3. ias-28-investments-in-associates-and-joint-ventures (1)

IAS 28 Overview

  • Adoption Timeline:

    • April 2001: IAS 28 Accounting for Investments in Associates adopted by the International Accounting Standards Board (IASB).

    • 1989: Original issuance by the International Accounting Standards Committee.

    • December 2003: Revised IAS 28 issued as "Investments in Associates".

    • May 2011: Further revised to include Joint Ventures.

  • Revisions and Amendments:

    • September 2014: Amendments on Sale or Contribution of Assets between Investor and Associate or Joint Venture issued.

    • December 2014: Investment Entities: Applying the Consolidation Exception issued.

    • October 2017: Long-term Interests in Associates and Joint Ventures clarified.

  • Related Standards:

    • Several standards, such as IFRS 9 and IFRS 17, have made minor amendments to IAS 28.

Contents Breakdown

  • Main Areas Covered:

    • Objective

    • Scope

    • Definitions

    • Significant Influence

    • Equity Method

    • Application of the Equity Method

    • Exemptions from applying the equity method

    • Classification and Discontinuing the Equity Method

    • Changes in Ownership Interest

    • Procedures and Impairment Losses

    • Separate Financial Statements

    • Effective Date and Transition

    • Withdrawal Notice of previous IAS 28

Definitions and Concepts

  • Associate: An entity over which the investor has significant influence.

  • Equity Method:

    • Investment is recognized at cost initially.

    • Adjusted for post-acquisition changes in net assets of investee.

    • Investor’s share of profit or loss included in its own income.

  • Joint Venture: A joint arrangement whereby parties have joint control of the arrangement and rights to net assets.

  • Significant Influence:

    • Power to participate in decisions without having control.

    • Presumed if owning 20% or more of voting power.

    • Can be shown through board representation, policy-making participation, and significant transactions.

Application of the Equity Method

  • Initial Recognition and Adjustments:

    • Investment recognized at cost; adjusted for share of investee’s profits/losses.

    • Distributions reduce the carrying amount of the investment.

    • Necessary accommodations for changes in comprehensive income due to significant influence.

  • Discontinuing the Equity Method:

    • Ceased when investment status changes, such as becoming a subsidiary.

    • Assets and gains/losses are accounted for as specified within the standard.

Changes in Ownership Interests

  • Gain or loss on reduced ownership interests recorded in profit/loss when applicable.

  • Similar procedures to those used for consolidated subsidiaries.

Impairment Losses

  • Entity assesses net investment for impairment based on observable data of loss events after initial recognition.

  • Impairment testing based on cash flows, with the whole investment treated as a single asset.

Effective Date and Transition

  • Applies for annual periods starting from January 1, 2013.

  • Earlier application is permitted with appropriate disclosures.

  • Retrospective application required for various amendments at specified future dates.