presentation of investment in associate

IAS 28 Investments in Associates and Joint Ventures

Let’s focus on associates, joint ventures, significant influence and equity method today.

You have already learned various aspects of having control over some investment: how to identify it, how to account for it and we also learned basic consolidation procedures step by step.

It was all covered by IFRS 3 Business Combinations and IFRS 10 Consolidated Financial Statements .

Another very frequent type of investment is an associate over which an entity has significant influence . It is all arranged by the standard IAS 28 Investments in Associates and Joint Ventures , so let’s take a look.

What is the objective of IAS 28?

The objective of IAS 28 Investments in Associates and Joint Ventures is:

• To prescribe the accounting for investments in associates , and
• To set out the requirements for the application of the equity method when accounting for investments in associates and joint ventures.

Let me remind you a couple of terms:

An associate is an entity over which an investor has significant influence.

A joint venture is a joint arrangement whereby the parties having joint control of the arrangement have rights to the net assets of the joint arrangement.

What is significant influence and how to detect it?

Standard IAS 28 defines significant influence as the power to participate in the financial and operating policy decisions of the investee, but is NOT a control or joint control of those policies.

Sometimes, it can be quite difficult to determine whether we deal with control or significant influence – and we can’t make a mistake, because the whole accounting treatment and reporting depends on this classification.

How can significant influence be evidenced?

The main indicator of significant influence is holding (directly or indirectly) more than 20% of the voting power of the investee.

It’s not the rule of thumb and often, the truth is different.

Sometimes, when an investor holds more than 20% of the voting power (but less than 50), it can still control the investee.

Let me show you an illustration (taken from my IFRS Kit ):

Here, CarProd does not own the majority (over 50%), but it’s still more than 20% – that would indicate significant influence.

But, as other investors own max. 1% each, the probability of outvoting CarProd in major decisions is very low, so CarProd may in fact exercise control over TyreCorp, rather than significant influence. Of course, you would need to examine it further.

The other ways of evidencing significant influence are as follows:

• Investor has a representation on the board of directors (or other equivalent governing body) of the investee.
• Investor participates in policy-making processes (including dividend decisions).
• There are material transactions between the investor and its investee.
• There’s interchange of managerial personnel .
• Provision of essential technical information .

When you assess the presence of significant influence, you should not forget to examine potential voting rights (in form of some options to buy shares, or convertible debt instruments, etc).

Apply the equity method

Once the investor acquires significant influence, or joint control of a joint venture, then it must apply equity method.

The basic principles of equity method are:

On initial recognition:.

• Debit investments in the statement of financial position,
• Credit cash (bank account, or whatever applies).

• When the difference is positive (cost is higher than the share on net assets), then there’s a goodwill and you don’t recognize it separately . It is included in the cost of an investment and NOT amortized.
• When the difference is negative (cost is lower than the share on net assets), then it’s recognized as an income in profit or loss in the period when the investment is acquired.

Subsequently, after the initial recognition:

• Debit Investment in the statement of financial position, and
• Credit Income from associate in profit or loss.

Or vice versa when an associate made loss.

• Debit Cash (or whatever applies here) and
• Credit Investment in the statement of financial position.

Learn the equity method procedures

The procedures in equity method are very similar to consolidation procedures under the standard IFRS 10 Consolidated Financial Statements :

• Both investor and investee shall apply uniform accounting policies for the similar transactions.
• The same reporting date shall be used, unless it’s impracticable.
• Investor’s share on gain or loss from mutual „upstream“ and „downstream“ transactions is eliminated.So here, you don’t eliminate mutual balances (receivables or payables) outstanding at the end of the reporting period, but you eliminate just investor’s share on trading profit and similar items.

Exemptions from applying the equity method

Investor does not need to apply the equity method in one of the following circumstances:

• Investor is a parent that is exempt from preparing consolidated financial statements by the scope exception of paragraph 4(a) of IFRS 10 (it’s similar as below point); OR
• The entity is a wholly owned subsidiary; or it’s a partially-owned subsidiary of another entity and its other owners have been informed about and do not object to not applying the equity method;
• The entity’s debit or equity Instruments are not traded in a public market;
• The entity did not file, nor is in the process of filing, its financial statements with a securities commission or other body for the purpose of issuing any class of Instruments in a public market;
• The ultimate or any intermediate parent of the entity produces consolidated financial statements available for public use that comply with IFRS.
• When an investment in an associate or a joint venture is held by in entity that is a venture capital organization, mutual fund, unit trust or similar entity, then investor might opt to measure investments at fair value through profit or loss under IFRS 9 (and thus not apply equity method).The same applies for the situation when an investor has an investment in an associate a portion of which is held by these organizations.

Here, I’d like to add that when an investment meets the criteria in IFRS 5 and is classified as held for sale , then an investor shall apply IFRS 5 to that investment and not equity method (even when it relates to a portion of investment, then IFRS 5 is applied to that portion).

When to discontinue equity method

An investor stops applying the equity method when its investment ceases to be an associate or a joint venture .

The way of discontinuing depends on specific circumstances, for example if the investment becomes a subsidiary, then an investor stops equity method and starts full consolidation in line with IFRS 10/IFRS 3.

You can watch a video with the summary of IAS 28 here:

JOIN OUR FREE NEWSLETTER AND GET

report "Top 7 IFRS Mistakes" + free IFRS mini-course

Please check your inbox to confirm your subscription.

119 Comments

Dear Silvia, Could you tell me whether an investment in a subsidiary can be measured at fair value in the parent company’s financial statements and then consolidated? So, the Company will fair value this investment at each financial year.

In individual parent’s financial statement – yes, there is that choice in line with IAS 27. However, in consolidated financial statements: no, generally not, the subsidiary must be consolidated. The exception is when the parent is investment entity according to IFRS 10 – in such a case, a subsidiary is not consolidated, but shown in its fair value.

Thank you Silvia. So, indeed a parent company that is not classified as an investment entity, the ability to present investments at fair value is limited. If such a parent were to lose control of a subsidiary, it could then account for any retained interest at fair value, but this would not apply if the parent continues to hold controlling interest in the subsidiary. In this case, the parent must continue to use the cost method unless it decides to change its accounting policy, which would need to be applied retrospectively. So, only the investment in associate and using the equity method could be fair valued but this with amendments to IAS 28. And here is allow non-investment entity investors to retain the fair value measurement applied by their investment entity associates and joint ventures to their subsidiaries when applying the equity method. This means that if a non-investment entity holds an investment in an associate that is itself an investment entity, it can measure that investment at fair value, aligning with the measurement approach of the investment entity.

Hi Silvia, If Company A owns 40% shares in Company X and Company B owns 60% shares in Company X , but both Company And B have equal voting rights. How Company X is accounted for in Company A and B?

I have one confusion. As per IAS 27 (Separate financial statements), it is allowed to account for investment in associate under 1. equity method, or 2. cost model, or 3. as per IFRS 9. However, in IAS 28, it is requiring to account under equity method. Does this mean in separate FS it can be shown at cost and in consolidated FS it will be accounted under equity method?

Hi Waqas, yes, exactly.

How do we treat impairment loss in investment in associate?

we are group of companies and we have investment in an associate “X” through our group Companies A and B. Companies A and B both have common directorship and one of directors is also a director of X. I owes 25% in X through A and 2% through B. Is X is associate for both A and B?

Yes. In this case, both A and B have common directorship (of the same director of X), which essentially means that A and B have significant influence over X (plus consider ownership).

For the illustration (taken from IFRS Kit), if another 60% shareholder of Tyrecorp is held by 1 entity/person instead, does Carprod still remain appropriate to recognise the investment in Tyrecorp as an Associate or Financial Instrument as per IFRS 9?

Hi Liew, if we assume that % of ownership equals to % of voting rights, that would mean that the other shareholder would most likely be able to exercise control and Carprod would be able to exercise significant influence – that points to the equity method.

Hi Silvia, What is the accounting treatment of Tyrecop in Carprod and other shareholder if % of voting rights not equal % of voting rights?

Hi Silvia, If the investor or parent company sells a piece of equipment to the investee, how is this transaction treated under the equity method?

