IAS 28 — Potential effect of IFRS 3 and IAS 27 (as revised in 2008) on equity method accounting
The staff noted that the FASB's Emerging Issues Task Force (EITF) added EITF Issue No. 08-6 Equity Method Investment Accounting Considerations to its agenda. This draft EITF addresses several potential issues arising from the issue of the revised business combination standards (these are in large parts converged between US GAAP and IFRS).
Four issues are addressed:
- How the initial carrying value of an equity method investment should be determined
- How an impairment assessment of an underlying indefinite-lived intangible asset of an equity method investment should be performed
- How an equity method investee's issuance of shares should be accounted for
- How to account for a change in an investment from the equity method to the cost method.
The IFRIC had some discussion in principle over the equity method of accounting and issues arising from its application. With regard to the four issues the EITF had identified the IFRIC agreed that the staff should come back with further analysis on the issues of determining the initial carrying amount of an equity method investment and how an equity method investee's issuance of shares should be accounted for. For the remaining two issues the IFRIC will issue a tentative agenda decision not to take them on the agenda.
