New Standards on Subsidiaries and Joint Arrangements May 2015 Flash In September 2014, the Canadian Accounting Standards Board (AcSB) issued into Part II of the CPA Canada Handbook Accounting, Accounting Standards for Private Enterprises (ASPE) new Section 1591, Subsidiaries, which replaces Section 1590 of the same title and Accounting Guideline 15, Consolidation of Variable Interest Entities (AcG-15). At the same time, the AcSB also issued new Section 3056, Interests in Joint Arrangements, which replaces Section 3055, Interests in Joint Ventures, and amended Section 3051, Investments. The issuance of these new and amended sections also resulted in consequential amendments to various standards. Sections 1591 and 3056, amended Section 3051 and the consequential amendments to other standards apply to fiscal years beginning on or after January 1, 2016. Earlier application is permitted. The objective of this publication is to describe: the key differences and similarities between the new and replaced standards; the nature of the consequential amendments; in addition, it will remind readers about the main principles of Sections 1590 and 3055 that were retained in the new sections. This publication also discusses the consequential amendments to Section 4450, Reporting Controlled and Related Entities by Not-for-Profit Organizations, in Part III of the CPA Canada Handbook Accounting, Accounting Standards for Not-for-Profit Organizations.
Section 1591, Subsidiaries Why was Section 1591 issued? Since its publication, AcG-15 has often been criticized for the resulting practical issues relating to identifying and accounting for variable interest entities (VIE). Preparers still consider this guideline to be very complex and difficult to apply. In replacing Section 1590 and AcG-15 with Section 1591, the AcSB aims to promote the use of judgment by including new guidance to determine when control is obtained through means other than equity interests (for example, contractual arrangements). Comparison of the guidance of Section 1590 and AcG-15 and Section 1591 The key differences and similarities in assessing control and accounting for subsidiaries between Section 1590 and AcG-15 and Section 1591 are summarized below: Comparison of guidance Purpose and scope Definitions Assessing control through equity and voting interests Assessing control through potential voting interests Assessing control through contractual rights Accounting for subsidiaries Contractual arrangements between enterprises under common control are now scoped out of Section 1591 No changes to the definitions of control and subsidiary No significant changes No changes New guidance on determining whether an enterprise controls another enterprise through contractual rights Same accounting policy choices (cost method, equity method or consolidation); however, the accounting for the interest in the enterprise may be predicated on how the enterprise controls the subsidiary Purpose and scope Similar to Section 1590, Section 1591 establishes standards for subsidiaries in an enterprise s general purpose financial statements. Section 1591 carries forward the same scope exclusions as Section 1590 and some of the exclusions of AcG-15. An important new element that was added to the exclusions from the scope of Section 1591 pertains to the exclusion of accounting for contractual arrangements between enterprises under common control. This addition may have significant consequences for enterprises that were forced to consolidate enterprises that were under common control due to relationships arising from contractual arrangements such as guarantees, lease agreements or loans receivable. As a result of this change, these 2
enterprises will no longer have to assess whether a contractual arrangement with such an enterprise results in a control relationship; instead they can account for the contractual arrangement in accordance with the relevant standard in the CPA Canada Handbook Accounting (e.g., Section 3065, Leases). Definitions Section 1591 does not change the definitions of control or subsidiary presented in Section 1590. Thus, control of an enterprise is still defined as the continuing power to determine its strategic operating, investing and financing policies without the co-operation of others and a subsidiary is still an enterprise controlled by another enterprise (the parent) that has the right and ability to obtain future economic benefits from the resources of the enterprise and is exposed to the related risks. Nevertheless, Section 1591 specifies that in addition to being acquired through an equity interest in a subsidiary, control may be acquired by other means such as contractual arrangements or a combination of voting interests, potential voting interests or contractual arrangements. Control through equity and voting interests Section 1591 does not change any of the guidance in Section 1590 regarding the presumption that: 1) control exists when an individual or an enterprise owns, directly or indirectly, an equity interest that carries the right to elect the majority of the members of the other enterprise s board of directors; and 2) control does not exist when such rights do not exist. However, this presumption may be overcome by other factors. The greater an enterprise s voting interest is above the 50% level, the more persuasive the other factors must be in overcoming this presumption. Additionally, in Section 1591, the concept of control still depends on the ability to exercise the right to elect the majority of the board of directors and determine the strategic operating, investing and financing policies and not on its actual exercise; this consideration is an important concept in evaluating control. Control through potential voting interests Section 1591 does not make any changes to the guidance on potential voting interests from Section 1590. It asserts that control may exist, even when an enterprise does not own a majority voting interest, if the enterprise owns rights (for example, options, warrants or convertible securities) that, if exercised or converted provide the holder with the ability to elect the majority of the members of the board of directors. Thus, in assessing control, the holder of such rights must take potential voting interests into account to determine its ability to control another enterprise by exercising the rights or converting the securities, and conversely, the ability of others to dilute the enterprise s voting interest if they exercise their rights or convert their securities. 3
