Leading view

The proportionate consolidation method for accounting for unconsolidated entities should be rejected in favor of the equity or expanded equity method.

* The main objection to the proportionate consolidation method is that it results in a loss of information because numbers related to unconsolidated subsidiaries are combined with numbers related to the holding company and its fully consolidated subsidiaries [p. 2, 9-10, 13-14, 16]

* There is no strong preference among users for either the equity or expanded equity method provided the same level of information (including footnote disclosures) is available under each method [p. 2-3, 9-10, 13- 14]

* Users have no strong views on the appropriateness of the 20% criterion used to determine whether an unconsolidated entity should be accounted for using (primarily) the equity method [p. 7-8].

More detailed information about unconsolidated entities in general and about "significant" investees in particular should be provided in financial statements.

* Investments in unconsolidated entities are increasing in popularity and users believe that the current disclosure of information about them is not satisfactory [p. 3-7, 11-12, 16-17]. Many (more creditors than investors ) would prefer to have full financial statements for all or at least for each "significant" unconsolidated entity and would define "significant" using a 10% criterion rather than the SEC's 20% criterion (prescribed by Rule 3-09 of Regulation S-X) [p. 4-5, 10-12, 16-17]. Some users would restrict the "full financial statements" requirement to only significant investee using a 20% criterion because of cost/benefit considerations [p. 3, 6]. Some investors believe that it is more important to get more information about each significant investee than aggregated information for "nonsignificant" investees because the latter information might be misleading [p. 6-7]. At a minimum, information about the composition of the "other income" line in the income statement and the "equity investment" line in the balance sheet should be provided [p. 3, 6].

Alternative view

No preference for any of the three methods as long as appropriate disclosure of information about unconsolidated entities is provided in the notes to the investor's financial statements.

* This view is conditional upon getting more information in the notes to the financial statements than is currently provided [p. 11, 16].