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Final stage

In May 2008 the International Accounting Standards Board issued Cost of an Investment in a Subsidiary, Jointly Controlled Entity or Associate (Amendments to IFRS 1 and IAS 27). The amendments have an effective date of 1 January 2009, but earlier adoption is permitted.


The amendments to IFRS 1 allow first-time adopters, in their separate financial statements, to use a deemed cost option for determining the cost (in accordance with paragraph 38(a) of IAS 27) of an investment in a subsidiary, jointly controlled entity or associate.

The deemed cost of such an investment shall be its :

  • fair value (determined in accordance with IAS 39 Financial Instruments: Recognition and Measurement) at the entity's date of transition to IFRSs; or
  • previous GAAP carrying amount at that date

A first-time adopter may choose either deemed cost option to measure its investment in each subsidiary, jointly controlled entity or associate that it elects to measure using a deemed cost.

The amendments to IAS 27 remove the definition of the "cost method" from paragraph 4 of that standard.

Additionally, when an entity reorganises the structure of its group by establishing a new entity as its parent (subject to specific criteria), the amendments require the new parent to measure cost (for the purpose of paragraph 38(a) of IAS 27) as the carrying amount of its share of the equity items shown in the separate financial statements of the original parent at the date of the reorganisation.