disclosures may not actually provide useful information to the user of the
       financial statements if the reporting entity is merely involved with the other
       entity and doesn’t actually control or consolidate them.




Allied Irish Banks, p.l.c.                                                  page 3 of 4
   11. Q A) Do you think that reputational risk is an appropriate basis for
       consolidation? If so, please describe how it meets the definition of control
       and how such a basis of consolidation might work in practices.
       B) Do you think that the proposed disclosures in paragraph B 47 are
       sufficient? If not, how should they be enhanced?
       A: We agree with the Board in deciding that reputational risk is not a basis for
       consolidation. The proposed disclosure requirements in paragraph B47 are
       adequate and would provide useful information.

   12. Do you think that the Board should consider the definition of significant
       influence and the use of the equity method with a view to developing
       proposals as part of a separate project that might address the concerns
       raised relating to IAS 28?
       A: Yes

If you require clarification with regard to the above, please do not hesitate to contact
me.

Yours sincerely




____________________

Brendan McHugh
Group Financial Controller




Allied Irish Banks, p.l.c.                                                  page 4 of 4

								
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