Hi Silvia thank you so much.I have a question: How do we account for an error whereby a person has treated a joint operation as an associate and vice versa.What sort of journal entries do we process

Hi Sylvia. I would like to ask if in previous year the associate was accounted for using equity method. However in this year the holding company fulfils the exemption from applying equity method due to change in group structure. As such, on its financial statements the associate will be stated at cost. Then how to treat the previous year’s share of profit.

Some simple calculations of Investments in Associates are needed.

Hi Sylvia, I have a question, for a company that has only an investment in an associate. does it need to prepare consolidated accounts or would it just need to account for the investment using equity method ? i.e. recording share of profits

I also need answer to this question.

No need to prepare consolidated financial statements here. These are mandatory only when there is a subsidiary, and no exception applies.

Hello Silvia, thanks for the article one question, how do you calculate the cost of an investment if the parent company used PPE instead of cash. Do you take the cost of ppe in parents book or do you need FV ? or something completely different ? Thanks in advance

FV of PPE as it is a form of non-cash consideration.

Thanks for the answer, so the parent would include the gain/loss in PL ? or should it go directly to equity.

Hello Rati, Yes the parent will include the other’s share of gain (if sold at gain). Conversely, if sold at a loss, then it will include entire loss in it’s books (ref. = para 28, 29 & 30 of IAS28). @Ms Silvia, Pl. correct if I’m mistaken.

As far as I understand – “cost” should be non-monetary >>> would use historical cost -“share in Net assets” >>> perhaps monetary as once the associates pays dividend, parent com.. will credit share in associates so this represents cash settlement and should be subject to FX revaluation.

If we say that Equity method is = cost + share on Net assets I would recalculate cost using historical FX rate as this is non-monetary item and share on Net assets recalculated using Year-end FX rate as this is subject to future cash settlement once the Associates pays out the dividend.

Does it make sense?:)

Hm, but in the link you sent for mon/non-mon., I see that investment in associates is non-monetary item, so based on that logic, I should only use historical FX rate, both for cost and equity method. I would use YE- FX rate, only in case that Fair value method would be applied.

Hello Silvia, Sorry for a silly question:) If parent company owns investment in associates which is denominated in foreign currency (e.g. foreign associates) and parent company uses equity method. Would you recalculate total = (cost + share on associate’s Net assets) using Year-end FX rate or recalculate only share on Net assets using YE rate and cost using historical cost?

Hmhm, is this monetary or non-monetary ? 🙂

Hi Silvia, When I review the impairment of an investment in associate, should do I evaluate the impairment of the investment as whole, or its assets indivudually? An investment in associate is evaluated for impairment individually or can be part of an CGU? Thank you!!

As a whole since you have one asset in your books. However its individual assets will affect the value as a whole.

Dear Silvia, I have an investment in associate at the end of the reporting period of lets say $20,000. The share of losses apportioned to my investment equal to $25,000. I have recognised a provision (liability) of $5,ooo because I have legal or constructive obligations to the associate. My entries are What if next year, the associate incurs losses again? Will it increase my provision balance again? Thank you in advance for your time.

Hi dear Eve You recognise provision if your entity has incurred obligation. any amount your obligation should not recognise

exeed of your obligation

Hi Sylvia, thanks for this. It seems from the above that the value of an associate in an entity’s consolidated financials is not necessarily equal to their share of the net assets of that entity. I am being told this by a number of people in my organisation but I think they are wrong. For example, say we bought 25% of an entity for $5m, and that entity had net assets of $15m on acquisition. This transaction would generate goodwill of $1.25m ($5m – $15m*25%), which would be effectively included in the cost of the associate (and not separately disclosed). Assuming no impairment, the value of that associate would always be greater than the share of net assets because of the equity method. Conversely, in the case of a bargain purchase, the carrying value of the investment in associate would actually be equal to the share of net assets. Using the same example, say we bought 25% of the company and only paid $3m. This results in $750k which would be accounted for: Dr Investment in associate Cr P&L. The value of the investment in associate on acquisition would then be $3.75m, equalling the share of net assets ($15m*25%). The associate value would then rise up and down by the change in net assets of the business.

Am I correct here or am I missing something? Many thanks for your time.

Hi Sylvia, my question is related to initial recognition. If at initial recogntion, the fair value of the asset invested is diffent from its carrying amount, what cost are we going to consider? is it the fair value of the asset or its carrying amount or anything else?

I mean different, not diffent

Hi Ms Silivia I need help with regards to accounting for unrealised losses from when an investor sells property to the associate for less than the carrying amount. Thanks for the notes

Hello Linah, The investor shall recognize whole of losses in thsi transaction (ref. = para 29 of IAS 28).

@Ms Silvia. Pl. correct me if my understanding is in-correct.

Leave a Reply Cancel reply

Recent Comments

• Kevin on Current or Non-Current?
• Antonio on Tax Reconciliation under IAS 12 + Example
• Kwen on IFRS 18 Presentation and Disclosure in Financial Statements: summary
• Yasaswi Gomes on How to account for financial guarantees under IFRS 9?
• Piper Cheng on Example: Cash flow projections and value in use under IAS 36
• Accounting Policies and Estimates (14)
• Consolidation and Groups (24)
• Current Assets (21)
• Financial Instruments (55)
• Financial Statements (50)
• Foreign Currency (9)
• IFRS Videos (68)
• Insurance (3)
• Most popular (6)
• Non-current Assets (54)
• Other Topics (15)
• Provisions and Other Liabilities (44)
• Revenue Recognition (26)

JOIN OUR FREE NEWSLETTER

report “Top 7 IFRS Mistakes” + free IFRS mini-course

1514305265169 -->

We use cookies to offer useful features and measure performance to improve your experience. By clicking "Accept" you agree to the categories of cookies you have selected. You can find further information here .

Discover the latest MyICAEW app for ACA students and members, available to download now. Find out more

• Benefits of membership

Gain access to world-leading information resources, guidance and local networks.

• Visit Benefits of membership

Becoming a member

98% of the best global brands rely on ICAEW Chartered Accountants.

• Visit Becoming a member
• Pay fees and subscriptions

Your membership subscription enables ICAEW to provide support to members.

Fees and subscriptions

Member survey.

We have partnered with Truth Consulting to conduct a comprehensive study on the needs of ICAEW members.

• Find out more

Member rewards

Take advantage of the range of value added or discounted member benefits.

• Member rewards – More from your membership
• Technical and ethics support
• Support throughout your career

Information and resources for every stage of your career.

From software start-ups to high-flying airlines and high street banks, 98% of the best global brands rely on ICAEW Chartered Accountants. A career as an ICAEW Chartered Accountant means the opportunity to work in any organisation, in any sector, whatever your ambitions.

Everything you need to know about ICAEW annual membership fees, community and faculty subscriptions, eligibility for reduced rates and details of how you can pay.

Membership administration

Welcome to the ICAEW members area: your portal to members'-only content, offers, discounts, regulations and membership information.

• Membership regulations

Members are required to supply certain information to the members’ registrar and to pay annual fees and subscriptions. These matters are governed by regulations.

• Continuing Professional Development (CPD)

Continuing Professional Development (CPD) is an integral part of being a successful ICAEW Chartered Accountant.

The ICAEW Chartered Accountant qualification, the ACA, is one of the most advanced learning and professional development programmes available. It is valued around the world in business, practice and the public sector.

ACA for employers

Train the next generation of chartered accountants in your business or organisation. Discover how your organisation can attract, train and retain the best accountancy talent, how to become authorised to offer ACA training and the support and guidance on offer if you are already providing training.

Digital learning materials via BibliU

All ACA, ICAEW CFAB and Level 4 apprenticeship learning materials are now digital only. Read our guide on how to access your learning materials on the ICAEW Bookshelf using the BibliU app or through your browser.

Take a look at ICAEW training films

Focusing on professional scepticism, ethics and everyday business challenges, our training films are used by firms and companies around the world to support their in-house training and business development teams.

Attract and retain the next generation of accounting and finance professionals with our world-leading accountancy qualifications. Become authorised to offer ACA training and help your business stay ahead.

