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IAS 28 — Assessment of fund manager's significant influence over funds

Date recorded:

The project manager introduced Agenda Paper 10 (link to IASB's website) which refers to a request for clarification received by the IC asking what factors may indicate that a fund manager has significant influence over a fund that it manages and has a direct holding in. The submitter described a particular situation in which an assessment of control under IFRS 10 Consolidated Financial Statements resulted in the conclusion that a fund manager did not control the fund that it managed and had a direct holding in, because it was acting as an agent in accordance with paragraphs B58–B72 of IFRS 10.

The staff considered that the fact that decision-making rights of the fund manager were constrained such that it was acting as an agent in accordance with IFRS 10, did not necessarily preclude significant influence in accordance with IAS 28. The concept of control as a whole and guidance on agency relationships focused on all three elements of control. In contrast, the concept of significant influence focused only on investor’s power to participate in policy decisions of the investee. It did not refer to the following elements: (i) exposure, or rights, to variable returns of the investee; and (ii) the ability to use investor’s power to affect the amount of its returns.

The staff concluded that the existing guidance in this respect was sufficient and, therefore, recommended that the Interpretations Committee should not take these issues onto its agenda. The staff also recommended that the Interpretations Committee should not take onto its agenda the issue of whether the fund manager should include in the significant influence assessment its participation in financial and operating policy decisions that it undertakes on behalf and for the benefit of others. The staff believed that the issue would be better considered as a part of the IASB research project on the equity method of accounting.


The Chairman asked for clarification from the project manager as to whether the scope of the research project on the equity method of accounting was only about the mechanics or whether it would be broader. The project manager confirmed that this issue would be in scope of the project because it was not only about mechanics; the project included the analysis of the definition of significant influence. He explained that at the time IFRS 10 was issued, there were some discussions as to whether to analyse IFRS 10 and IAS 28 together; however, the Board decided to finalise IFRS 10 first.  

There was general agreement from IFRIC members on the staff recommendations not to take the issue into the agenda.

The main concerns raised were:

One member expressed that there seemed to be some contradiction in the wording of the agenda decision, because it started by saying that IAS 28 should not be precluded from the analysis but then said that IAS 28 did not address the issue of whether the fund manager should include in the significant influence assessment its participation in financial and operating policy decisions that it undertakes on behalf and for the benefit of others. The IC member asked whether if an entity was an agent, if it could ever have significant influence. The staff responded that IAS 28 was not explicit on this topic so an entity still needed to make a separate assessment under IAS 28. The IC member expressed that by referring to IAS 28, there would be an implicit response that an agent could have significant influence and that they had not debated this issue. However, the IC member confirmed that if an entity did not meet the definition of control, it still had to make the assessment under IAS 28 and so the member suggested just to remove the second paragraph. 

One member indicated that the definitions of activities under IFRS 10 (relevant activities) and IAS 28 (participation in policy making process) were different and he believed that this fact should be mentioned in the agenda decision.  Another member indicated that the fact that an entity was entitled to certain rights whether on its own behalf or on behalf of others should not matter in the analysis of whether there was significant influence. Another member pointed out that it was not clear whether an entity could have significant influence if it acted on behalf of others and this should be reflected in the agenda decision and he believed that the issue should be taken onto the agenda. Another member supported this statement by saying that it was a widespread issue and they needed to provide guidance.

There were also concerns expressed in relation to the wording of the agenda decision which stated that the agent should consider in its analysis “its holding in the fund” because it would raise more questions. One member expressed that IAS 28 was not clear whether or not this should be considered because the agent was acting on behalf of others.   

There were also concerns raised on moving this issue to the equity method research project, because in terms of timing it would take a long time to provide an answer to users and they believed that it was necessary to provide some clarity. The project manager responded that they expected to have a DP on the equity method next year so it would not be a long term project. One member asked that the IC should be kept updated on the status of the project because if the project did not provide an answer to this issue, then they would need to take it back. The Chairman agreed with this recommendation.

Some members expressed agreement with moving the project to the research project on the equity method provided that its timing was right.

One member indicated that the agenda decision did not mention anything about disclosing the accounting policy selected. The implementation director confirmed that IFRS 12 already had disclosure requirements about the significant judgements made about significant influence.


The Chairman called a vote on the following:

  1. Whether to remove the second paragraph- The proposal obtained only 3 votes in favour and it was rejected.
  2. Agenda decision. The Chairman confirmed that they would obtain further feedback from the research project team as to the scope and how the project was progressing; if the project did not advance they would take the issue again. The agenda decision was approved by 10 votes in favour.

The Chairman also clarified that the wording of the agenda decision would be updated based on the warnings raised during the discussion.

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