IAS 28 — Investments in Associates (2003) - IAS Plus

IAS 28 outlines the accounting for investments in associates. An associate is an entity over which an investor has significant influence, being the power to ... IASplus IASplus Global(English) Global(English) Global(Deutsch) Canada(English) Canada(Français) UnitedKingdom(English) LoginorRegister DeloitteUser? Login LoginName Password Login Register | Forgotpassword Welcome Myaccount Logout IASplus Global(English) Global(English) Global(Deutsch) Canada(English) Canada(Français) UnitedKingdom(English) Togglenavigation⋮ Searchsite Togglenavigation Home News Publications Meetings Standards Projects Jurisdictions Resources MyIASPlus Topics Communications Togglenavigation⋮ Searchsite Navigation Standards Effectivedates InternationalFinancialReportingStandards InternationalAccountingStandards IFRICInterpretations SICInterpretations Otherpronouncements Navigation InternationalAccountingStandards IAS1—PresentationofFinancialStatements IAS2—Inventories IAS7—StatementofCashFlows IAS8—AccountingPolicies,ChangesinAccountingEstimatesandErrors IAS10—EventsAftertheReportingPeriod IAS11—ConstructionContracts IAS12—IncomeTaxes IAS14—SegmentReporting(Superseded) IAS15—InformationReflectingtheEffectsofChangingPrices(Withdrawn) IAS16—Property,PlantandEquipment IAS17—Leases IAS18—Revenue IAS19—EmployeeBenefits(2011) IAS19—EmployeeBenefits(1998)(superseded) IAS20—AccountingforGovernmentGrantsandDisclosureofGovernmentAssistance IAS21—TheEffectsofChangesinForeignExchangeRates IAS22—BusinessCombinations(Superseded) IAS23—BorrowingCosts IAS24—RelatedPartyDisclosures IAS26—AccountingandReportingbyRetirementBenefitPlans IAS27—SeparateFinancialStatements(2011) IAS27—ConsolidatedandSeparateFinancialStatements(2008) IAS28—InvestmentsinAssociatesandJointVentures(2011) IAS28—InvestmentsinAssociates(2003) IAS29—FinancialReportinginHyperinflationaryEconomies IAS30—DisclosuresintheFinancialStatementsofBanksandSimilarFinancialInstitutions IAS31—InterestsInJointVentures IAS32—FinancialInstruments:Presentation IAS33—EarningsPerShare IAS34—InterimFinancialReporting IAS35—DiscontinuingOperations(Superseded) IAS36—ImpairmentofAssets IAS37—Provisions,ContingentLiabilitiesandContingentAssets IAS38—IntangibleAssets IAS39—FinancialInstruments:RecognitionandMeasurement IAS40—InvestmentProperty IAS41—Agriculture Info IAS28—InvestmentsinAssociates(2003) QuickArticleLinks Overview IAS28InvestmentsinAssociatesoutlinestheaccountingforinvestmentsinassociates.Anassociateisanentityoverwhichaninvestorhassignificantinfluence,beingthepowertoparticipateinthefinancialandoperatingpolicydecisionsoftheinvestee(butnotcontrolorjointcontrol),andinvestmentsinassociatesare,withlimitedexceptions,requiredtobeaccountedforusingtheequitymethod. IAS28wasreissuedinDecember2003,appliestoannualperiodsbeginningonorafter1January2005,andissupersededbyIAS28InvestmentsinAssociatesandJointVenturesandIFRS12DisclosureofInterestsinOtherEntitieswitheffectfromannualperiodsbeginningonorafter1January2013. HistoryofIAS28 DateDevelopmentComments July 1986 ExposureDraftE28AccountingforInvestmentsinAssociatesandJointVentures April 1989 IAS28AccountingforInvestmentsinAssociatesissued Effective1January1990 1994 IAS28wasreformatted December 1998 AmendedbyIAS39FinancialInstruments:RecognitionandMeasurement Effective1January2001 18 December 2003 IAS28InvestmentsinAssociatesissued Effectiveforannualperiodsbeginningonorafter1January2005 10 January 2008 AmendedbyIFRS3BusinessCombinations(lossofsignificantinfluence) Effectiveforannualperiodsbeginningonorafter1July2009 22 May 2008 AmendedbyImprovementstoIFRSs(impairmenttesting) Effectiveforannualperiodsbeginningonorafter1January2009 12 May 2011 SupersededbyIAS28InvestmentsinAssociatesandJointVentures(2011) Effectiveforannualperiodsbeginningonorafter1January2013 RelatedInterpretations