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IAS 28 – Share of other changes in equity (continuing)

Date recorded:

The Board had previously requested that the Committee further analyse an issue related to IAS 28 Investments in Associates and Joint Ventures and the equity method of accounting.

The issue focuses on that paragraph 3 of IAS 28 indicates that all changes in the net assets of an investee should be recognised by the investor. However, because of the consequential amendments to paragraph 10 of IAS 28, the standard no longer states whether and where the investor should account for its share of changes in the net assets that are not recognised in net profit or other comprehensive income of the investee (such as movements in other reserves of the associate or gains and losses arising on an associate's transactions with non-controlling interest of its subsidiaries).

The Committee members had differing views on whether to proceed with any further work on this project. Some Committee members noted that equity method accounting has been highly criticised and certain Board members have expressed interest in moving away from such an approach. However, other Committee members felt that any phase-out of equity method accounting would not be done in the near term and therefore addressing the issues identified was necessary. One Committee member emphasised that if the Committee were to take on additional work on this issue it was important that they find an overriding principle rather than opening up a discussion around the conceptual merits of equity method accounting.

The Committee ultimately found enough support to request the staff continue performing research on the issue. The staff said they would bring examples back at a future meeting and ask the Committee to help develop a principle once they have analysed the example transactions.

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