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

Date recorded:

The staff said that the issue being addressed was whether, at the consolidated financial statement level, the use of the scope exemption in paragraph 1 of IAS 28 Investments in Associates for a portion of an investment in an associate is appropriate.

The request received by IFRIC noted that current practice is divided between two views:

  • View A - Identify all direct and indirect interests held in the associate by either the parent or any of its subsidiaries and apply IAS 28 to the entire investment in the associate.
  • View B - Identify all direct and indirect interests held in the associate, but use the scope criteria in IAS 28 to determine the allowed accounting treatments for the investment (or a portion of the investment).

The staff believes that existing IFRS are not clear regarding whether View A or View B is appropriate and guidance exists to support both views. The staff recommended that the IFRIC not add the issue to the agenda. Rather the staff recommended that the staff present the issue to the Board for its deliberation and potential inclusion in the exposure draft of Proposed Improvements to IFRSs to be published in August 2009.

A number of IFRIC members agreed with the staff recommendation. The Chairman noted that the question is really can the parent use the scope exemption, or does it have to account for it all using a consistent accounting policy.

Only one IFRIC member felt this issue should be added to the agenda.

One IFRIC member suggested that IAS 28 should be abolished.

On the assumption that IAS 28 will be opened up as a larger project by the Board, the IFRIC did not think that it should provide any recommendations for the Board in its rejection notice.

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