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IFRS amendments to IAS 28

IFRS amendments to IAS 28: In April 2001 the International Accounting Standards Board (the Board) adopted IAS 28
Accounting for Investments in Associates, which had originally been issued by the International
Accounting Standards Committee in April 1989. IAS 28 Accounting for Investments in Associates
replaced those parts of IAS 3 Consolidated Financial Statements (issued in June 1976) that dealt
with accounting for investment in associates.
In December 2003 the Board issued a revised IAS 28 with a new title—Investments in Associates.
This revised IAS 28 was part of the Board’s initial agenda of technical projects and also
incorporated the guidance contained in three related Interpretations (SIC-3 Elimination of
Unrealised Profits and Losses on Transactions with Associates, SIC-20 Equity Accounting
Method—Recognition of Losses and SIC-33 Consolidation and Equity Method—Potential Voting Rights
and Allocation of Ownership Interests).
In May 2011 the Board issued a revised IAS 28 with a new title—Investments in Associates and
Joint Ventures.
In September 2014 IAS 28 was amended by Sale or Contribution of Assets between an Investor and
its Associate or Joint Venture (Amendments to IFRS 10 and IAS 28). These amendments
addressed the conflicting accounting requirements for the sale or contribution of assets to a
joint venture or associate.

IFRS amendments to IAS 28

IFRS amendments to IAS 28

IFRS amendments to IAS 28: The effective date

The effective date of this amendment was deferred in December 2015 to a date to be determined by Effective Date of Amendments to IFRS 10 and IAS 28. In December 2014 IAS 28 was amended by Investment Entities: Applying the Consolidation Exception (Amendments to IFRS 10, IFRS 12 and IAS 28). These amendments provided relief whereby a non-investment entity investor can, when applying the equity method, choose to retain the fair value through profit or loss measurement applied by its investment entity associates and joint ventures to their subsidiaries.
In December 2015 the mandatory effective date of the above amendments were indefinitely deferred by the Effective Date of Amendments to IFRS 10 and IAS 28. Other Standards have made minor consequential amendments to IAS 28. They include IFRS 9 Financial Instruments (issued July 2014) and Equity Method in Separate Financial Statements (Amendments to IAS 27) (issued August 2014). IAS 28.

International Accounting Standard 28

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International Accounting Standard 28 Investments in Associates and Joint Ventures (IAS 28) is
set out in paragraphs 1–47. All the paragraphs have equal authority but retain the IASC
format of the Standard when it was adopted by the IASB. IAS 28 should be read in the
context of its objective and the Basis for Conclusions, the Preface to International Financial
Reporting Standards and the Conceptual Framework for Financial Reporting. IAS 8 Accounting
Policies, Changes in Accounting Estimates and Errors provides a basis for selecting and applying
accounting policies in the absence of explicit guidance.

IFRS amendments to IAS 28

Introduction
IN1 International Accounting Standard 28 Investments in Associates and Joint Ventures (IAS 28) prescribes the accounting for investments in associates and sets out the requirements for the application of the equity method when accounting for
investments in associates and joint ventures.

The Standard is effective for annual periods beginning on or after 1 January
2013. Earlier application is permitted.
Main features of the Standard
IAS 28 (as amended in 2011) is to be applied by all entities that are investors with
joint control of, or significant influence over, an investee.
The Standard defines significant influence as the power to participate in the
financial and operating policy decisions of the investee but is not control or
joint control of those policies.

IFRS 11 Joint Arrangements establishes principles for the financial reporting of
parties to joint arrangements. It defines joint control as the contractually
agreed sharing of control of an arrangement, which exists only when decisions
about the relevant activities require the unanimous consent of the parties
sharing control.

An entity applies IFRS 11 to determine the type of joint arrangement in which it
is involved. Once it has determined that it has an interest in a joint venture, the
entity recognises an investment and accounts for it using the equity method in
accordance with IAS 28 (as amended in 2011), unless the entity is exempted from
applying the equity method as specified in the Standard.

Equity method

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The Standard defines the equity method as a method of accounting whereby the
investment is initially recognised at cost and adjusted thereafter for the
post-acquisition change in the investor’s share of net assets of the investee. The
profit or loss of the investor includes its share of the profit or loss of the investee
and the other comprehensive income of the investor includes its share of other
comprehensive income of the investee.

An entity uses the equity method to account for its investments in associates or
joint ventures in its consolidated financial statements. An entity that does not
have any subsidiaries also uses the equity method to account for its investments
in associates or joint ventures in its financial statements even though those are
not described as consolidated financial statements. An entity could elect to use
the equity method in its separate financial statements that it presents in accordance with IAS 27 Separate Financial Statements.
Exemptions from applying the equity method

The Standard provides exemptions from applying the equity method similar to
those provided in IFRS 10 Consolidated Financial Statements for parents not to
prepare consolidated financial statements.

IFRS amendments to IAS 28

The Standard also provides exemptions from applying the equity method when
the investment in the associate or joint venture is held by, or is held indirectly
through, venture capital organisations, or mutual funds, unit trusts and similar
entities including investment-linked insurance funds. Those investments in
associates and joint ventures may be measured at fair value through profit or
loss in accordance with IFRS 9 Financial Instruments.
Disclosure

The disclosure requirements for entities with joint control of, or significant
influence over, an investee are specified in IFRS 12 Disclosure of Interests in Other
Entities.

IFRS amendments to IAS 28

Objective
The objective of this Standard is to prescribe the accounting for investments in associates and to set out the requirements for the application of the equity method when accounting for investments in associates and joint ventures.
Scope
This Standard shall be applied by all entities that are investors with joint control of, or significant influence over, an investee.
Definitions
The following terms are used in this Standard with the meanings specified:
An associate is an entity over which the investor has significant influence. Consolidated financial statements are the financial statements of a group in which assets, liabilities, equity, income, expenses and cash flows of the parent and its subsidiaries are presented as those of a single economic entity.
The equity method is a method of accounting whereby the investment is initially recognised at cost and adjusted thereafter for the post-acquisition change in the investor’s share of the investee’s net assets.

The investor’s profit or loss includes its share of the investee’s profit or loss and the investor’s other comprehensive income includes its share of the investee’s other comprehensive income.

  • IFRS amendments to IAS 28
    A joint arrangement is an arrangement of which two or more parties
    have joint control.
  • Joint control is the contractually agreed sharing of control of an arrangement, which exists only when decisions about the relevant activities require the unanimous consent of the parties sharing control.
  • A joint venture is a joint arrangement whereby the parties that have joint control of the arrangement have rights to the net assets of the arrangement.
  • A joint venture is a party to a joint venture that has joint control of that joint venture.

Significant influence is the power to participate in the financial and operating policy decisions of the invitee but is not control or joint control of those policies.

IFRS amendments to IAS 28

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