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IASB finalizes amendments related to the application of the investment entities exception

  • IASB document Image

Dec 18, 2014

The IASB has published "Investment Entities: Applying the Consolidation Exception (Amendments to IFRS 10, IFRS 12 and IAS 28)." The amendments address issues that have arisen in the context of applying the consolidation exception for investment entities. They are effective for annual periods beginning on or after January 1, 2016, with earlier application permitted.



In October 2012, the IASB issued Investment Entities (Amendments to IFRS 10, IFRS 12 and IAS 27), which provided an exemption from consolidation of subsidiaries under IFRS 10, Consolidated Financial Statements, for entities that meet the definition of an "investment entity." Subsequently, the IFRS Interpretations Committee received several submissions regarding the implementation of the exemption. The Committee recommended that the IASB address the issues in a narrow-scope project, and in March 2014, the IASB formally added a project on IFRS 10/IAS 28 — Investment entity amendments to its work program. In June 2014, it published an exposure draft of proposed amendments in June 2014, with comments due by September 15, 2014.


Key Provision of the Amendments

The amendments are intended to clarify the following:

  • Exemption from preparing consolidated financial statements The exemption from preparing consolidated financial statements for an intermediate parent entity is available to a parent entity that is a subsidiary of an investment entity, even if the investment entity measures all of its subsidiaries at fair value.
  • A subsidiary providing services that relate to the parent's investment activities — A subsidiary that provides services related to the parent's investment activities should not be consolidated if the subsidiary itself is an investment entity.
  • Application of the equity method by a non-investment entity investor to an investment entity investee — When applying the equity method to an associate or a joint venture, a non-investment entity investor in an investment entity may retain the fair value measurement applied by the associate or joint venture to its interests in subsidiaries.
  • Disclosures required — An investment entity measuring all of its subsidiaries at fair value provides the disclosures related to investment entities required by IFRS 12.


Changes to guidance proposed in exposure draft

ED/2014/2, Investment Entities: Applying the Consolidation Exception (Proposed amendments to IFRS 10 and IAS 28) would have provided relief to non-investment entity investors for their interests in investment entity associates but not for their interests in investment entity joint ventures. To retain consistency in the treatment of the application of the equity method to both associates and joint ventures, the final amendments provide relief to noninvestment entity investors in both investment entity associates and joint ventures.

The IASB amended IFRS 12, Disclosure of Interests in Other Entities, because the comments received in response to the ED highlighted that constituents were unclear about the applicability of IFRS 12 to the financial statements of an investment entity. The amendments clarify that the scope exclusion in paragraph 6(b) of IFRS 12 does not apply to the financial statements of a parent that is an investment entity and measures all of its subsidiaries at fair value.


Additional information

Correction list for hyphenation

These words serve as exceptions. Once entered, they are only hyphenated at the specified hyphenation points. Each word should be on a separate line.