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Fair value measurement: unit of account

Date recorded:

The IASB has been discussing the unit of account for financial assets that are investments in subsidiaries, joint ventures and associates and their measurement at fair value when those investments are quoted. On the basis of these discussions, the IASB decided to publish an exposure draft to propose a narrow scope amendment to the Standard that deal with the accounting of those investments.

At this meeting, the IASB discussed transition provisions. The staff commented that the amendment would not constitute a change in accounting policy as there was no change in the measurement basis. Furthermore, for the purposes of impairment testing and measuring CGUs, the staff noted that applying the amendment retrospectively could potentially result in reversals of goodwill impairment which were not allowed under paragraph 124 of IAS 36 Impairment of Assets. The staff therefore proposed prospective application. 

The staff did however recommend that for the purposes of IAS 36 a disclosure be made of the impact (i.e. the impairment loss amount, if any, that would have been recognised) in the immediately preceding period presented if the amendment had been applied. 

The staff also asked the Board if they were satisfied that all the due process requirements had been met and whether the staff had permission to start the balloting process. 

The Board agreed with all the staff recommendations and were also satisfied with due process and agreed for the staff to start the drafting and balloting process. 

One Board member made a comment (which was supported by a few others) that the basis for conclusions should make it clear that the Board acknowledge that this proposed amendment was not necessarily the amount market participants would transact at, but that this was rather an exception (or convention) for accounting purposes.

One Board member indicated that he intends to dissent. He stated that the Board indicated that the unit of account was the interest as a whole and as such there was no observable price to measure the unit of account. What the Board was proposing did not reflect what market participants would consider based on the unit of account.  

Correction list for hyphenation

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