IAS28(2003)supersededSIC-3EliminationofUnrealisedProfitsandLossesonTransactionswithAssociates IAS28(2003)supersededSIC-20EquityAccountingMethod–RecognitionofLosses IAS28(2003)supersededSIC-33ConsolidationandEquityMethod–PotentialVotingRightsandAllocationofOwnershipInterest AmendmentsunderconsiderationbytheIASB None SummaryofIAS28 Scope IAS28appliestoallinvestmentsinwhichaninvestorhassignificantinfluencebutnotcontrolorjointcontrolexceptforinvestmentsheldbyaventurecapitalorganisation,mutualfund,unittrust,andsimilarentitythataredesignatedunderIAS39tobeatfairvaluewithfairvaluechangesrecognisedinprofitorloss.[IAS28.1] Keydefinitions[IAS28.2] Associate:anentityinwhichaninvestorhassignificantinfluencebutnotcontrolorjointcontrol. Significantinfluence:powertoparticipateinthefinancialandoperatingpolicydecisionsbutnotcontrolthem. Equitymethod:amethodofaccountingbywhichanequityinvestmentisinitiallyrecordedatcostandsubsequentlyadjustedtoreflecttheinvestor'sshareofthenetassetsoftheassociate(investee). Identificationofassociates Aholdingof20%ormoreofthevotingpower(directlyorthroughsubsidiaries)willindicatesignificantinfluenceunlessitcanbeclearlydemonstratedotherwise.Iftheholdingislessthan20%,theinvestorwillbepresumednottohavesignificantinfluenceunlesssuchinfluencecanbeclearlydemonstrated.[IAS28.6] Theexistenceofsignificantinfluencebyaninvestorisusuallyevidencedinoneormoreofthefollowingways:[IAS28.7] representationontheboardofdirectorsorequivalentgoverningbodyoftheinvestee participationinthepolicy-makingprocess materialtransactionsbetweentheinvestorandtheinvestee interchangeofmanagerialpersonnel provisionofessentialtechnicalinformation Potentialvotingrightsareafactortobeconsideredindecidingwhethersignificantinfluenceexists.[IAS28.9] Accountingforassociates Initsconsolidatedfinancialstatements,aninvestorshouldusetheequitymethodofaccountingforinvestmentsinassociates,otherthaninthefollowingthreeexceptionalcircumstances: Aninvestmentinanassociateheldbyaventurecapitalorganisationoramutualfund(orsimilarentity)andthatuponinitialrecognitionisdesignatedasheldfortradingunderIAS39.UnderIAS39,thoseinvestmentsaremeasuredatfairvaluewithfairvaluechangesrecognisedinprofitorloss.[IAS28.1] AninvestmentclassifiedasheldforsaleinaccordancewithIFRS5.[IAS28.13(a)] Aparentthatisexemptedfrompreparingconsolidatedfinancialstatementsbyparagraph10ofIAS27mayprepareseparatefinancialstatementsasitsprimaryfinancialstatements.Inthoseseparatestatements,theinvestmentintheassociatemaybeaccountedforbythecostmethodorunderIAS39.[IAS28.13(b)] Aninvestorneednotusetheequitymethodifallofthefollowingfourconditionsaremet:[IAS28.13(c)] theinvestorisitselfawholly-ownedsubsidiary,orisapartially-ownedsubsidiaryofanotherentityanditsotherowners,includingthosenototherwiseentitledtovote,havebeeninformedabout,anddonotobjectto,theinvestornotapplyingtheequitymethod; theinvestor'sdebtorequityinstrumentsarenottradedinapublicmarket; theinvestordidnotfile,norisitintheprocessoffiling,itsfinancialstatementswithasecuritiescommissionorotherregulatoryorganisationforthepurposeofissuinganyclassofinstrumentsinapublicmarket;and theultimateoranyintermediateparentoftheinvestorproducesconsolidatedfinancialstatementsavailableforpublicusethatcomplywithInternationalFinancialReportingStandards. Applyingtheequitymethodofaccounting Basicprinciple.Undertheequitymethodofaccounting,anequityinvestmentisinitiallyrecordedatcostandissubsequentlyadjustedtoreflecttheinvestor'sshareofthenetprofitorlossoftheassociate.[IAS28.11] Distributionsandotheradjustmentstocarryingamount.Distributionsreceivedfromtheinvesteereducethecarryingamountoftheinvestment.Adjustmentstothecarryingamountmayalsoberequiredarisingfromchangesintheinvestee'sothercomprehensiveincomethathavenotbeenincludedinprofitorloss(forexample,revaluations).