CPD guidance and help

Continuing Professional Development (CPD) is an integral part of being a successful ICAEW Chartered Accountant. Find support on ICAEW's CPD requirements and access resources to help your professional development.

ICAEW flagship events

ICAEW boasts an extensive portfolio of industry-leading conferences. These flagship events offer the opportunity to hear from and interact with all the key players in the industry. Find out what's coming up.

Leadership Development Programmes

ICAEW Academy’s in-depth leadership development programmes take a holistic approach to combine insightful mentoring or coaching, to exclusive events, peer learning groups and workshops. Catering for those significant transitions in your career, these leadership development programmes are instrumental to achieving your ambitions or fulfilling your succession planning goals.

Specialist Finance Qualifications & Programmes

Whatever future path you choose, ICAEW will support the development and acceleration of your career at each stage to enhance your career.

Why a career in chartered accountancy?

If you think chartered accountants spend their lives confined to their desks, then think again. They are sitting on the boards of multinational companies, testifying in court and advising governments, as well as supporting charities and businesses from every industry all over the world.

• Why chartered accountancy

Search for qualified ACA jobs

Matching highly skilled ICAEW members with attractive organisations seeking talented accountancy and finance professionals.

Volunteering roles

Helping skilled and in-demand chartered accountants give back and strengthen not-for-profit sector with currently over 2,300 organisations posting a variety of volunteering roles with ICAEW.

• Search for volunteer roles
• Get ahead by volunteering

Advertise with ICAEW

From as little as £495, access to a pool of highly qualified and ambitious ACA qualified members with searchable CVs.

• Start your career

Explore a career that opens doors into any industry and where your passions are. ICAEW Chartered Accountants are supporting economies, businesses and initiatives worldwide. Want to join the ICAEW Community?

Qualified ACA careers

Find Accountancy and Finance Jobs

Voluntary roles

Find Voluntary roles

While you pursue the most interesting and rewarding opportunities at every stage of your career, we’re here to offer you support whatever stage you are or wherever you are in the world and in whichever sector you have chosen to work.

ACA students

"how to guides" for aca students.

• ACA student guide
• How to book an exam
• How to apply for credit for prior learning (CPL)

Exam resources

Here are some resources you will find useful while you study for the ACA qualification.

• Certificate Level
• Professional Level
• Advanced Level

Digital learning materials

All ACA learning materials are now digital only. Read our guide on how to access your learning materials on the ICAEW Bookshelf via the BibliU app, or through your browser.

• Read the guide

My online training file

Once you are registered as an ACA student, you'll be able to access your training file to log your progress throughout ACA training.

• Access your training file
• Student Insights

Fresh insights, innovative ideas and an inside look at the lives and careers of our ICAEW students and members.

• Read the latest articles

System status checks

Getting started.

Welcome to ICAEW! We have pulled together a selection of resources to help you get started with your ACA training, including our popular 'How To' series, which offers step-by-step guidance on everything from registering as an ACA student and applying for CPL, to using your online training file.

Credit for prior learning (CPL)

Credit for prior learning or CPL is our term for exemptions. High quality learning and assessment in other relevant qualifications is appropriately recognised by the award of CPL.

Apply for exams

What you need to know in order to apply for the ACA exams.

The ACA qualification has 15 modules over three levels. They are designed to complement the practical experience you will be gaining in the workplace. They will also enable you to gain in-depth knowledge across a broad range of topics in accountancy, finance and business. Here are some useful resources while you study.

• Exam results

You will receive your results for all Certificate Level exams, the day after you take the exam and usually five weeks after a Professional and Advanced Level exam session has taken place. Access your latest and archived exam results here.

Training agreement

Putting your theory work into practice is essential to complete your ACA training.

Student support and benefits

We are here to support you throughout your ACA journey. We have a range of resources and services on offer for you to unwrap, from exam resources, to student events and discount cards. Make sure you take advantage of the wealth of exclusive benefits available to you, all year round.

• Applying for membership

The ACA will open doors to limitless opportunities in all areas of accountancy, business and finance anywhere in the world. ICAEW Chartered Accountants work at the highest levels as finance directors, CEOs and partners of some of the world’s largest organisations.

ACA training FAQs

Do you have a question about the ACA training? Then look no further. Here, you can find answers to frequently asked questions relating to the ACA qualification and training. Find out more about each of the integrated components of the ACA, as well as more information on the syllabus, your training agreement, ICAEW’s rules and regulations and much more.

• Anti-money laundering

Guidance and resources to help members comply with their legal and professional responsibilities around AML.

Technical releases

ICAEW Technical Releases are a source of good practice guidance on technical and practice issues relevant to ICAEW Chartered Accountants and other finance professionals.

• ICAEW Technical Releases
• Thought leadership

ICAEW's Thought Leadership reports provide clarity and insight on the current and future challenges to the accountancy profession. Our charitable trusts also provide funding for academic research into accountancy.

• Academic research funding

Technical Advisory Services helpsheets

Practical, technical and ethical guidance highlighting the most important issues for members, whether in practice or in business.

• ICAEW Technical Advisory Services helpsheets

Bloomsbury – free for eligible firms

In partnership with Bloomsbury Professional, ICAEW have provided eligible firms with free access to Bloomsbury’s comprehensive online library of around 80 titles from leading tax and accounting subject matter experts.

• Bloomsbury Accounting and Tax Service

Country resources

Our resources by country provide access to intelligence on over 170 countries and territories including economic forecasts, guides to doing business and information on the tax climate in each jurisdiction.

Industries and sectors

Thought leadership, technical resources and professional guidance to support the professional development of members working in specific industries and sectors.

Audit and Assurance

The audit, assurance and internal audit area has information and guidance on technical and practical matters in relation to these three areas of practice. There are links to events, publications, technical help and audit representations.

The most up-to-date thought leadership, insights, technical resources and professional guidance to support ICAEW members working in and with industry with their professional development.

• Corporate Finance

Companies, advisers and investors making decisions about creating, developing and acquiring businesses – and the wide range of advisory careers that require this specialist professional expertise.

• Corporate governance

Corporate governance is the system by which companies are directed and controlled. Find out more about corporate governance principles, codes and reports, Board subcommittees, roles and responsibilities and shareholder relations. Corporate governance involves balancing the interests of a company’s many stakeholders, such as shareholders, employees, management, customers, suppliers, financiers and the community. Getting governance right is essential to build public trust in companies.

• Corporate reporting

View a range of practical resources on UK GAAP, IFRS, UK regulation for company accounts and non-financial reporting. Plus find out more about the ICAEW Corporate Reporting Faculty.

Expert analysis on the latest national and international economic issues and trends, and interviews with prominent voices across the finance industry, alongside data on the state of the economy.

• Financial Services

View articles and resources on the financial services sector.

• Practice resources

For ICAEW's members in practice, this area brings together the most up-to-date thought leadership, technical resources and professional guidance to help you in your professional life.

Public Sector

Many ICAEW members work in or with the public sector to deliver public priorities and strong public finances. ICAEW acts in the public interest to support strong financial leadership and better financial management across the public sector – featuring transparency, accountability, governance and ethics – to ensure that public money is spent wisely and that public finances are sustainable.

Sustainability and climate change

Sustainability describes a world that does not live by eating into its capital, whether natural, economic or social. Members in practice, in business and private individuals all have a role to play if sustainability goals are to be met. The work being undertaken by ICAEW in this area is to change behaviour to drive sustainable outcomes.

The Tax area has information and guidance on technical and practical tax matters. There are links to events, the latest tax news and the Tax Faculty’s publications, including helpsheets, webinars and Tax representations.

Keep up-to-date with tech issues and developments, including artificial intelligence (AI), blockchain, big data, and cyber security.

Trust & Ethics

Guidance and resources on key issues, including economic crime, business law, better regulation and ethics. Read through ICAEW’s Code of Ethics and supporting information.

Communities

ICAEW Communities

Information, guidance and networking opportunities on industry sectors, professional specialisms and at various stages throughout your career. Free for ICAEW members and students.

• Discover a new community

ICAEW Faculties

The accountancy profession is facing change and uncertainty. The ICAEW Faculties can help by providing you with timely and relevant support.

