Investment entities (IASB only)
The IASB discussed the interaction of the investment entity proposals with IAS 28. The exposure draft proposed to replace the current fair value option in IAS 28 available when ‘an associate or a joint venture is held by, or is held indirectly through, an entity that is a venture capital organisation, or a mutual fund, unit trust and similar entities including investment-linked insurance funds’ with a requirement to measure an investment entities interests in associates or joint ventures at fair value through profit or loss.
Most constituents agreed with the requirement to use fair value for an investment entity’s interests in associates and joint ventures, but some noted that subsidiaries that provide services to the investment entity are consolidated and therefore suggested that associates or joint ventures that provide services should have the equity method of accounting applied rather than fair value. However, a majority of constituents disagreed with removing the fair value option available in IAS 28 as many entities that may not meet the definition of an investment entity currently avail themselves of this option.
Based on the constituent feedback, the IASB tentatively decided to require investment entities to measure their investments in associates and joint ventures providing services to the investment entity using the equity method of accounting and all other investments in associates and joint ventures at fair value through profit or loss. The IASB also tentatively decided to retain the fair value option in IAS 28 for venture capital organisations, mutual funds, unit trusts, investment-linked insurance funds and similar entities that are not investment entities.