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EFRAG issues draft endorsement advice and effects study report on Equity Method in Separate Financial Statements (Amendments to IAS 27)

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

23 Oct 2014

The European Financial Reporting Advisory Group (EFRAG) has issued for comment its draft endorsement advice for the use of Equity Method in Separate Financial Statements (Amendments to IAS 27) in the European Union (EU). EFRAG has also issued its Effects Study Report.

The International Accounting Standards Board (IASB) published 'Equity Method in Separate Financial Statements (Amendments to IAS 27)' in August 2014. This amendment reinstates the equity method as an accounting option for investments in subsidiaries, joint ventures and associates in an entity's separate financial statements. This means that an entity can account for investments in subsidiaries, joint ventures and associates in its separate financial statements:

  • at cost,
  • in accordance with IFRS 9 Financial Instruments (or IAS 39 Financial Instruments: Recognition and Measurement for entities that have not yet adopted IFRS 9), or
  • using the equity method as described in IAS 28 Investments in Associates and Joint Ventures.

EFRAG supports the adoption of this amendment to IAS 27 and recommends its endorsement.  EFRAG’s initial assessment is that this amendment meets the technical requirements of the Regulation (EC) No 1606/2002 of the European Parliament and of the Council on the application of international accounting standards.     

EFRAG’s conclusion is supported by an Effects Study Report which considers the costs and benefits of implementing this amendment to IAS 27. EFRAG’s assessment is that the benefits for preparers and users in implementing this amendment outweigh the costs.

Comments are requested by 21 November 2014. 

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