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The International Accounting Standards Board (IASB) has issued three new rulings aimed at bringing companies' off-balance sheet activities more clearly into the open.

The financial crisis exposed the way that some businesses had been using special-purpose entities and other vehicles to present a rosy picture of their liabilities.

The new rulings bring International Financial Reporting Standards (IFRS) on this issue into closer alignment with US practices.

But to achieve that alignment the IASB has pushed ahead with a controversial plan to abolish proportionate consolidation, one of the methods that companies outside the US have used to account for joint ventures. Equity accounting will now be mandatory.

The new standards will tighten up reporting requirements for the consolidation of subsidiaries and special purpose vehicles and force companies to reveal the substance of joint arrangements, said IASB chairman Sir David Tweedie.

“As a package, these changes will provide a check on off balance sheet activities and give investors a much clearer picture of the nature and extent of a company's involvement with other entities,” he said.

Of the new standards, “IFRS 10 – Consolidated Financial Statements” makes it clear that control is the determining factor in deciding whether an entity should be included within the consolidated financial statements of the parent company.

“IFRS 11 – Joint Arrangements” emphasizes the need to focus on the rights and obligations of the arrangement, rather than its legal form, which is currently the case.

“IFRS 12 – Disclosure of Interests in Other Entities” sets new disclosure requirements for all forms of interests in other entities, including joint arrangements, associates, special purpose vehicles and other off balance sheet vehicles.