Control through contractual rights (when equity interests and potential voting interests are not the dominant factor in determining control) Section 1591 includes guidance to determine whether an enterprise controls another through contractual rights. Section 1590 does not contain such guidance; however, AcG-15 provides guidance to clarify how to assess whether control is conferred by other arrangements. This assessment is done by: 1) assessing whether the enterprise holds a variable interest (contractual, ownership or other pecuniary interests in an enterprise that change with changes in the fair value of an enterprise s net assets exclusive of variable interests) in the potential VIE; 2) determining if the enterprise is a VIE; and 3) assessing who is the primary beneficiary of the VIE (the entity that has a variable interest, or combination of variable interests, that will absorb a majority of the enterprise s expected losses, receive a majority of the enterprise s expected residual returns, or both). The guidance in AcG-15 is quite prescriptive and rules based and sets out specific criteria to be met for an enterprise to be identified as a VIE. Section 1591 does not carry forward the concepts of VIE, variable interests and primary beneficiary; instead, it prescribes a more qualitative assessment with greater use of professional judgment. Under Section 1591, when equity interests and potential voting rights are not the dominant factor in determining control, an enterprise must analyze all of its contractual rights 1 and consider all facts and circumstances when determining whether it controls another enterprise. The two conditions that must be satisfied for an enterprise to have control through contractual rights are the following: 1. The enterprise holds rights that are sufficient to direct the strategic operating, investing and financing policies of the other enterprise without the co-operation of others; and 2. The enterprise has the right and ability to obtain the future economic benefits and is exposed to the related risks of the other enterprise. Although the AcSB wanted to encourage the use of professional judgment, it provides some additional guidance in Section 1591 to assist enterprises in evaluating whether the two above conditions are met. As a result, enterprises are required to consider the following facts and circumstances when assessing if the contractual rights are sufficient to give one enterprise control over the other, without however limiting the use of professional judgment: The degree of its involvement at inception of the other enterprise in determining its purpose and design (although, on its own, involvement in design is not sufficient to confer control); 1 Section 1591 provides the following examples of contractual arrangements (non-exhaustive): supply arrangements, management contracts, lease agreements, licence agreements, royalty contracts, other sales contracts and finance arrangements, call rights or put rights related to the other enterprise and liquidation rights. 4
How decisions are made about the strategic policies that could notably determine: the right and ability to obtain future economic benefits and related risks; who has the continuing ability to direct the activities of the other enterprise; and who receives the economic benefits and is exposed to the related risks from those activities; The risks to which the other enterprise was designed to be exposed, the risks it was designed to pass on to the parties involved with it and whether the enterprise is exposed to some or all of those risks; Whether one enterprise has the continuing unilateral ability in the contractual arrangement to direct the strategic policies of the other enterprise. Section 1591 also includes further guidance with respect to specific situations, in particular when: the other enterprise is designed so that the direction of its activities is predetermined unless and until particular circumstances arise or events occur (operating on autopilot); an enterprise has given an explicit or implicit commitment to ensure that another enterprise continues to operate as designed, which may increase its incentive to obtain rights sufficient to give it power because of its increased exposure to variability of future economic benefits and to the related risks; or an enterprise is in a position, through call or put rights or liquidation rights in a contractual agreement, to have power over activities that are closely related to the other enterprise. Lastly, Section 1591 introduces the concept of protective rights, which are rights designed to protect the interest of the enterprise holding those rights but do not confer control. For example, veto rights that allow an enterprise to participate in or prevent events or transactions that are not in the normal course of the other enterprise s operations do not confer control. Accounting for subsidiaries Section 1591 provides accounting policy choices to account for subsidiaries, some of which are predicated on how the enterprise controls them: Consolidate all its subsidiaries; Account for its interest in subsidiaries: - controlled through voting interests, potential voting interests or a combination thereof using: 5
