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IAS 28 — Acquisition of an associate or joint venture from an entity under common control

Date recorded:


In June 2017, the IC discussed how an entity accounts for the acquisition of an interest in an associate or joint venture from an entity under common control. The IC concluded that an entity applies IAS 28 to such transactions and should not apply the BCUCC scope exception in IFRS 3 by analogy. The IC believed that the scope of IAS 28 is clear in this regard and decided not to add this matter onto its agenda.

Staff analysis of comment letters received

Eleven comment letters were received and the responses were mixed: five agreed with the IC, five disagreed and one had mixed views.

Those who disagreed with the IC’s technical conclusion noted that it is inconsistent with the agenda decision published in May 2013 on the same issue, which explicitly acknowledged a lack of clarity in how to account for such transactions. They questioned what led the IC to change their view from 2013. In response, the Staff did not believe that there is any inconsistency between the two agenda decisions. They observed that the 2013 agenda decision did not provide any technical conclusion on the matter and merely set out the basis for diversity in practice.

Some respondents repeated some of the issues already considered by the IC in their June 2017 meeting without any new arguments. The Staff continued to agree with the IC’s decision on those issues.

More than half of the respondents also disagreed that the cost of the investment in an associate or joint venture should always be adjusted for the effects of a transaction with owners. The Staff acknowledged their concern and recommended removing that reference.

The Staff rejected suggestions of postponing the finalisation of the agenda decision until completion of the BCUCC project as that would unnecessarily perpetuate the diversity in practice.

Staff recommendation

The Staff recommended that the IC finalise the agenda decision subject to drafting changes.


The IC did not vote on this paper. The Chair of the IC will report back to the Board and discuss the potential next steps with them.

There was significant re-debate of this issue. Some members were happy to finalise the agenda decision while others disagreed with the technical conclusion reached in the tentative agenda decision. Both sides re-iterated the comments made in the previous meeting (see June 2017 agenda paper 8). Those who disagreed believed that IAS 28.26 could reasonably be read to mean that the IFRS 3 BCUCC exemption applies to an associate acquired under common control. In addition, these IC members believed that it is not intuitive to have an exemption for subsidiaries but not for associates when an entity controls a subsidiary (and have all the fair value information at hand on the date of acquisition) but not an associate. Furthermore, they believed that finalising the agenda decision would lead to significant operational and practical issues for entities that have previously applied predecessor accounting to account for associates acquired under common control. This is because these entities would have to go back to all such transactions, perhaps many years ago, and apply fair value accounting. The availability of information and the use of hindsight are just some of the potential practical issues resulting from such a change. Without any transition provisions, using an agenda decision to conclude on this matter is simply not workable.

The Chair of the IC and the Staff had wanted to finalise the agenda decision because they believed that it was clear that IAS 28 applies to such a transaction (which was supported by a majority of the IC members in the June 2017 meeting). This was also in response to criticisms that the IC had tended to postpone finalising agenda decisions pending the outcome of the Board’s research projects, thus not reigning in diversity in practice in a timely manner. However, they conceded to the dissenting opinions and decided to hold back on finalising the agenda decision.

Correction list for hyphenation

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