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IAS 28 — Venture capital consolidations and partial use of fair value through profit or loss

Date recorded:

In the submission guidance was asked for clarifying the application of the scope exemption in IAS 32 Financial Instruments: Presentation for venture capitalists and similar entities. In particular, it was asked whether in a situation where a group has a venture capital operation that holds an investment in an entity (and has an optional exemption from IAS 28 Investments in Associates) and also holds shares in that entity via another subsidiary. Would the entity have to assess significant influence based on the total investment and apply the equity method on the investment as a whole?

This triggered a long discussion. Some IFRIC members believed that the whole investment is the unit of account. Others thought that assessing significant influence was separate from applying the equity method (that is, the total investment is considered for assessing influence, but the equity method is applied only to the non-VC portion).

Many IFRIC members considered the wording in IAS 28 as ambiguous and did not concur with the staff view that IAS 28 is clear in requiring assessing the total investment of the group and apply, if required, equity accounting to the whole investment.

It emerged from the debate that the diversity around the table could be indicative for diversity in practice. Most IFRIC members seemed to have sympathy for developing an Interpretation on this issue. Staff was asked to perform further research including an assessment of the IFRIC agenda criteria and to bring back a paper at a later meeting

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