• Choose to join any of the faculties

UK groups and societies

We have teams on the ground in: East of England, the Midlands, London and South East, Northern, South West, Yorkshire and Humberside, Wales and Scotland.

• Access your UK region
• Worldwide support and services

Support and services we offer our members in Africa, America, Canada, the Caribbean, Europe, Greater China, the Middle East, Oceania and South East Asia.

• Discover our services

ICAEW Faculties are 'centres of technical excellence', strongly committed to enhancing your professional development and helping you to meet your CPD requirements every year. They offer exclusive content, events and webinars, customised for your sector - which you should be able to easily record, when the time comes for the completion of your CPD declaration. Our offering isn't exclusive to Institute members. As a faculty member, the same resources are available to you to ensure you stay ahead of the competition.

Communities by industry / sector

Communities by life stage and workplace, communities by professional specialism, local groups and societies.

We aim to support you wherever in the world you work. Our regional offices and network of volunteers run events and provide access to local accounting updates in major finance centres around the globe.

Election explainers

ICAEW experts offer simple guides to help understand the technical, economic jargon that will be at the heart of political debates in the coming weeks.

Insights pulls together the best opinion, analysis, interviews, videos and podcasts on the key issues affecting accountancy and business.

• See the latest insights

ICAEW podcasts

ICAEW produces two podcast series that count towards your CPD: Accountancy Insights for news from across the profession, and The Tax Track for specialist analysis from the ICAEW Tax Faculty.

Professional development and skills

With new requirements on ICAEW members for continuing professional development, we bring together resources to support you through the changes and look at the skills accountants need for the future.

• Visit the hub
• Diversity and Inclusion

Diversity and inclusion is a key pillar of ICAEW's strategy. Discover the latest insights on equality, diversity and inclusion. You can also join our Diversity & Inclusion Community.

• Find out more on our hub
• Join the community

Insights specials

A listing of one-off Insights specials that focus on a particular subject, interviewing the key people, identifying developing trends and examining the underlying issues.

Top podcasts

Insights by topic.

ICAEW Regulation

• Regulatory News

View the latest regulatory updates and guidance and subscribe to our monthly newsletter, Regulatory & Conduct News.

• Regulatory Consultations

Strengthening trust in the profession

Our role as a world-leading improvement regulator is to strengthen trust and protect the public. We do this by enabling, evaluating and enforcing the highest standards in the profession. 

Regulatory applications

Find out how you can become authorised by ICAEW as a regulated firm. 

ICAEW codes and regulations

Professional conduct and complaints, statutory regulated services overseen by icaew, regulations for icaew practice members and firms, additional guidance and support, popular search results.

• Practice Exam Software
• Training File
• Ethics Cpd Course
• Routes to the ACA
• ACA students membership application
• Join as a member of another body
• How much are membership fees?
• How to pay your fees
• Receipts and invoices
• What if my circumstances have changed?
• Difficulties in making changes to your membership
• Faculty and community subscription fees
• Updating your details
• Complete annual return
• Promoting myself as an ICAEW member
• Verification of ICAEW membership
• Become a life member
• Become a fellow
• Request a new certificate
• Report the death of a member
• Practising certificates
• Advancement to fellowship regulations
• Regulations relating to membership cessation, readmission and resignation
• ICAEW's guide to directors' duties and responsibilities
• Information to be supplied by members
• Payment of annual subscription
• Power to change subscription fees
• New members
• Career progression
• Career Breakers
• Volunteering at schools and universities
• ICAEW Member App
• Working internationally
• Self employment
• Support Members Scheme
• Your guide to CPD
• CPD learning resources
• Online CPD record
• How to become a chartered accountant
• Register as a student
• Train as a member of another body
• More about the ACA and chartered accountancy
• How ACA training works
• Become a training employer
• Access the training file
• Why choose the ACA
• Training routes
• Employer support hub
• Get in touch
• Apprenticeships with ICAEW
• A-Z of CPD courses by topic
• Firms' guide to CPD
• ICAEW Business and Finance Professional (BFP)
• ICAEW Annual Conference 2024
• Restructuring & Insolvency Conference
• Virtual CPD Conference
• Virtual Healthcare Conference 2024
• All our flagship events
• Financial Talent Executive Network (F-TEN®)
• Developing Leadership in Practice (DLiP™)
• Network of Finance Leaders (NFL)
• Women in Leadership (WiL)
• Mentoring and coaching
• Partners in Learning
• Board Director's Programme e-learning
• Corporate Finance Qualification
• Diploma in Charity Accounting
• ICAEW Certificate in Insolvency
• ICAEW Data Analytics Certificate
• Financial Modeling Institute’s Advanced Financial Modeler Accreditation
• ICAEW Sustainability Certificate for Finance Professionals
• All specialist qualifications
• Team training
• Why become an ICAEW Chartered Accountant?
• How to become an ICAEW Chartered Accountant
• Start your training
• Early careers events and resources
• Search employers
• Find a role
• Role alerts
• Organisations
• Practice support – 11 ways ICAEW and CABA can help you
• News and advice
• ICAEW Volunteering Hub
• Support in becoming a chartered accountant
• Vacancies at ICAEW
• ICAEW boards and committees
• Exam system status
• ICAEW systems: status update
• Changes to our qualifications
• How-to guides for ACA students
• Apply for credits - Academic qualification
• Apply for credits - Professional qualification
• Credit for prior learning (CPL)/exemptions FAQs
• Applications for Professional and Advanced Level exams
• Applications for Certificate Level exams
• Tuition providers
• Latest exam results
• Archived exam results
• Getting your results
• Marks feedback service
• Exam admin check
• Training agreement: overview
• Professional development
• Ethics and professional scepticism
• Practical work experience
• Access your online training file
• How training works in your country
• Student rewards
• TOTUM PRO Card
• Student events and volunteering
• Xero cloud accounting certifications
• Student support
• Join a community
• Wellbeing support from caba
• Student mentoring programme
• Student conduct and behaviour
• Code of ethics
• Fit and proper
• Level 4 Accounting Technician Apprenticeship
• Level 7 Accountancy Professional Apprenticeship
• AAT-ACA Fast Track FAQs
• ACA rules and regulations FAQs
• ACA syllabus FAQs
• ACA training agreement FAQs
• Audit experience and the Audit Qualification FAQs
• Independent student FAQs
• Practical work experience FAQs
• Professional development FAQs
• Six-monthly reviews FAQs
• Ethics and professional scepticism FAQs
• Greater China
• Latin America
• Middle East
• North America
• Australasia
• Russia and Eurasia
• Southeast Asia
• Charity Community
• Construction & Real Estate
• Energy & Natural Resources Community
• Farming & Rural Business Community
• Forensic & Expert Witness
• Global Trade Community
• Healthcare Community
• Internal Audit Community
• Manufacturing Community
• Media & Leisure
• Portfolio Careers Community
• Small and Micro Business Community
• Small Practitioners Community
• Travel, Tourism & Hospitality Community
• Valuation Community
• Audit and corporate governance reform
• Audit & Assurance Faculty
• Professional judgement
• Regulation and working in audit
• Internal audit resource centre
• ICAEW acting on audit quality
• Everything business
• Latest Business news from Insights
• Strategy, risk and innovation
• Business performance management
• Financial management
• Finance transformation
• Economy and business environment
• Leadership, personal development and HR
• Webinars and publications
• Business restructuring
• The Business Finance Guide
• Capital markets and investment
• Corporate finance careers
• Corporate Finance Faculty
• Debt advisory and growth finance
• Mergers and acquisitions
• Private equity
• Start-ups, scale-ups and venture capital
• Transaction services
• Board committees and board effectiveness
• Corporate governance codes and reports
• Corporate Governance Community
• Principles of corporate governance
• Roles, duties and responsibilities of Board members
• Stewardship and stakeholder relations
• Corporate Governance thought leadership

