IASB finalises amendments to IAS 28 regarding long-term interests in associates and joint ventures
12 Oct, 2017
The International Accounting Standards Board (IASB) has published 'Long-term Interests in Associates and Joint Ventures (Amendments to IAS 28)' to clarify that an entity applies IFRS 9 'Financial Instruments' to long-term interests in an associate or joint venture that form part of the net investment in the associate or joint venture but to which the equity method is not applied.
Background
IFRS 9 Financial Instruments excludes from its scope interests in associates and joint ventures accounted for in accordance with IAS 28 Investments in Associates and Joint Ventures. However, the IFRS Interpretations Committee received a submission asking whether that scope exclusion applies only to interests in associates and joint ventures to which the equity method is applied, which seemed a point not clear to some stakeholders.
The proposed amendments to clarify the matter were originally included in the exposure draft ED/2017/1 Annual Improvements to IFRS Standards 2015–2017 Cycle published on 12 January 2017. However, in May 2017 the Board decided to finalise the amendments as a narrow scope amendment in its own right.
Changes
The amendments in Long-term Interests in Associates and Joint Ventures (Amendments to IAS 28) are:
- Paragraph 14A has been added to clarify that an entity applies IFRS 9 including its impairment requirements, to long-term interests in an associate or joint venture that form part of the net investment in the associate or joint venture but to which the equity method is not applied.
- Paragraph 41 has been deleted because the Board felt that it merely reiterated requirements in IFRS 9 and had created confusion about the accounting for long-term interests.
The ammendments are accompanied by an illustrative example.
Dissenting opinion
The final amendments contain a dissenting opinion as one Board member disagrees amending IAS 28 without also specifying the types of interests that an entity accounts for using the equity method and the types of interests that an entity accounts for applying IFRS 9.
Effective date and transition requirements
The amendments are effective for periods beginning on or after 1 January 2019. Earlier application is permitted. This will enable entities to apply the amendments together with IFRS 9 if they wish so but leaves other entities the additional implementation time they had asked for.
The amendments are to be applied retrospectively but they provide transition requirements similar to those in IFRS 9 for entities that apply the amendments after they first apply IFRS 9. They also include relief from restating prior periods for entities electing, in accordance with IFRS 4 Insurance Contracts, to apply the temporary exemption from IFRS 9. Full retrospective application is permitted if that is possible without the use of hindsight.
Additional information
Please click for:
- IASB press release (link to IASB website)
- Illustrative Example — Long-term Interests in Associates and Joint Ventures
- Our UK Accounting Plus Plus project page on IAS 28 — Long-term interests in associates and joint ventures
- Our Need to know newsletter