IAS 28 — Partial use of fair value for measurement of associates

Date recorded:

The IFRIC discussed the comment letters received in response to the Board proposals to allow partial use of fair value for measurement of associates in consolidated financial statements. Most IFRIC members supported the amendment subject to drafting and editorial amendments that would better explain the amendment in the proposed Basis for Conclusions.

The IFRIC considered a comment that an implication of the proposal might be that a 1% share in a 30%-owned associate would be accounted for using the equity method and remaining 29% using the fair value exemption. The IFRIC noted that it would be the consequence of the model used (split accounting). Several IFRIC members challenged the economic sense and usefulness of such accounting. Nonetheless, no different proposal how to solve this issue was proposed.

The IFRIC briefly discussed consistency of this proposal with the requirements of IFRS 5 Non-current Assets Held for Sale and Discontinued Operations and agreed that IFRS 5 served a different purpose.

On that basis, the IFRIC recommended to the Board to finalise the amendments subject to editorial drafting suggestions.

The IFRIC also discussed the possible amendment of IAS 31 Interests in Joint Ventures (as a similar provision currently applies for Joint Ventures). The Technical Director explained that the new Joint Ventures Standard is scheduled for publication in March, so amendment to IAS 31 would not be practicable (as it would have to be re-exposed in any case). The staff would analyse the requirements of the new Standard and this amendment to IAS 28 Investments in Associates and analyse how a similar requirement could be incorporated in the new Joint Venture Standard requirements.

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