the equity method; or the cost method; - controlled through contractual arrangements or in combination with voting interests, potential voting interests, or a combination thereof according to the nature of the contractual arrangements in accordance with the applicable section. It should be noted that when an enterprise elects to account for its subsidiaries using either the cost or the equity method, it would not be required to perform a control assessment on other enterprises that it may control by means other than equity interest. Similar to Section 1590, Section 1591 requires all interests in subsidiaries be accounted for using the same method. Disclosure Consolidated financial statements While Section 1591 makes some changes to the wording in this section for consistency with the nature and spirit of the changes made to the standards on subsidiaries, it maintains the Section 1590 disclosure requirements and includes the AcG-15 requirement pertaining to the disclosure of significant restrictions affecting the access to VIE s assets. This disclosure now makes the AcG-15 disclosure applicable to all consolidated subsidiaries rather than just VIEs. Disclosure Non-consolidated financial statements Section 1591 maintains the Section 1590 disclosure requirements, specifying that they now apply only to subsidiaries controlled through voting interests, potential voting interests, or a combination thereof. Effective date and transition Sections 1591 and the related consequential amendments apply to fiscal years beginning on or after January 1, 2016; however, earlier application is permitted. If an enterprise elects to account for its subsidiaries using the cost or equity method on transition to Section 1591, the transitional provisions of Section 1591 do not apply. Similarly, when an enterprise elects to consolidate its subsidiaries on transition to Section 1591, it is not required to make retrospective adjustments to its previous accounting for its involvement with enterprises that were not previously consolidated and continue not to be consolidated following the adoption of Section 1591. The same principle applies for enterprises that are consolidated and must continue to be consolidated under Section 1591. 6
While Section 1591 applies retrospectively, there is some relief provided in situations where an enterprise is required to: consolidate a subsidiary that was not consolidated previously; no longer consolidate a subsidiary that was consolidated previously. The next two sections discuss each of these transitional provisions in more detail. Transitional guidance Consolidate a subsidiary that was not consolidated previously The following two tables summarize the transitional provisions and the methods available in Section 1591 when an enterprise applies or chooses to apply for the first time the consolidation method of accounting for its subsidiaries. Both methods convey how to measure the assets and liabilities of subsidiaries that were not consolidated previously and the non-controlling interests (NCI), if any, in those subsidiaries. The enterprise must select one of these two methods for each previously unconsolidated subsidiary and must use financial information prepared in accordance with ASPE: 7
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Transitional guidance No longer consolidate a subsidiary that was consolidated previously The following table presents the steps an enterprise must perform at the beginning of the fiscal year immediately preceding the date at which Section 1591 is applied for the first time or on the date the interest is obtained (if later) when accounting for an interest in an enterprise that was previously consolidated: Consequential amendments Section 1500, First-time Adoption Section 1500 has been amended to permit a first-time adopter of ASPE to apply the transitional provisions in Section 1591 if it decides to consolidate its subsidiaries for the first time upon transition. Section 1601, Consolidated Financial Statements Following the issuance of Section 1591, guidance on how to consolidate a subsidiary in Section 1590 was moved to Section 1601 so that all the guidance is contained in one section. 10
Section 3056, Interests in Joint Arrangements Why was Section 3056 issued? Under Section 3055, an enterprise that has an interest in a joint venture, with the meaning given to this term in that section (refer to section Terminology and definitions in this publication) could elect to proportionately consolidate that interest or use the cost or equity method. However, the AcSB believes that proportionate consolidation was not always a faithful representation of the nature of the interest in a joint arrangement. In many cases, the investor has rights only to the net assets of an enterprise used to carry out the activities of the joint arrangement rather than rights to the individual assets of the joint arrangement and obligations for its individual liabilities. Nevertheless, the application of the proportionate consolidation method results in the investor recognizing, in its balance sheet, its share of the assets and liabilities of the jointly controlled enterprise, based on its level of equity interest when in reality, it has only rights to the net assets. The AcSB s objective, in replacing Section 3055 with Section 3056, is to change the accounting policy choices available to investors in joint arrangements to ensure the financial reporting of these interests better reflect the nature of the interest and, consequently, the rights and the obligations therein. Comparison of the guidance of Sections 3055 and 3056 The key accounting differences and similarities in accounting between Sections 3055 and 3056 are summarized below: Comparison of guidance Purpose and scope Terminology and definitions Interests in a joint arrangement