Corporate reporting resources

• Small and micro entity reporting
• IFRS Accounting Standards
• UK Regulation for Company Accounts
• Non-financial reporting
• Improving Corporate Reporting
• Economy home
• ICAEW Business Confidence Monitor
• ICAEW Manifesto 2024
• Economy explainers
• Spring Budget 2024
• Energy crisis
• Levelling up: rebalancing the UK’s economy
• Resilience and Renewal: Building an economy fit for the future
• Social mobility and inclusion
• Investment management
• Inspiring confidence
• Setting up in practice
• Running your practice
• Supporting your clients
• Practice technology
• TAS helpsheets
• Support for business advisers
• Join ICAEW BAS
• Public Sector hub
• Public Sector Audit and Assurance
• Public Sector Finances
• Public Sector Financial Management
• Public Sector Financial Reporting
• Public Sector Learning & Development
• Public Sector Community
• Latest public sector articles from Insights
• Making COP count
• Climate hub
• Sustainable Development Goals
• Accountability
• Modern slavery
• Resources collection
• Sustainability Committee
• Sustainability & Climate Change community
• Sustainability and climate change home
• Tax Faculty
• Budgets and legislation
• Business tax
• Devolved taxes
• Employment taxes
• International taxes
• Making Tax Digital
• Personal tax
• Property tax
• Stamp duty land tax
• Tax administration
• Tax compliance and investigation
• UK tax rates, allowances and reliefs
• Artificial intelligence
• Blockchain and cryptoassets
• Cyber security
• Data Analytics Community
• Digital skills
• Excel community
• Finance in a Digital World
• IT management
• Technology and the profession
• Trust & Ethics home
• Better regulation
• Business Law
• UK company law
• Data protection and privacy
• Economic crime
• Help with ethical problems
• ICAEW Code of Ethics
• ICAEW Trust and Ethics team.....
• Solicitors Community
• Forensic & Expert Witness Community
• Latest articles on business law, trust and ethics
• Audit and Assurance Faculty
• Corporate Reporting Faculty
• Financial Services Faculty
• Academia & Education Community
• Construction & Real Estate Community
• Entertainment, Sport & Media Community
• Retail Community
• Black Members Community
• Career Breakers Community
• Diversity & Inclusion Community
• Women in Finance Community
• Personal Financial Planning Community
• Restructuring & Insolvency Community
• Sustainability and Climate Change Community
• London and East
• Yorkshire and Humberside
• European public policy activities
• ICAEW Middle East
• Latest news
• The World’s Fastest Accountant
• Access to finance special
• Attractiveness of the profession
• Audit and Fraud
• Audit and technology
• Adopting non-financial reporting standards
• Cost of doing business
• Mental health and wellbeing
• Pensions and Personal Finance
• Ukraine crisis: central resource hub
• More specials ...
• The economics of biodiversity
• How chartered accountants can help to safeguard trust in society
• Video: The financial controller who stole £20,000 from her company
• It’s time for chartered accountants to save the world
• Video: The CFO who tried to trick the market
• Video: Could invoice fraud affect your business?
• Business confidence, local authority finance, probate delays, and tax reform
• Why are female-led startups so underfunded?
• How to get Britain growing
• Groupthink: the boardroom’s most pervasive problem?
• Corporate reporting update and VAT on private hire vehicles
• AI in audit: the good, the bad and the ugly
• Company size thresholds and CGT on residences
• Lessons in leadership from ICAEW's CEO
• So you want to be a leader?
• A busy new tax year, plus progress on the Economic Crime Act
• Does Britain have a farming problem?
• More podcasts...
• Top charts of the week
• EU and international trade
• CEO and President's insights
• Sponsored content
• Insights index
• Charter and Bye-laws
• Archive of complaints, disciplinary and fitness processes, statutory regulations and ICAEW regulations
• Qualifications regulations
• Training and education regulations
• How to make a complaint
• Guidance on your duty to report misconduct
• Public hearings
• What to do if you receive a complaint against you
• Anti-money laundering supervision
• Working in the regulated area of audit
• Local public audit in England
• Probate services
• Designated Professional Body (Investment Business) licence
• Consumer credit
• Quality Assurance monitoring: view from the firms
• The ICAEW Practice Assurance scheme
• Licensed Practice scheme
• Professional Indemnity Insurance (PII)
• Clients' Money Regulations
• Taxation (PCRT) Regulations
• ICAEW training films
• Helpsheets and guidance by topic
• ICAEW's regulatory expertise and history
• IFRS accounting standards

IAS 28 Investments in Associates and Joint Ventures

Ias 28 investments in associates and joint ventures prescribes the accounting for investments in associates and sets out the requirements for the application of the equity method when accounting for investments in associates and joint ventures., access the standard, recent amendments, related ifric interpretations, icaew factsheets and guides, other resources, interests in other entities.

This factsheet guides you through the accounting and disclosure requirements for investments in subsidiaries, joint ventures and associates.

• 2023 Issued Standard – IAS 28 The 2023 Issued Standards include all amendments issued up to and including 1 January 2023.

Registration is required to access the free version of the Issued Standards, which do not include additional documents that accompany the full standard (such as illustrative examples, implementation guidance and basis for conclusions).

IAS 28 prescribes the accounting for investments in associates and sets out the requirements for the application of the equity method when accounting for investments in associates and joint ventures.

An associate is an entity over which the investor has significant influence. A shareholding of 20% or more of an entity is presumed to result in significant influence, although where a shareholding is less than this, significant influence can be established by other means.

In the consolidated financial statements, equity accounting is applied to investments in associates and joint ventures:

• In the consolidated statement of financial position the investment is initially carried at cost and subsequently adjusted for the investor’s share of profits or losses and other comprehensive income made by the investee. Distributions received from the investee reduce the carrying value of the investment.
• The investor’s share of the investee’s profit or loss and other comprehensive income are reported in the consolidated statement of profit or loss and other comprehensive income.

IAS 28 does not include any disclosure requirements; these are included in IFRS 12 Disclosure of Interests in Other Entities.

Log in to read more

These resources are available exclusively to Corporate Reporting Faculty subscribers, ICAEW members and students.

• Join the faculty

IFRIC 5 Rights to Interests Arising from Decommissioning, Restoration and Environmental Rehabilitation Funds Provides guidance on how a contributor to a decommissioning fund should account for its interest in a fund.

The Corporate Reporting Faculty's annual IFRS factsheets  provide a more detailed discussion of recent IFRS amendments.

• Helpsheets and support
• 22 Feb 2023
• PDF (337kb)

The ICAEW Library & Information Service provides full text access to a selection of key business and reference eBooks from leading publishers. eBooks are available to logged-in ICAEW members, ACA students and other entitled users. If you are unable to access an eBook, please see our Help and support advice or contact [email protected] .

• eBook chapter
• PKF International Ltd
• Wiley Interpretation and Application of IFRS Standards
• Ernst & Young LLP
• International GAAP - Generally Accepted Accounting Practice under International Financial Reporting Standards

Terms of use

You are permitted to access, download, copy, or print out content from eBooks for your own research or study only, subject to the terms of use set by our suppliers and any restrictions imposed by individual publishers. Please see individual supplier pages for full terms of use.

Overviews of each international accounting standard, with a history and timeline of key events and amendments.

Detailed guide on interpreting and implementing IFRS, with illustrative examples and extracts from financial statements. The manual is available online (free registration required) as part of EY Atlas Client Edition.

Further support

Practical resources including factsheets, online guides and webinars on financial and non-financial reporting.

Technical Advisory Services

Our experienced advisors can help you with technical questions.

Library and Information Service

Expert help with research and access to trustworthy, professional sources.

• +44 (0)20 7920 8620
• [email protected]

Some of the content on this web page was provided by the Chartered Accountants’ Trust for Education and Research, a registered charity, which owns the library and operates it for ICAEW.

Read out this code to the operator.

Loading Results

No Match Found

IAS 28 Investments in associates and joint ventures

Upon completion of this module you will be able to identify investments that must be accounted for using the equity method under IAS 28, calculate the carrying value of the investment and share of the profit or loss of associate or joint venture applying the equity method and define disclosure requirements.

Topics covered in the e-learning:

Objectives and scope

Significant influence

Equity method

Disclosures

This e-learning course takes approximately 50 minutes to complete, and as such, it can provide 1 learning hour – 1 CPD point based on a 50-minute hour. Upon completion of this course, you can print the certificate of completion as an evidence that you undertook the course.

