The amendments (in Exposure Draft (ED) 2014/4) would confirm that the unit of account for investments in subsidiaries, joint ventures and associates is the investment as a whole, but that the fair value measurement of quoted investments in subsidiaries, joint ventures and associates should be the product of the quoted price multiplied by the quantity of financial instruments held, without adjustments.

EFRAG supports the clarification that the unit of account for investments within the scope of IFRS 10 Consolidated Financial statements, IAS 27 Separate Financial Statements and IAS 28 Investments in Associates and Joint Ventures is the investment as a whole rather than the individual financial instruments included within that investment.

However, EFRAG is concerned that determining the fair value measurement of quoted investments in subsidiaries, joint ventures and associates as the product of the quoted price multiplied by the quantity of financial instruments held, without adjustments will not always result in relevant information because where the unit of account is the investment in a subsidiary, joint venture or associate, the price paid may include control premiums or discounts and consequently differ from the mathematical product price × quantity. EFRAG believes that the resulting financial information would lack relevance, impair the assessment of management stewardship and would not faithfully represent the substance of the transaction. 

EFRAG believes that before the IASB reaches the conclusion that there is no better method to measure the fair value of an investment in a subsidiary, joint venture or associate quoted in an active market, the IASB should perform an analysis of current practices in measuring this type of quoted investment and “reassess where to strike the balance between relevance and reliability”.

Additionally, before finalising these proposals, EFRAG believes that the IASB should “consider developing guidance to bring fair value estimates that are consistent with the unit of account of the investment to a reasonable level of reliability”.

The press release and full comment letter are available on the EFRAG website.