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IAS 27 — Equity method in separate financial statements

Background

Prior to 2005, IAS 27 Consolidated Financial Statements and Accounting for Investments in Subsidiaries, IAS 28 Accounting for Investments in Associates, and IAS 31 Financial Reporting of Interests in Joint Ventures contained requirements for the measurement of investments in subsidiaries, joint ventures and associates in the separate financial statements of the investor.  These choices permitted the use of one of three methods to measure these investments: the cost method, the equity method, or as available for sale financial assets in accordance with IAS 39 Financial Instruments: Recognition and Measurement.

As part of its improvements process in preparation for the adoption of IFRS in Europe and other countries from 2005, the IASB amended and renamed these standards and consolidated the requirements for the measurement of investments in separate financial statements within IAS 27 Consolidated and Separate Financial Statements.  In doing so, the IASB removed the option to use the equity method of accounting in measuring investments in subsidiaries, joint ventures and associates in the separate financial statements of the investor.  Accordingly, such investments can be measured either at cost (IFRS 5 Non-current Assets Held for Sale and Discontinued Operations where relevant), or in accordance with IAS 39 or IFRS 9 Financial Instruments.  These requirements were carried over into IAS 27 Separate Financial Statements (2011).

Constituent feedback in the Agenda consultation 2011 revealed that in some countries, corporate law requires the use of the equity method in separate financial statements to measure investments in subsidiaries, joint ventures and associates.  Accordingly, in these countries, two sets of financial statements are required to be prepared to meet the requirements of both IAS 27 and local laws.

In response to feedback, the IASB agreed to add a project to its active agenda to consider reinstating the option to use the equity method to measure investments in subsidiaries, joint ventures and associates, and to also clarify some matters related to balances with subsidiaries and joint arrangements.

 

Current status of the project

This project has been completed. The IASB issued Equity Method in Separate Financial Statements (Amendments to IAS 27) on 12 August 2014. The amendments reinstate the equity method as an accounting option for investments in subsidiaries, joint ventures and associates in an entity's separate financial statements.

 

Project milestones

DateDevelopmentComments
December 2012 Project added to the IASB's active agenda
2 December 2013 ED/2013/10 Equity Method in Separate Financial Statements (Proposed amendments to IAS 27) published Comment deadline 3 February 2014
12 August 2014 Equity Method in Separate Financial Statements (Amendments to IAS 27) issued
The amendments are effective for annual periods beginning on or after 1 January 2016. Earlier application is permitted. The amendments are to be applied retrospectively in accordance with IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors.

Correction list for hyphenation

These words serve as exceptions. Once entered, they are only hyphenated at the specified hyphenation points. Each word should be on a separate line.