In case you need CPA CPE credit points, please contact us for the certificates.

Buy online Click here for purchasing

Further information:

Training hours: 50 minutes

Language: English

• Topics: IFRS, Reporting
• Sector: Corporates

Training method: E-learning

Type: Single course

Geographic relevance: Global

This e-learning course is part of an e-learning series designed by PwC’s Academy Hungary which aims to provide a comprehensive overview of the application of IFRS (IAS) standards to finance and accounting experts who are already familiar with fundamental (local) accounting and reporting processes.

More information on corporate package solutions

© 2023 - 2024 PwC. All rights reserved. “PwC” refers to PricewaterhouseCoopers Auditing Ltd. and PricewaterhouseCoopers Hungary Ltd. which are member of the PwC network. PwC refers to the PwC network and/or one or more of its member firms, each of which is a separate legal entity. Please see www.pwc.com/structure for further details.

• Privacy Statement
• Cookie Policy
• About Site Provider

Trending Courses

Course Categories

Certification Programs

• Free Courses

Mergers and Acquisitions Resources

• Free Practice Tests
• On Demand Webinars

Investment in Associates

Published on :

21 Aug, 2024

Blog Author :

Edited by :

Aaron Crowe

Reviewed by :

Dheeraj Vaidya

Investment in Associates Definition

Investment in associate refers to the investment in an entity in which the investor has significant influence but does not have full control like a parent and a subsidiary relationship. Usually, the investor has a significant impact when it has 20% to 50% of shares of another entity.

Table of contents

Accounting for investment in associates, basic example, practical example - nestle’s investment in associates, practical example - siemens ag, disadvantages, important points to note about change in investment in associates, recommended articles.

• Investment in the associate is an entity where the investor has a significant effect but does not have complete regulation like a parent and a subsidiary relationship. Generally, the investor has a significant impact when it has another entity's 20% to 50% of shares.
• Accounting for investment in associates is conducted using the equity method. In the equity method, a 100% consolidation is not used. Instead, the proportion of shares owned by the investor is shown as an investment in accounting.
• Investment in associates is typical for companies to utilize the investment to take a lesser stake in another company.

Accounting for investment in associates is done using the equity method. In the equity method, there is not a 100% consolidation used. Instead, the proportion of shares owned by the investor will be shown as an investment in accounting.

When an investor takes more shares in associates than in the investor's balance sheet, it is recorded as an “increase in associates,” and the same amount reduces cash. The dividend from the associate is shown as an increase in money for the investor. To record the proportion of the net income of an associate, the investment revenue of the investor gets credit, and investment in the associate account gets debited.

Example of Investment in Associates

Below are some of the basic to advanced examples of investment in associates.

Suppose ABC Corp. has purchased 30% shares of XYZ Co. That means ABC Corp. has significant influence over XYZ Co. Therefore, XYZ Co. can be treated as an associate of ABC Corp. The value of 30% shares is $500,000. So, while making a purchase, below will be an accounting transaction for ABC Corp .

After 6 months, XYZ Co. declares $10,000 dividends to its shareholders. That means ABC Corp. will receive 30% of dividends or $3,000. Below will be accounting entries for the same: -

XYZ Co. also declares a net income of $50,000. Accordingly, ABC Corp. will debit 30% of $50,000 in its “Investment in Associates” account while crediting the same amount as “Investment Revenue” in its income statement.

The ending balance of ABC Corp. “Investments in Associates” account increased to $512,000.

Nestle is a Swiss multinational company headquartered in Switzerland. Nestle, the largest food company, globally had around CHF 91.43 billion in revenue in 2018. Below is the income statement of Nestle as per the 2018 annual report .

Source : www.nestle.com

We can see that income from associates has increased from CHF 824 million to CHF 916 million.

Also, as per the balance, their Investment in Associates account has gone down from CHF 11.6 billion to CHF 10.8 billion.

Below is the more detailed information on associates for Nestle: -

In L’Oreal, Nestle has 23% shares after eliminating its treasury shares. Nestle holds another number of associates also, but that is not material. Major factors in investment in associates are share of results with CHF 919 million.

Siemens AG is a German multinational company headquartered in Berlin and Munich. Siemens AG mainly operates in energy, healthcare, and infrastructure. Their revenue is around €83 bn as per the 2018 annual report . Below is the balance sheet snippet for Siemens AG, which shows its investment in associates, which is shown under “Investment in Accounted for using the equity method.”

Source: siemens.com

As we can see, their associates' investment has changed from €3 billion to €2.7 billion.

We can see below their definition of associates also.

As we have mentioned above, they treat the investment as associates in which they have 20% to 50% shares, and they are using the equity method to account that investment is recognized at cost.

• With these investments, investors show an accurate and reliable income balance. In addition, it shows the percentage of earnings from its investment.
• Since the investor shows the only percent of income or investment in an associate, it is easy to reconcile the accounts.
• It is a bit complex to do the accounting for this method. A lot of time is required to gather and analyze, evaluate the figures, and get the correct information.
• The investor cannot show dividends from associates as revenue. It can only be treated as a “reduction to investment” amount and not as a dividend income.
• A company is treated as an associate when the share in investee is between 20% and 50%.
• The equity method is used to do the accounting.
• Investment is treated as an asset, and only the percentage of shares bought is treated as an investment.
• Dividends are treated as a change in investment, not the dividend revenue.

Investment in associates is common for companies to use their investment to take a lesser stake in another company. The equity method is useful for the accounting process for these investments. Though companies can show the net income of the associate company as part of their revenue, dividend income won’t be part of it, and it would be a reduction in the “investment in associate” asset.

Frequently Asked Questions (FAQs)

Suppose the investment carrying amount in an associate or joint venture increases its recoverable amount. As a result, an impairment loss is identified. However, the loss is allocated to the investment as a whole and not to the underlying assets of the investee that make up the carrying amount of the investment.

Investments in associates using the equity method are classified as non-current assets. As a result, the investor's profit or loss shares of associates and the carrying amount of those investments are separately revealed.

The minority interest value is added because it shows the claim on assets consolidated into the firm. The value of associate companies is deducted as it shows the claim on assets consolidated into other firms.

Investments in associates using the equity method must be classified as long-term investments and revealed distinct in the consolidated balance sheet. Accordingly, the investor's share of the profits or losses of such assets should be disclosed separately in the consolidated statement of profit and loss.

This article has been a guide to investment in associates and its definition. Here, we discuss how accounting for investments in associates is done along with examples, advantages, and disadvantages. You can learn more about financing from the following articles: -

• Multinational Company
• Mergers vs. Acquisitions
• What is Mergers and Acquisitions?
• Synergies in M&A

IPSAS 36, Investments in Associates and Joint Ventures

IPSAS 36 explains the application of the equity method of accounting, which is used to account for investments in associates and joint ventures. The requirements are very similar to the current guidance in IPSAS 7, Investment in Associates . Because equity accounting must now be used when accounting for joint ventures, the title of the standard now also refers to joint ventures.

In contrast with IPSAS 7, IPSAS 36 does not permit a different accounting treatment for temporary investments. 

IFRScommunity.com

IFRS Forums and IFRS Knowledge Base

Equity Method

Last updated: 13 June 2024

The equity method, governed by IAS 28, is a simplified form of consolidation used to account for investments in associates and joint ventures , with one key distinction: investee’s financials are not incorporated line-by-line into the investor’s financial statements. Instead, a solitary asset, representative of the equity-accounted investment, is recognised in the statement of financial position. Additionally, single lines are presented in the investor’s P/L and OCI statements. To achieve this outcome, the investment is initially recognised at cost, and subsequently adjusted for the post-acquisition change in the investor’s share of the net assets.

Currently, the IASB is working to clarify several application issues regarding the equity method that have been raised with the IFRS Interpretations Committee. More information can be found in this summary of the IASB’s tentative decisions and on the project page .

Now, let’s begin with an introductory example on applying the equity method:

Example: Simple illustration of the equity method application

On 1 January 20X1, Entity A acquired a 25% interest in Entity B for a total consideration of $50m and applies the equity method in accounting for it. Entity B’s net assets as per its financial statements totalled $150m. These assets include real estate with a carrying amount of $20m and a fair value of $35m, with a remaining useful life of 15 years. For other assets and liabilities, the carrying amount is roughly equivalent to their fair value. In this example, deferred tax is not considered. A corresponding Excel file is available for download.

