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We comment on the equity method ED

  • Deloitte Comment Letter Image

Feb 10, 2014

We have published our comment letter on the IASB’s exposure draft ED/2013/10 “Equity Method in Separate Financial Statements.” We believe that, as a short-term measure, certain modifications are needed to be made before finalizing the amendments to address issues raised by entities in certain jurisdictions that require the use of the equity method to account for investments in subsidiaries, joint ventures, and associates in preparing thier separate financial statements. In addition, we do not agree with the consequential amendment to IAS 28.

The comment letter notes that equity accounting remains an area of controversy because of the lack of guidance in IAS 27 on the purpose of separate financial statements or the principles underpinning the measurement of an entity’s investment in its separate financial statements. We suggest that the IASB develop an underlying basis for the preparation of separate financial statements and should evaluate whether in its separate financial statements an entity should be permitted to account for different types of investments on an inconsistent basis.

Further, we do not agree with the amendment made to IAS 28 because we do not believe that the principles applied to loss of control over a subsidiary in IFRS 10 should be applied in a situation in which loss of control does not result in a change in the method of accounting applied because both subsidiaries and associates or joint ventures are accounted for using the equity method.

Click for the full comment letter.

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