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EFRAG suggests the IASB addresses interests in joint operations structured through separate vehicles

  • EFRAG (European Financial Reporting Advisory Group) (dk green) Image

01 Mar 2014

In a letter to the IASB, the EFRAG requests that the IASB review the issues surrounding the accounting for interests in joint operations structured through a separate vehicle in separate financial statements.

Specifically, the guidance in IFRS 11 Joint Arrangements, which requires a joint operator to follow in its separate financial statements the same accounting method as in its consolidated financial statements when accounting for interest in a joint operation structured through a separate vehicle, provides different options than the guidance in IAS 27 Separate Financial Statements, which requires investments in subsidiaries, associates or joint ventures to be accounted for at cost or fair value in the separate financial statements of the investor. These differences have created issues for listed companies that present separate financial statements in accordance with IFRSs.

In Italy, the application of IFRSs is not only required in consolidated financial statements but also in separate financial statements of listed companies and therefore the Italian standard-setter Organismo Italiano di Contabilità (OIC) has brought the issue to the IASB's attention in 2012 and again in 2013. In the letter now submitted to the IASB, EFRAG agrees with the concerns of the OIC and notes that a practical solution to address the issue is for the IASB to amend IAS 27 to allow joint operations, structured through a separate vehicle, to be accounted for in the same way as joint ventures (i.e. at cost or fair value) in the separate financial statements of the joint operator.

For more information, see the press release and the letter to the IASB on the EFRAG website.

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