Entity A recognises the investment in Entity B at cost, i.e., $50m, on the date of acquisition. This amount can be broken down as follows:

Goodwill was calculated as shown below:

During the year ended 31 December 20X1, Entity B generated net income of $10m and paid dividends of $7m. In addition, Entity A must account for the $0.25m of additional depreciation charge on the fair value adjustment on real estate when applying the equity method. This is calculated as the fair value adjustment on real estate divided by 15 years of remaining useful life, multiplied by Entity A’s 25% share (i.e., $15m/15 years x 25%).

The entries made by Entity A at 31 December 20X1 are as follows:

1. Recognition of 25% share of B’s net income of $10m less 25% share in depreciation of fair value adjustment:

2. Recognition of 25% share of $7m of dividends paid by Entity B:

Are you tired of the constant stream of IFRS updates? I know it's tough! That's why I created Reporting Period – a once-a-month summary for professional accountants. It consolidates all essential IFRS developments and Big 4 insights into one readable email. I personally curate every issue to ensure it's packed with the most relevant information, delivered straight to your inbox. It's free, with no spam, and if it turns out not to be right for you, you can unsubscribe with just one click.

Initial recognition

An investment accounted for using the equity method is initially recognised at cost. The term ‘at cost’ is not defined in IAS 28, and a discussion similar to that in IAS 27 applies here as well.

When an investment transitions from a consolidated subsidiary to an associate or joint venture, the cost for initial recognition purposes is the fair value of retained interest at the date when control is lost (IFRS 10.25(b)).

Initial recognition becomes more complex when a ‘regular’ equity investment (e.g. a 5% interest) becomes an associate or joint venture. In such a case, the same discussion on how to determine the cost of a subsidiary when control is achieved in stages applies.

When an investment in an associate becomes a joint venture (or vice versa), the entity continues to apply the equity method and does not remeasure the retained interest (IAS 28.24).

If additional interest is acquired in an entity that was, and remains, an associate or joint venture accounted for under the equity method, the best practice is to add the additional consideration to the carrying amount of the investment without recognising any additional gains or losses (this specific case is not covered in IFRS).

Goodwill and fair value adjustments

When acquiring an investment in an associate or joint venture, entities must recognise their interest at the fair value of the associate or joint venture’s net assets and goodwill. This is similar to the requirements under IFRS 10, except that all items are subsumed into one line (IAS 28.32). Similarities include additional depreciation of fair value adjustments on assets recognised only upon consolidation, such as an internally generated brand of the acquired entity. As goodwill is not recognised separately from the investment under the equity method, the mandatory annual impairment test requirements of IAS 36 do not apply (IAS 28.42).

Determining the fair value is typically more challenging for an associate since having significant influence can make it difficult to obtain all the necessary valuation inputs. Therefore, approximations and estimates are frequently used to a greater extent than usual. A simple example illustrating an investment in an associate or joint venture, accounted for under the equity method and broken down into the investor’s share in net assets, fair value adjustments and goodwill, is provided here .

Intercompany transactions with associates and joint ventures

Regular intercompany transactions.

Associates and joint ventures do not form part of the group according to the IFRS 10 definition, as a group consists of a parent and its subsidiaries. Consequently, intercompany transactions with associates and joint ventures are not eliminated in consolidated financial statements. However, some accounting practitioners do eliminate regular intercompany transactions to the extent of the investor’s share in an associate or joint venture. These two methods are illustrated below. Fortunately, IAS 28 provides specific guidance on transactions involving assets .

Example: Revenue earned from an associate

Company P, with a 20% interest in Company A (its associate), provides consulting services to A for $100 during the year. As services are provided, P recognises revenue in its books:

Associate A recognises the corresponding expense:

When applying the equity method in its consolidated financial statements, Company P does not eliminate the recognised revenue and receivable. However, it needs to recognise 20% of its share in A’s profit or loss:

Overall, this transaction has the following impact on P’s consolidated financial statements:

Alternative approach

As previously mentioned, a minority of practitioners eliminate even ‘regular’ intercompany transactions to the extent of the investor’s share in an associate or joint venture. Under this approach, when applying the equity method in its consolidated financial statements, Company P from the previous example eliminates 20% of the recognised revenue and correspondingly deducts this amount from its share in A’s profit or loss. The consolidation entries under this approach would appear as follows:

Initially, Company P recognises 20% of its share in A’s profit or loss:

Subsequently, P eliminates its 20% share (the intercompany part) in the revenue and expenses recognised on consulting services:

In conclusion, the alternative approach has the following impact on P’s consolidated financial statements:

Upstream and downstream transactions involving assets

IAS 28.28 stipulates that gains and losses from ‘upstream’ (i.e., sales from an associate or joint venture to the investor) and ‘downstream’ (i.e., sales from the investor to the associate or joint venture) transactions involving assets must be recognised only to the extent of unrelated investors’ interests. When applying the equity method, the investor’s share in the investee’s gains or losses from these transactions is eliminated. This principle is illustrated in the subsequent examples.

Example: Accounting for a downstream transaction

Entity A holds a 20% interest in Entity B and accounts for it using the equity method. In the year 20X0, Entity A sold an item of inventory to Entity B for $1m, which was carried at a cost of $0.7m in A’s books. During the year 20X1, Entity B sold this inventory to its client for $1.5 million. Deferred tax has been ignored in this example. Please note that an Excel file for this example can be downloaded.

Entity A recognises the sale to Entity B in its books:

Simultaneously, Entity B recognises the purchase in its books:

In the consolidated financial statements, Entity A recognises an adjustment to eliminate the gain on the sale of inventory with regard to its 20% interest in Entity B:

* Entity A adjusts the value of its investment in B, as the asset subject to elimination is held by B.

Entity B recognises the sale to a client:

In the consolidated financial statements, Entity A reverses the previous entry and recognises a 20% portion of revenue and cost of sales:

In addition, Entity A recognises its share in the gain made by Entity B:

Example: Accounting for an upstream transaction

Entity A holds a 20% interest in Entity B and accounts for it using the equity method. In the year 20X0, Entity B sold an item of inventory to Entity A for $1m, which was carried at a cost of $0.7m in B’s books. During the year 20X1, Entity A sold this inventory to its client for $1.5 million. Deferred tax has been ignored in this example.

Entity B recognises the sale to Entity A in its books:

Simultaneously, Entity A recognises the purchase in its books:

In the consolidated financial statements, Entity A recognises its share in the gain made by Entity B:

At the same time, Entity A eliminates the effect of the upstream transaction concerning its 20% interest in the consolidated financial statements. There are two acceptable approaches to this step, both commonly used in practice:

Entity A recognises the sale to a client:

Additionally, Entity A reverses the consolidation entry made in year 20X0 and includes the profit that B made on the sale to A.

This approach should also be applied to the contribution of non-monetary assets to an associate or joint venture (IAS 28.30).

Associate or joint venture as a parent

The share of an investee’s profit or loss and OCI is determined based on its consolidated financial statements. This includes the investee’s consolidated subsidiaries and other investments accounted for using the equity method (IAS 28.10). While IAS 28 doesn’t provide specific guidance on how to treat non-controlling interest in the investee’s group, it is most logical for the investor to account only for the controlling interest’s share of P/L and OCI. This is because the net income attributable to non-controlling interest of the investee’s group will never accrue to the investor.

For further information, refer to the forums discussion on reciprocal equity interests (‘cross-holdings’) between parent and associate.

Dividends and other capital distributions

Dividends and other capital distributions received from an investee reduce the carrying amount of the investment (IAS 28.10).

Exchange differences on translation

Exchange differences that arise when translating an investee’s financial statements into the investor’s presentation currency are recognised in OCI (IAS 21.44).

