Deloitte comment letter on IASB ED/2014/2 'Investment Entities: Applying the Consolidation Exception (Proposed amendments to IFRS 10 and IAS 28)'

Published on: 15 Sep, 2014

Deloitte Touche Tohmatsu Limited has responded to the International Accounting Standards Board’s (IASB) Exposure Draft ED/2014/2 Investment Entities: Applying the Consolidation Exception (Proposed amendments to IFRS 10 and IAS 28).

The IASB's proposed amendments aim at clarifying the following aspects:

  • 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.
  • A subsidiary that provides services related to the parent's investment activities should not be consolidated if the subsidiary itself is an investment entity.
  • 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.

We are concerned two of these three proposals result in arrangements being differentiated on a basis other than the relevance of the resulting information:

  • We believe that the proposals to subsume a service providing entity into a single fair value number will, for some arrangements, result in an inappropriate lack of transparency and that they will allow structuring opportunities.
  • We believe that an assumed difference in the ease of obtaining information is not sufficient reason to introduce a difference in the equity method of accounting for associates and joint ventures.

Download the full comment letter below.


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