IFRS Implementation issues

Date recorded:

Draft Interpretation of IFRS 9 Financial Instruments and IAS 28 Investments in Associates and Joint Ventures—Long-term interests – Summary of due process followed and technical matters agreed by the IFRS IC — Agenda paper 12A

Background and summary of recommendations from the Interpretations Committee

The IFRS Interpretations Committee (the ‘IC’) received a request relating to the interaction between IFRS 9 and IAS 28 specifically on whether an entity applies IFRS 9, IAS 28 or a combination of both Standards to the measurement of long-term interests in an associate or a joint venture that, in substance, form part of the net investment in the associate or joint venture, but to which the equity method is not applied (long-term interests).

The IC completed its discussion of the issue in the September 2016 meeting with the following recommendations in relation to the draft Interpretation:

  1. Long-term interests are subject to all of the requirements in IFRS 9 as well as to the loss allocation and impairment requirements in IAS 28;
  2. An entity should allocate the IAS 28 impairment loss between the equity method investments and long-term interests in the same order as specified in IAS 28.38 for a loss allocation (i.e. in the reverse order of seniority);
  3. No new disclosure requirements will be added; instead, entities should apply the overall objective in IFRS 12 to ensure that they disclose information that would help users understand the financial effects of long-term interests;
  4. To require retrospective application but with relief from having to restate comparative information, unless an entity chooses to restate the comparative information on initial application of IFRS 9. The same relief applies to insurers applying the temporary exemption from IFRS 9 and to first-time adopters; and
  5. To propose an effective date of 1 January 2018 for the draft Interpretation.

Staff recommendation

The Staff recommends publishing the draft Interpretation with a comment period of 90 days.


The Board rejected the recommendation mainly on the grounds that the proposed interpretation was much wider in scope than the originally submitted narrow-scope question of whether long-term interests were within the scope of IFRS 9, IAS 28 or both Standards. It also touched on the mechanics of equity accounting, the principles of which had already drawn a lot of debate. Many Board members commented that from previous discussions it was clear that an entity should apply both IFRS 9 and IAS 28 to long-term interests. They were concerned that the proposed interpretation would attract many comments from respondents on the mechanics of applying the equity method of accounting, detracting from the core scope issue. The Staff responded that the interpretation was expanded to cater for what-if scenarios that arose during previous discussions.

Next Steps

The Staff agreed to explore other ways to focus on addressing the core scope issue, e.g. through an annual improvement or other educational material.

As a separate matter, the Board asked about the status on the longer term project on equity accounting as this interpretation highlighted some of the problems of equity accounting. The Staff responded that it was in the pipeline and reiterated that there was no quick fix for IAS 28.

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