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The International Accounting Standards Board (IASB) is undertaking research to assess whether application questions with the equity method as set out in IAS 28 Investments in Associates and Joint Ventures can be addressed in consolidated and individual financial statements by identifying and explaining principles in IAS 28.

IASB® Update September 2022

The IASB met on 20 September 2022 to continue its discussions on these two application questions:

  1. how to measure the portion of an investment to be derecognised on the disposal of an interest in an associate entity while retaining significant influence; and
  2. how to apply the equity method to changes in an associate’s net assets that change the investor’s ownership interest.

The IASB also started to discuss the application question ‘how should an investor recognise gains and losses that arise from the sale of subsidiary to an associate, applying the requirements in IFRS 10 Consolidated Financial Statements and IAS 28 Investments in Associates and Joint Ventures?’.

Partial disposals—How to measure the portion to be derecognised (Agenda Paper 13A)

The IASB asked the staff to consider further how its preferred approach for applying the equity method to acquisitions and disposals while retaining significant influence would be applied on initial recognition and on subsequent measurement of the investment in the associate.

Changes in an associate’s net assets that change the investor’s ownership interest (Agenda Paper 13B)

The IASB discussed how to apply the equity method to changes in an associate’s net assets that change the investor’s ownership interest from the issue of equity instruments.

The IASB tentatively decided that when the investor’s ownership interest increases and retains significant influence, an investor applying the preferred approach would recognise that increase as a purchase of an additional interest.

Ten of 11 IASB members agreed with this decision.

The IASB tentatively decided that when the investor’s ownership interest decreases and retains significant influence, an investor applying the preferred approach would recognise that decrease as a partial disposal.

Ten of 11 IASB members agreed with this decision.

Transactions between investor and associate—An acknowledged inconsistency between the requirements in IFRS 10 Consolidated Financial Statements and IAS 28 Investments in Associates and Joint Ventures (Agenda Paper 13C)

The IASB discussed four alternatives for how an investor recognises gains and losses that arise on the sale of a subsidiary to its associate. The IASB was not asked to make any decisions.

The IASB asked the staff to continue exploring the four alternatives and bring a decision-making paper for consideration at a future meeting.

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