held by an investor who does not share joint control Types of joint arrangements Recognition Contributions and transactions No conceptual changes Various changes in terminology used, but no conceptual changes in the definitions No changes in requirements No change in the broad types of joint arrangements Withdrawal of the proportionate consolidation method and different accounting methods based on the type of joint arrangement Withdrawal of the requirements in Section 3055 to defer and amortize the portion of a gain that does not relate to the amount of cash received or fair value of other assets received Purpose and scope The issuance of Section 3056 has not resulted in any conceptual changes in the purpose and scope. The Section still establishes standards for interests in arrangements in which the investor has joint control. As is the case with Section 3055, Section 3056 does not deal with accounting by joint arrangements themselves. 11
Section 3056 continues to apply when economic activities meet the definitions and criteria outlined in the section, even though such activities may not be referred to as joint arrangements. Conversely, the section does not apply when economic activities do not meet these same definitions and criteria, even though they may be referred to as joint arrangements. Terminology and definitions Section 3055 refers to a joint venture as an economic activity resulting from a contractual arrangement whereby two or more venturers jointly control the economic activity. It also refers to a venturer as a party to a joint venture: 1) having joint control over that joint venture; 2) having the right and ability to obtain future economic benefits from the resources of the joint venture; and 3) being exposed to the related risks. With the publication of Section 3056, the definitions presented in Section 3055 remain unchanged, including the definition of joint control; however, the AcSB made some terminology changes. Going forward, a joint arrangement is the term used to describe the economic activity identified by the term joint venture in Section 3055. Additionally, Section 3056 refers to an investor rather than a venturer. Unlike Section 3055, it does not provide a specific definition of an investor. Interests in a joint arrangement held by an investor who does not share joint control As is the case in Section 3055, Section 3056 states that the interest of an investor who does not have joint control over the joint arrangement qualifies as an investment and is subject to the requirements of Section 3051 or Section 3856, Financial Instruments. Types of joint arrangements Section 3056 does not change the types of joint arrangements in which an investor may have an interest; these remain as follows: jointly controlled operations; jointly controlled assets; jointly controlled enterprises. Accounting for an interest in a joint arrangement Section 3055 allows for an accounting policy choice to account for an interest in a joint venture regardless of the category to which the joint venture belongs. The accounting policy choices are the: proportionate consolidation method; 12
equity method; cost method. With the issuance of Section 3056, determining the correct type of joint arrangement is important because the accounting method for an investor s interest will depend on the category. The proportionate consolidation method is no longer permitted. The next three sections of this publication discuss the three types of joint arrangements in more detail and the recognition requirements for each type of interest. Jointly controlled operations In a jointly controlled operation, the investors use their own assets and resources and incur their own liabilities and expenses rather than establish a corporation, partnership or other enterprise that is separate from the investors. The assets remain under the control and ownership of each investor. For example, investors may combine their operations, resources and expertise to carry out an activity jointly, such as manufacturing, distributing or marketing a product. The contractual arrangement between the investors usually provides means by which the revenue from the sale of any good or services and any expense incurred in common are shared. In this context, an investor in a jointly controlled operation is considered to have rights to the individual assets and obligations for the individual liabilities; therefore it must recognize: in its balance sheet, the assets that it controls and the liabilities that it incurs; and in its income statement, its share of the revenue of the joint arrangement and its share of the expenses incurred by the joint arrangement. This method is similar to proportionate consolidation, but instead of using the investor s ownership interest in the joint arrangement solely to determine its share of assets, liabilities, revenue and expenses of the joint arrangement, this method requires the investor to consider all the facts and circumstances related to its interest (e.g., contractual arrangements). Jointly controlled assets This type of joint arrangement refers to contractual arrangements whereby one or more assets are under joint control, and often joint ownership of the investors and are dedicated to the purpose of the joint arrangement. The investors may take a share of the output from the assets and each bears a share of the expenses incurred. This type of joint arrangement also does not involve the establishment of a corporation, partnership or other structure that is separate from the investors. One example of this type of arrangement is a jointly controlled rental property for which each investor receives a share of the rental revenues and incurs a share of the expenses. An investor in jointly controlled 13
