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IAS 28 — Contributing property, plant and equipment to an associate

Date recorded:

Agenda decision to finalise – Agenda Paper 2


In September 2017, the IC discussed how an entity accounts for a transaction in which it contributes property, plant and equipment (PPE) to a newly-formed associate in exchange for shares in that associate. The entities that set up the associate are under common control.

The submitter asked three questions:

  • a) Whether IFRSs provide a general exemption from applying the requirements of a particular Standard to common control transactions;
  • b) Do ‘unrelated investors’ in IAS 28.28 (which requires an investor to recognise gains and losses from upstream and downstream transactions only to the extent of unrelated investors’ interests in the associate) refer to:
    • i) any investor other than the reporting entity, or
    • ii) investors that do not meet the definition of a related party in IAS 24? and
  • c) Should the investor determine the gain or loss on contributing PPE to the associate and the cost of its investment in the associate based on:
    • i) the fair value of the PPE contributed, or
    • ii) the fair value of the acquired interest in the associate?

The IC tentatively concluded that:

  • a) Unless a Standard specifically excludes common control transactions from its scope, that Standard is applicable to common control transactions;
  • b) The term ‘unrelated investors’ in IAS 28.28 refers to investors other than the reporting entity (including its consolidated subsidiaries); and
  • c) The investor should determine the gain or loss on contributing PPE and the cost of its investment in the associate based on the fair value of the PPE contributed.

Staff analysis of comment letters received

All six respondents agreed with the IC’s technical conclusions and with not adding the matter to its agenda. No substantive matters were raised.

Staff recommendation

The Staff recommended that the IC finalise the agenda decision.


The IC agreed to finalise the agenda decision without change.

For question (c), a couple of IC members were concerned that the agenda decision states the conclusion that the fair value of the PPE should be used without explaining why. The Staff reminded the IC that when they discussed the issue in September 2017, most IC members were comfortable with the conclusion but got there in different ways. Consequently, the reason for the conclusion that was included in the draft tentative agenda decision (that was presented to the IC for discussion as part of the staff paper) was removed before it was published for comment. The Staff therefore did not propose to change the wording in the current agenda decision.

Correction list for hyphenation

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