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Investment Entities: Applying the Consolidation Exception (Amendments to IFRS 10, IFRS 12 and IAS 28) [Completed]

Effective date:  Annual periods beginning on or after January 1, 2016. Earlier adoption is permitted.

Transitional provisions:

The amendments must be applied retrospectively and are effective for annual periods beginning on or after January 1, 2016. Earlier adoption is permitted.

Last updated:

April 2015

Overview

The amendments address issues that have arisen in the context of applying the consolidation exception for investment entities, as follows:

  1. the amendments confirm that the exemption from preparing consolidated financial statements for an intermediate parent entity is available to a parent entity that is a subsidiary of an investment entity, even if the investment entity measures all of its subsidiaries at fair value;
  2. a subsidiary that provides services related to the parent's investment activities should not be consolidated if the subsidiary itself is an investment entity;
  3. when applying the equity method to an associate or a joint venture, a non-investment entity investor in an investment entity may retain the fair value measurement applied by the associate or joint venture to its interests in subsidiaries; and
  4. an investment entity measuring all of its subsidiaries at fair value provides the disclosures relating to investment entities required by IFRS 12.

Other developments

April 2015

In April 2015, Highlight Summary I.30 was issued adding these amendments to the “IFRSs Issued but Not Yet Effective” section of the CPA Canada Handbook, Part 1. Of note, new IFRSs only become part of Canadian GAAP once they have been issued in the CPA Canada Handbook.

December 2014

On December 18, 2014, the IASB issued Investment Entities: Applying the Consolidation Exception (Amendments to IFRS 10, IFRS 12 and IAS 28).

IFRS 10 Consolidated Financial Statements, IFRS 12 Disclosure of Interests in Other Entities and IAS 28 Investments in Associates and Joint Ventures (amended in 2011) have been revised to incorporate amendments issued by the International Accounting Standards Board (IASB) in December 2014. The amendments clarify that:
  • a parent that is an investment entity does not present consolidated financial statements when it measures all of its subsidiaries at fair value in accordance with IFRS 10;
  • an investment entity consolidates a subsidiary that is not itself an investment entity and whose main purpose and activities are providing services that relate to the investment entity's investment activities;
  • an investment entity that prepares financial statements in which all of its subsidiaries are measured at fair value in accordance with IFRS 10 is within the scope of IFRS 12; and
  • when applying the equity method to an associate or joint venture that is an investment entity, an entity that is not itself an investment entity may retain the fair value measurements used by the investment entity associate or joint venture for its subsidiaries.

Correction list for hyphenation

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