assets, similar to a jointly controlled operation, also has rights to individual assets and obligations for individual liabilities; as a result, the investor must recognize: in its balance sheet, its share of the jointly controlled assets and its share of any liabilities incurred jointly with the other investors in relation to the joint arrangement; and in its income statement, any revenue from the sale or use of its share of the output of the joint arrangement, and its share of any expenses incurred by the joint arrangement. This accounting is also similar to the proportionate consolidation method, but it requires the determination of the share of assets, liabilities, revenues and expenses to be based on the facts and circumstances in the arrangement rather than solely based on ownership interests. Jointly controlled enterprises Contrary to the two aforementioned categories of joint arrangements, a jointly controlled enterprise involves the establishment of a separate entity (e.g., corporation, partnership or other structure) to achieve the activities of the joint arrangement. As the entity has its own legal status, it owns the assets of the joint arrangement, incurs liabilities and expenses and earns revenue; the investors have an interest in the enterprise. A jointly controlled enterprise generally confers separation between the investors and the assets and obligations of the joint arrangement, so that the investors have rights only to the net assets of the jointly controlled enterprise. However, there may be situations where investors enter into a separate contractual arrangement or there are other facts and circumstances that counteract the legal form of this entity such that the substance of the arrangement is that the investors, in fact, do not have an interest in the net assets of the jointly controlled enterprise, rather, they have rights to the individual assets and obligations for the individual liabilities. An appendix to Section 3056, which is an integral part of the section, has been added to assist investors in determining if they have a right to the net assets of the jointly controlled enterprise or rights to the individual assets and obligations for the individual liabilities relating to such arrangement. This appendix includes factors an investor should consider in its analysis, a table with the common terms in contractual arrangements that provide evidence of the substance of the interest and a decision tree summarizing the process to analyze the arrangement. An investor with an interest in a jointly controlled enterprise must make an accounting policy choice to account for its interests to: use the equity method; use the cost method; 14
perform an analysis of its interests in all of its joint arrangements that are jointly controlled enterprises to determine the nature of the interests and apply an accounting policy that is consistent therewith: - for those interests that represent interests in the net assets, the investor accounts for them using the equity or the cost method; - for those interests the investor determines represent rights to the individual assets and obligations for the individual liabilities, it accounts for them on the same basis as jointly controlled operations or assets as appropriate; that is, by accounting for its share of the assets, liabilities, revenues and expenses, based on all the relevant facts and circumstances of the arrangement. All interests in jointly controlled enterprises must be accounted for by applying the same accounting method (i.e. the equity method, the cost method or the analysis of the interests). The three steps in analyzing the substance of an investor s interest in a jointly controlled enterprise are to look at its legal form and the terms of the contractual arrangement, and to consider other facts and circumstances. When reviewing the other facts and circumstances of the arrangement, the investor should ascertain whether the jointly controlled enterprise: carries activities primarily aim to provide the investors with an output (which indicates that the investors have rights to substantially all the economic benefits of the assets held in the enterprise); and depends on the investors on a continuous basis to settling the liabilities from the activities it conducts (which indicates that the investors essentially have an obligation for the liabilities of the enterprise). When both of these criteria are met, in substance, the investors have rights to the individual assets and obligations for the individual liabilities relating to the jointly controlled enterprise. Contributions and transactions For contributions to a joint arrangement, Section 3056 has removed the requirement of Section 3055 to defer and amortize the portion of a gain that does not relate to the amount of cash received or fair value of other assets received that do not represent a claim on the assets of the joint arrangement. The other basic principles of accounting for contributions and transactions with joint arrangements remain unchanged; in particular, a gain or loss from a transaction with a joint arrangement is recognized in the financial statements of the investor only to the extent of the interests of the non-related investors. The guidance also remains unchanged related to a transaction between an investor and a 15
