Improvements to IAS

Date recorded:

Improvements IAS 27

Exemption from presenting consolidated financial statements

The Board agreed that where a partially owned subsidiary does not prepare consolidated financial statements the approval required from the minority would be worded that it applies where on objection from a minority shareholder is received.

Certain commentators requested clarification of the words "its securities are not publicly traded" and "in the process of issuing securities in public securities markets" used in conjunction with the above exemption. The Board requested the staff to provide more detailed explanations of "securities" and "publicly traded".

Parent Company Financial Statements

The Board agreed to retain the proposed accounting for subsidiaries in parent company financial statements. It was agreed that a requirement to disclose the names of significant subsidiaries would be required in parent company financial statements

Investments in subsidiaries held by venture capital organisations Comment was received requesting that the exemption in IAS 28 for these types of organisations should be extended to include investments in subsidiaries or that the temporary control should be linked to a business cycle where this is longer than 12 months.

The Board did not agree that such an exemption should be provided. They did however note that the fair value of such investments could be used for measurement purposes in the parent-only financial statements. They further noted that it was likely that the amended standard would have an effective date of 1 January 2005 giving entities the time to develop systems to comply with this requirement.

In addition the Board agreed that extending the temporary control exemption beyond twelve months was not appropriate except where the sale of an acquired subsidiary was required by a competition authority and the necessary permission to sell was delayed beyond twelve months.

It was noted that both of the above decisions were subject to a review of the requirements under US GAAP and discussion with FASB where necessary.


A concern was raised regarding the use of the words "undue cost and effort" and "impracticable" in standards. It was agreed that the staff would provide explanations as to the intended meaning of these words and where they should be used in different standards.

Improvements IAS 28

Investments in associates held by venture capital organisations

Comment was received that for such associates the standard should only note that IAS 39 applied and consequently entities could choose to account for the fair value of the investment in the income statement or equity. The Board agreed that any fair value adjustment to an investment in such an associate should be reported in the income statement and that these investments would meet the definition of "held for trading" in IAS 39. The wording in this regard would therefore remain as it was exposed. It was however agreed to drop the reference to "well established practice in those industries" as it was not necessary. Where fair value could not be determined IAS 39 provided adequate exemptions.

Inclusion of long-term receivables within investment in associate

It was agreed that long-term receivables should be excluded from inclusion within the investment in an associate except where the receivable is in substance part of the investment in the associate. It was noted that where the associate incurred losses, these would be used to reduce such receivables, which would then also be subject to the impairment requirements of IAS 39.


Comment was received that the requirement to equity account using information from within the last three months was problematic. The Board believed that this requirement was correct and if information could not be obtained they should consider a requirement to fair value the associate through the income statement. If neither of these could be done it was questioned whether the investment was an associate. This will however be discussed again.

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.