EFRAG publish final comment letter on amendments regarding the application of the investment entities exemption

  • EFRAG (European Financial Reporting Advisory Group) (dk green) Image

01 Oct, 2014

The European Financial Reporting Advisory Group (EFRAG) has issued its final comment letter on the proposed amendments to IFRS 10 'Consolidated Financial Statements' and IAS 28 'Investments in Associates and Joint Ventures'. The proposed amendments aim at addressing issues that have arisen in relation to the exemption from consolidation for investment entities.

The IASB proposes in ED/2014/2 Investment Entities: Applying the Consolidation Exception (Proposed amendments to IFRS 10 and IAS 28) amendments aimed at clarifying the following aspects:


  •  Exemption from preparing consolidated financial statements. The suggested amendments confirm that an entity can apply the consolidation exemption even if its parent entity measures its subsidiaries at fair value in accordance with IFRS 10.

EFRAG supports this proposal but notes that the possible interaction between the proposed amendment and the EU Accounting Directive needs to be investigated further.


  • A subsidiary providing services that relate to the parent's investment activities. The requirement for an investment entity to consolidate a subsidiary, instead of measuring it at fair value, would apply only to those subsidiaries that act as an extension of the operations of the investment entity parent, and do not themselves qualify as investment entities.

EFRAG supports the IASB’s efforts to clarify the application of IFRS 10, but disagrees with the proposal to limit the situations where an investment entity parent should consolidate a subsidiary to those subsidiaries that are not investment entities.


  • Application of the equity method by a non-investment entity investor to an investment entity investee. When applying the equity method, a non-investment entity investor in an investment entity retains the fair value measurement applied by the associate to its interests in subsidiaries, unless the non-investment entity investor is a joint venturer where the joint venture is an investment entity.

EFRAG considers that fair value measurement of an investment entity’s investments provides the most useful information and should be retained by a non-investment entity investor when applying the equity method to its investment entity investees, regardless of whether the investee is an associate or a joint venture.

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