joint arrangement that provides evidence of a decline in the value of the assets received or transferred. Impairment Section 3056 does not include requirements regarding impairment of an interest in a joint arrangement accounted for using the equity or the cost method; rather, it refers to Section 3051 for guidance. According to the requirements of Section 3051, an investor must assess whether there are any indications that an investment may be impaired; this requirement is consistent with the guidance in Section 3055. Assessing impairment of an investor s share of any assets of a joint arrangement that are recorded in the investor s balance sheet is subject to the impairment requirements of the relevant standards (e.g., Section 3063, Impairment of Long-lived Assets, or Section 3064, Goodwill and Intangible Assets). Presentation and disclosure Section 3056 carries forward the presentation requirements of Section 3055 that require the presentation of certain items separately in the balance sheet, notably the interests in joint arrangements accounted for using the equity method or accounted for using the cost method. Income from those investments must also be presented separately in the income statement. As there is no longer an accounting policy choice for jointly controlled operations and jointly controlled assets, Section 3056 only requires disclosure of the method used to account for interests in a jointly controlled enterprise. Investors accounting for their interests in joint arrangements using the cost or equity method must provide all the relevant disclosures for investments accounted for using either of those methods included in Section 3051. Illustrative examples Contrary to Section 3055, Section 3056 does not include any illustrative examples with regard to the application of the standard s principles. The examples presented in Section 3055 are related to accounting for contributions to a joint venture and transactions in the normal course of operations between a venturer and a joint venture. In the examples presented, the venturer uses the proportionate consolidation method. These examples have not been adapted to reflect the requirements in Section 3056. Effective date and transition Section 3056 and the related consequential amendments apply to fiscal years beginning on or after January 1, 2016; however, earlier application is permitted. It is important to note that if an investor elects to early adopt Section 3056, it must also apply the amendments to Section 3051 at the same time. 16
Section 3056 provides specific transitional provisions where an investor must: transition from proportionate consolidation to the cost or equity method; or transition from the cost or equity method to accounting for the investor s interests in the individual assets and liabilities of a joint arrangement. The next two sections discuss each of these transitional provisions in more detail. Transition guidance From proportionate consolidation to the cost or equity method The following chart presents the steps of the transitional provisions of Section 3056 to be applied to evaluate an interest in a joint arrangement when the assets and liabilities were previously proportionately consolidated: 17
Transition guidance From the cost or equity method to accounting for the investor s interests in the individual assets and liabilities of a joint arrangement The following chart presents the three different options an investor has to choose from when measuring its share of the assets and liabilities of the joint arrangement: Consequential amendments Section 1500, First-time Adoption Section 1500 has been amended to permit a first-time adopter of ASPE to apply the transitional provisions in Section 3056. Section 1506, Accounting Changes Section 1506 was amended to clarify that the accounting policy choice related to jointly controlled enterprises is exempted from meeting the relevance and reliability criteria. Section 1520, Income Statement Section 1520 has been amended to reflect the requirement to present separately, on the face of the income statement, the income from investments in joint arrangements accounted for using the cost or equity method. Section 1521, Balance Sheet Section 1521 was amended to reflect the requirement to present separately, on the face of the balance sheet, investments in joint arrangements accounted for using the cost or equity method. 18
Amendments to Section 3051, Investments Section 3051 was amended as a result of the issuance of the new standards on subsidiaries and joint arrangements. The amendments: clarify that the scope includes investments subject to significant influence and certain other non-financial instruments, such as works of art and other tangible assets held for investment purpose, but does not include interests in subsidiaries and in joint arrangements unless they are accounted for using the cost or equity method; and add guidance on contributions and other transactions between an investor and an equity-accounted investee that is consistent with the guidance in Section 3056. Effective date and transition Section 3051 and the related consequential amendments apply to fiscal years beginning on or after January 1, 2016; however, earlier application is permitted. It is important to note that if an enterprise elects to early adopt Section 3051, it must also apply Section 3056 at the same time. The amendments to Section 3051 may be applied prospectively. Consequential amendments Section 1500, First-time Adoption Section 1500 has been amended to permit a first-time adopter of ASPE to apply the transitional provisions in amended Section 3051. Section 3831, Non-monetary Transactions Section 3831 has been amended to refer to the guidance in Section 3051, in addition to the guidance in Section 3056, on the accounting for gains or losses from non-monetary transactions. Consequential amendments to Section 4450, Reporting Controlled and Related Entities by Not-for-Profit Organizations, of Part III of the CPA Canada Handbook Accounting, Accounting Standards for Not-for-Profit Organizations In the case of a not-for-profit organization with an interest in a joint venture, 2 proportionate consolidation is still permitted. However, since this method is not one of the choices available under Section 3056, Section 4450 has been amended to include the definition of proportionate consolidation. 2 The terminology used in Section 3055 continues to be used in Section 4450. 19
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