Equity Method research project

Date recorded:

Cover Paper (Agenda Paper 13)


The equity method research project has the following background:

  • Added to the IASB Agenda in 2011 following the agenda consultation
  • Work commenced on the project in June 2015 to address application problems arising from the equity method
  • Project deferred in May 2016 until after completion of Post-implementation Review of IFRS 10, 11 and 12
  • In October 2020, the IASB moved the project to the research programme with the following objective: “To assess whether application problems with the equity method, as set out in IAS 28 Investments in Associates and Joint Ventures, can be addressed in consolidated and individual financial statements by identifying and explaining the principles of IAS 28”.

The project is focused on identifying application questions and addressing these by explaining the underlying principles of IAS 28. This may help the IASB develop new requirements, application guidance or other amendments to IAS 28.

The purpose of this paper was to help the IASB review the progress of the project.

Project status

In March 2021, the IASB discussed the process for selecting application questions in scope of the project. The application questions selected can be found in Appendix C to the paper.

The IASB also reviewed IAS 28 and set out the principles that underlie it, as set out in Appendix B to the paper. A process was agreed to identify missing principles by analogising to the principles of IAS 28 and applying the judgement required when developing an accounting policy applying IAS 8.

The staff have acknowledged that developing solutions to the application questions has taken longer than anticipated due to having to extend the analysis to incorporate aspects that were initially considered to be outside the scope of the project and due to the underlying IAS 28 principles not providing an appropriate basis for addressing the questions.

However, the staff still think it is possible to develop solutions to the application questions using the agreed approach.

The staff did not recommend deciding on the type of consultation document to be published at this time.

The IASB was asked whether they agree to continue the research project with its current objective and approach. 

IASB discussion

The majority of IASB members, including the Chair, supported continuing with the project.

Some IASB members explained that this was because it is clear that there are practical issues being faced by preparers and diversity in practice that the project would help resolve.

The Chair noted that he wished for the project to continue as the IASB has tried to solve issues relating to IAS 28 on two previous occasions and stakeholders have continued to ask them to solve these. He added that it would be better if principles in IAS 28 could be pointed to in resolving the practical questions.

Some of the IASB members who supported continuing the project noted that it would be best to continue in a way that would be most efficient and potentially not to resolve all of the practical questions if this would take too much resource.

A minority of IASB members did not want to continue with the project as resources used on the project could be better utilised on other projects. They noted that whilst the project would reduce diversity, the information produced using the equity method was not utilised sufficiently by investors to make the project worthwhile.

One IASB member supported the objective but not the approach laid out in the staff paper. They explained that the approach was much broader than the objective as it includes considerations of the boundary of the reporting entity and identifying missing principles in IAS 28.

IASB decision

8 IASB members of 11 voted in support of continuing the project.

1 member highlighted that he had voted against as he supported the objective but not the approach.

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