[IAS28.11] Potentialvotingrights.Althoughpotentialvotingrightsareconsideredindecidingwhethersignificantinfluenceexists,theinvestor'sshareofprofitorlossoftheinvesteeandofchangesintheinvestee'sequityisdeterminedonthebasisofpresentownershipinterests.Itshouldnotreflectthepossibleexerciseorconversionofpotentialvotingrights.[IAS28.12] Implicitgoodwillandfairvalueadjustments.Onacquisitionoftheinvestmentinanassociate,anydifference(whetherpositiveornegative)betweenthecostofacquisitionandtheinvestor'sshareofthefairvaluesofthenetidentifiableassetsoftheassociateisaccountedforlikegoodwillinaccordancewithIFRS3BusinessCombinations.Appropriateadjustmentstotheinvestor'sshareoftheprofitsorlossesafteracquisitionaremadetoaccountforadditionaldepreciationoramortisationoftheassociate'sdepreciableoramortisableassetsbasedontheexcessoftheirfairvaluesovertheircarryingamountsatthetimetheinvestmentwasacquired.[IAS28.23] Impairment.TheimpairmentindicatorsinIAS39FinancialInstruments:RecognitionandMeasurement,applytoinvestmentsinassociates.[IAS28.31]Ifimpairmentisindicated,theamountiscalculatedbyreferencetoIAS36ImpairmentofAssets.Theentirecarryingamountoftheinvestmentistestedforimpairmentasasingleasset,thatis,goodwillisnottestedseparately.[IAS28.33]Therecoverableamountofaninvestmentinanassociateisassessedforeachindividualassociate,unlesstheassociatedoesnotgeneratecashflowsindependently.[IAS28.34] Discontinuingtheequitymethod.Useoftheequitymethodshouldceasefromthedatethatsignificantinfluenceceases.Thecarryingamountoftheinvestmentatthatdateshouldberegardedasanewcostbasis.[IAS28.18-19] Transactionswithassociates.Ifanassociateisaccountedforusingtheequitymethod,unrealisedprofitsandlossesresultingfromupstream(associatetoinvestor)anddownstream(investortoassociate)transactionsshouldbeeliminatedtotheextentoftheinvestor'sinterestintheassociate.However,unrealisedlossesshouldnotbeeliminatedtotheextentthatthetransactionprovidesevidenceofanimpairmentoftheassettransferred.[IAS28.22] Dateofassociate'sfinancialstatements.Inapplyingtheequitymethod,theinvestorshouldusethefinancialstatementsoftheassociateasofthesamedateasthefinancialstatementsoftheinvestorunlessitisimpracticabletodoso.[IAS28.24]Ifitisimpracticable,themostrecentavailablefinancialstatementsoftheassociateshouldbeused,withadjustmentsmadefortheeffectsofanysignificanttransactionsoreventsoccurringbetweentheaccountingperiodends.However,thedifferencebetweenthereportingdateoftheassociateandthatoftheinvestorcannotbelongerthanthreemonths.[IAS28.25] Associate'saccountingpolicies.Iftheassociateusesaccountingpoliciesthatdifferfromthoseoftheinvestor,theassociate'sfinancialstatementsshouldbeadjustedtoreflecttheinvestor'saccountingpoliciesforthepurposeofapplyingtheequitymethod.[IAS28.27] Lossesinexcessofinvestment.Ifaninvestor'sshareoflossesofanassociateequalsorexceedsits"interestintheassociate",theinvestordiscontinuesrecognisingitsshareoffurtherlosses.The"interestinanassociate"isthecarryingamountoftheinvestmentintheassociateundertheequitymethodtogetherwithanylong-termintereststhat,insubstance,formpartoftheinvestor'snetinvestmentintheassociate.[IAS28.29]Aftertheinvestor'sinterestisreducedtozero,additionallossesarerecognisedbyaprovision(liability)onlytotheextentthattheinvestorhasincurredlegalorconstructiveobligationsormadepaymentsonbehalfoftheassociate.Iftheassociatesubsequentlyreportsprofits,theinvestorresumesrecognisingitsshareofthoseprofitsonlyafteritsshareoftheprofitsequalstheshareoflossesnotrecognised.