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IAS 1 — Presentation of items of other comprehensive income arising from equity accounted investments

Date recorded:

In April 2013, the Committee received a request to clarify an issue in IAS 1 Presentation of Financial Statements related to the presentation of items of other comprehensive income (OCI).

Specifically, the submitter requested the Committee should revise the presentation requirements in paragraph 82A of IAS 1 to clarify how an entity should present its share of the OCI of associates and joint ventures accounted for using the equity method. This request was a consequence of the amendments to IAS 1 that were issued in June 2011 with an effective date of 1 July 2012. The revised wording in paragraph 82A of IAS 1 was found to cause inconsistencies with equity accounting and is therefore considered to be ambiguous. In particular, it is unclear whether the presentation of items of OCI arising from equity method investments should be shown separately or grouped by nature. Three views were identified in practice:

  1. presentation of items aggregated in a single line item; or
  2. presentation of items separately by nature; or
  3. presentation of items separately by nature aggregated within the corresponding line item of similar items of the reporting entity.

All three views assume that the amounts are classified based on whether or not the items will be reclassified (recycled) to profit or loss. The inconsistency arises from whether to report the items by nature or to aggregate them (and if aggregated, whether to do so separately or within the items of the reporting entity).

Staff were supportive of view one as it was in line with the IASB’s intention in making the amendments to IAS 1 and also in line with the 2011 Annual Improvements. Views 2 and 3 arise from the ambiguity within paragraph 82A of IAS 1.

Staff recommended revising paragraph 82A through an annual improvement to clarify that the requirements of IAS 1 concerning the presentation of items of OCI arising from equity accounted investments shall be presented in aggregate in a two line items classified by whether or not they may be reclassified to profit or loss; and to revise the Implementation Guidance in IAS 1 to reflect the proposed revision of paragraph 82A.

The Committee agreed with Staff that view 1 was the interpretation most consistent with the IASB’s intention in IAS 1 and should be made mandatory. View 2 and 3 should not be made mandatory in particular view 2 as it requires disaggregation and could become cumbersome for prepares of financial statements. However, the Committee added that should prepares of financial statements want to show disaggregation, they should be able to do so by way of notes. A Committee member noted that the amendment staff proposed to the IASB did not clarify the basis of view one and hence as a whole the Committee agreed that significant editorial changes were required to the amendments. The Committee had no objections to propose to the IASB to amend paragraph 82A of IAS 1 and provide consequential amendments to implementation guidance through an annual improvement to clarify the requirements for the presentation of items of OCI arising from equity accounted investments.

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