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EFRAG draft comment letter on the IASB's Exposure Draft regarding the unit of account

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

30 Oct 2014

The European Financial Reporting Advisory Group (EFRAG) has issued a draft comment letter on the IASB Exposure Draft (ED) proposing amendments to six standards regarding the unit of account for investments in subsidiaries, joint ventures and associates.

The amendments would confirm that the unit of account for investments in subsidiaries, joint ventures and associates is the investment as a whole, but that the fair value measurement of quoted investments in subsidiaries, joint ventures and associates should be the product of the quoted price multiplied by the quantity of financial instruments held, without adjustments.

EFRAG is concerned that these proposals will not always result in relevant information because where the unit of account is the investment in a subsidiary, joint venture or associate, the price paid may include control premiums or discounts and consequently differ from the mathematical product price × quantity. EFRAG believes that the resulting financial information would lack relevance, impair the assessment of management stewardship and would not faithfully represent the substance of the transaction. EFRAG states that it would only  - reluctantly - accept the IASB's proposals should further research by the IASB would demonstrate that there is no better way than price × quantity to measure the fair value of an investment in a subsidiary, joint venture or associate quoted in an active market.

Comments on the draft comment letter are due by 31 December 2014. It is available on the EFRAG website.

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