[IAS28.30] Partialdisposalsofassociates.Ifaninvestorlosessignificantinfluenceoveranassociate,itderecognisesthatassociateandrecognisesinprofitorlossthedifferencebetweenthesumoftheproceedsreceivedandanyretainedinterest,andthecarryingamountoftheinvestmentintheassociateatthedatesignificantinfluenceislost. Separatefinancialstatementsoftheinvestor Equityaccountingisrequiredintheseparatefinancialstatementsoftheinvestorevenifconsolidatedaccountsarenotrequired,forexample,becausetheinvestorhasnosubsidiaries.ButequityaccountingisnotrequiredwheretheinvestorwouldbeexemptfrompreparingconsolidatedfinancialstatementsunderIAS27.Inthatcircumstance,insteadofequityaccounting,theparentwouldaccountfortheinvestmenteither(a)atcostor(b)inaccordancewithIAS39. Disclosure Thefollowingdisclosuresarerequired:[IAS28.37] fairvalueofinvestmentsinassociatesforwhichtherearepublishedpricequotations summarisedfinancialinformationofassociates,includingtheaggregatedamountsofassets,liabilities,revenues,andprofitorloss explanationswheninvestmentsoflessthan20%areaccountedforbytheequitymethodorwheninvestmentsofmorethan20%arenotaccountedforbytheequitymethod useofareportingdateofthefinancialstatementsofanassociatethatisdifferentfromthatoftheinvestor natureandextentofanysignificantrestrictionsontheabilityofassociatestotransferfundstotheinvestorintheformofcashdividends,orrepaymentofloansoradvances unrecognisedshareoflossesofanassociate,bothfortheperiodandcumulatively,ifaninvestorhasdiscontinuedrecognitionofitsshareoflossesofanassociate explanationofanyassociateisnotaccountedforusingtheequitymethod summarisedfinancialinformationofassociates,eitherindividuallyoringroups,thatarenotaccountedforusingtheequitymethod,includingtheamountsoftotalassets,totalliabilities,revenues,andprofitorloss Thefollowingdisclosuresrelatingtocontingentliabilitiesarealsorequired:[IAS28.40] investor'sshareofthecontingentliabilitiesofanassociateincurredjointlywithotherinvestors contingentliabilitiesthatarisebecausetheinvestorisseverallyliableforallorpartoftheliabilitiesoftheassociate Venturecapitalorganisations,mutualfunds,andothersimilarentitiesmustprovidedisclosuresaboutnatureandextentofanysignificantrestrictionsontransferoffundsbyassociates.[IAS28.1] Presentation Equitymethodinvestmentsmustbeclassifiedasnon-currentassets.[IAS28.38] Theinvestor'sshareoftheprofitorlossofequitymethodinvestments,andthecarryingamountofthoseinvestments,mustbeseparatelydisclosed.[IAS28.38] Theinvestor'sshareofanydiscontinuingoperationsofsuchassociatesisalsoseparatelydisclosed.[IAS28.38] Theinvestor'sshareofchangesrecogniseddirectlyintheassociate'sothercomprehensiveincomearealsorecognisedinothercomprehensiveincomebytheinvestor,withdisclosureinthestatementofchangesinequityasrequiredbyIAS1PresentationofFinancialStatements.[IAS28.39] Quicklinks IAS28—Itemsnotaddedtotheagenda Relatednews IASBproposesclarificationsonwhenunrealisedprofitsareeliminatedwhenequityaccounting 13Dec2012 DeloittecommentlettersonrecenttentativeagendadecisionsoftheIFRSInterpretationsCommittee 28Nov2012 IASBpublishesproposalsforlimitedamendmentstoequityaccounting 22Nov2012 NotesfromtheNovemberIFRSInterpretationsCommitteemeeting 07Nov2011 IVSCandIPEVseekconsistencyinprivateequityvaluationstandards 13Oct2011 EFRAGUpdatewithmeetingsummaryfortheJuneEFRAGTEGmeeting 17Jun2011 AllRelated RelatedPublications IFRSinFocus—IASBissuesexposuredraft:AnnualimprovementstoIFRSs2014-2016cycle 20Nov2015 DeloittecommentletteronIFRSInterpretationsCommitteetentativeagendadecision:IAS28—Impairmentofinvestmentsinassociatesinseparatefinancialstatements 28Nov2012 IASPlusnewsletter-IASBreleasesomnibusexposuredraftofannualimprovements 18Sep2009 IASPlusnewsletter—ImprovementstoIFRSs2008 26May2008 AllRelated RelatedStandards IAS28—InvestmentsinAssociatesandJointVentures(2011) AllRelated RelatedInterpretations SIC-3—EliminationofUnrealisedProfitsandLossesonTransactionswithAssociates SIC-20—EquityAccountingMethod–RecognitionofLosses SIC-33—ConsolidationandEquityMethod–PotentialVotingRightsandAllocationofOwnershipInterests AllRelated RelatedProjects Annualimprovements—2006-2008cycle ImprovementstoexistingInternationalAccountingStandards(2001-2003) AllRelated Contactus About Legal Privacy Cookies FAQs ©2022.SeeLegalformoreinformation. 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