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IAS 28 — Impairment of investments in associates in separate financial statements

Date recorded:

Background

The issue is whether, in its separate financial statements, an entity should apply the provisions of IAS 36 Impairment of Assets or IAS 39 Financial Instruments: Recognition and Measurement to test its investments in subsidiaries, joint ventures, and associates carried at cost for impairment.

In the September meeting, the Interpretations Committee tentatively decided not to add this issue to its agenda, because the existing IFRS requirements provide sufficient guidance. According to paragraphs 4 and 5 of IAS 36 and paragraph 2(a) of IAS 39, investments in subsidiaries, joint ventures, and associates accounted for at cost are within the scope of IAS 36, while investments in subsidiaries, joint ventures, and associates accounted for in accordance with IAS 39 are within the scope of that Standard. Consequently, in its separate financial statements, an entity should apply the provisions of IAS 36 to test its investments in subsidiaries, joint ventures, and associates that are carried at cost for impairment.

Two comment letters were received on the tentative agenda decision.  Both of the comment letters agreed with the decision not to add this issue to the Interpretations Committee’s agenda and with the conclusion that investments in subsidiaries, joint ventures and associates are accounted for at cost in accordance with paragraph 10 of IAS 27 Separate Financial Statements are subject to the requirements of IAS 36.  One of the respondents suggested an amendment to the tentative agenda decision to clarify that the requirement was as a result of IAS 27 (2011) paragraph 10 or IAS 27 (2008) paragraph 38(a).

The Staff recommended that the Interpretations Committee should finalise its agenda decision not to add the issue to their agenda.  The Staff also asked the Interpretations Committee whether they had any comments on their proposed wording in the final agenda decision.

No significant comments were received in response to this Staff proposal.  All Committee members tentatively agreed to the Staff recommendations.

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