Equity transactions of associate or joint venture

IAS 28 does not provide guidance on how to account for equity transactions carried out by an associate or joint venture – those which have no impact on P/L or OCI (apart from dividends paid). According to the definition of the equity method in IAS 28.3, adjustments are required for the post-acquisition change in the investor’s share of the investee’s net assets. However, IAS 28.10 refers solely to the investor’s share of P/L and OCI. Practice varies widely, as shown below.

Example: Equity transactions of associate accounted for as deemed disposal

On 1 January 20X0, Entity A acquires a 25% stake in Entity B for $150m and applies the equity method. Entity B’s net assets, according to its financial statements, total $350m, approximating their fair value. Moreover, Entity B owns an internally generated brand with an indefinite useful life, valued at $100m. This example does not consider deferred tax. Note that an Excel file for this example is available for download.

Entity A recognises its investment in Entity B at cost of $150m on 1 January 20X0:

The calculated goodwill is shown below:

On 2 January 20X0, Entity B issues additional shares not subscribed by Entity A, bringing in total proceeds of $170m. This issuance decreases Entity A’s interest in B to 20%, yet significant influence remains. Such circumstances are often referred to as ‘deemed disposals’ in practice, despite not being explicitly covered in IFRS Standards. When an investor loses part of its interest in an associate or joint venture, it is generally agreed that such an investor needs to account for this ‘deemed disposal’ with an associated gain or loss recognised in P/L. This is because the investment in associate or joint venture should be ‘adjusted for the post-acquisition change in the investor’s share of the investee’s net assets.’

Entity A calculates the gain on disposal of its part interest in B as follows:

Example: Equity transactions of associate that is a parent with non-controlling interest in its consolidated financial statements

Entity A, holding a 20% interest in Entity B with a carrying amount of $100m, appplies the equity method. Entity B has a subsidiary in which it holds a 70% interest. Entity B’s consolidated financial statements report $500m of equity attributable to owners of parent and a $200m non-controlling interest. In 20X1, Entity B acquires the remaining 30% interest in its subsidiary for $300m. The effect of this transaction in Entity B’s consolidated financial statements is presented below:

Following the transaction, Entity B reports $400m of equity attributable to owners of the parent and $0 to the non-controlling interest. While Entity A still holds a 20% interest, it only translates to $80m of equity/net assets (20% x $400m), as opposed to the pre-transaction $100m (20% x $500m). Entity A must account for this change as the investment in associate/joint venture should be ‘adjusted for the post-acquisition change in the investor’s share of the investee’s net assets.’ There are two viable approaches:

Approach #1

Entity A recognises the change directly in equity as its share in changes in the equity of associates using the equity method. This approach is based on the idea that the equity method procedures align closely with the consolidation procedures described in IFRS 10, as indicated by IAS 28.26.

Approach #2

Entity A recognises the change in net assets attributed to its holding in its P/L. This approach is supported by the argument that holders of the non-controlling interest in Entity B were not shareholders in Entity A (Group A), thus, transactions with them cannot be accounted for directly in equity without impacting P/L or OCI, as mandated by IAS 1.109.

Loss making associate or joint venture

An investor recognises losses in an associate or joint venture up to the total amount of its investment. This means that when the value of an investment falls to zero, the investor stops recognition of further losses under the equity method, unless there is a legal or constructive obligation necessitating the recognition of a liability. Subsequent profits from such an investee are only recognised once the previously unrecognised losses have been recovered (IAS 28.38-39).

Crucially, an investment in an associate is not limited to ordinary shares held. It also encompasses all long-term interests (e.g., long-term financing) that substantively make up the entity’s net investment in an associate or joint venture. If such interests exist, cumulative losses exceeding the (equity-accounted) carrying amount of ordinary shares held by the investor are allocated to other components of the entity’s interest in reverse order of their seniority (i.e., priority in liquidation). Financial assets like preference shares and long-term receivables or loans without adequate collateral are examples of assets that form part of the net investment (IAS 28.38). See the example prepared by the IASB for further clarification.

Impairment requirements for investments accounted for using the equity method are outlined in IAS 28.40-43. Impairment losses recognised by an associate or joint venture may not always be incorporated into the investor’s financial statements in the same amount. This discrepancy is primarily due to fair value adjustments and goodwill recognised by the investor. Nevertheless, as goodwill is not recognised as a separate asset, impairment losses recognised on an investment in an associate or joint venture can be completely reversed in subsequent periods (IAS 28.42).

Net investment in an associate or joint venture

Impairment testing pertains to the total net investment in an associate or joint venture. This includes all long-term interests (e.g., long-term financing) that, in substance, form part of the entity’s net investment. Refer to the section on loss-making associate or joint venture for more information.

The introduction of paragraph IAS 28.14A in 2017 with an accompanying illustrative example Long-term Interests in Associates and Joint Ventures clarified the interaction between IAS 28 and IFRS 9 regarding financial assets that form part of the entity’s net investment:

• An entity applies IFRS 9 to account for long-term interests, including the impairment requirements.
• When allocating any losses of the associate or joint venture in accordance with IAS 28.38, the entity includes the carrying amount of those long-term interests (determined applying IFRS 9) as part of the net investment to which the losses are allocated.
• The entity then assesses for impairment the net investment in the associate or joint venture, of which the long-term interests form a part, by applying the requirements in paragraphs 40 and 41A–43 of IAS 28.
• If an entity allocates losses or recognises impairment in steps 2 and 3 above, the entity omits those losses or that impairment when accounting for long-term interests under IFRS 9 in subsequent periods.

Financial assets that, in substance, form part of the entity’s net investment in an associate or joint venture are accounted for under IFRS 9 and are not included in the line presenting investments accounted for using the equity method (though there is no explicit guidance in IFRS).

The equity method requirement

The equity method is mandatory when accounting for investments in joint ventures and associates in all financial statements, with the exception of separate financial statements prepared under IAS 27 (IAS 28.16). Nevertheless, there are conditions set out in IAS 28.17-19 which, if met, allow an entity to be exempt from using the equity method.

When an investor doesn’t have any subsidiaries but holds interests in associates or joint ventures, it’s essential to determine whether the exemptions in IAS 28.17-19 are applicable. If not, the investor is obliged to prepare financial statements using the equity method. Interestingly, these wouldn’t be referred to as ‘consolidated financial statements’, since there aren’t any subsidiaries to consolidate. Such statements are often labelled as ‘economic interest’ financial statements.

Furthermore, entities have the choice to adopt the equity method voluntarily in separate financial statements as outlined in IAS 27.10(c) .

Discontinuing the use of the equity method

IAS 28.22-24 provides guidance on the discontinuation of the equity method, typically occurring when an associate or joint venture is disposed of. However, such an investment is often classified as ‘ held for sale ‘ before disposal, thereby suspending equity accounting prior to actual disposal. IAS 28.20-21 provides specific requirements for classifying an investment in an associate or joint venture as an asset held for sale under IFRS 5.

IAS 28.21 additionally mandates that financial statements must be ‘amended accordingly’ if an equity-accounted investment, once classified as ‘held for sale’, no longer meets the ‘held for sale’ criteria. Yet, it remains unclear whether this stipulation applies solely to the investment’s measurement or its presentation too. The IFRS Interpretations Committee has considered this issue but, having declined to add it to their agenda, they did not provide a conclusive comment in their published agenda decision. In my opinion, the following approach would be the most suitable:

• If the investment no longer meets the ‘held for sale’ criteria during the reporting period, comparative amounts should be represented as if the equity method had been continuously applied.
• The opening balance of equity for the earliest comparative period should be restated to the extent that the retrospective application of the equity method impacts periods not included in the current financial statements.
• If the impact on the opening equity balance for the earliest comparative period is significant, a third statement of financial position should be provided under IAS 1:40A.
• Previously authorised financial statements should not be reissued.

When an associate or joint venture transitions into a subsidiary, full consolidation begins under IFRS 10 . The previously held interest is remeasured to its fair value, with any gain or loss recognised in the profit or loss. IFRS 3 generally applies in such scenarios.

In contrast, when a change in ownership reduces interest to the point where the investment becomes a ‘regular’ financial asset, it is accounted at fair value under IFRS 9 . The difference between the fair value of retained interest, the disposal proceeds, and the investment’s carrying amount when the equity method was discontinued, is recognised in P/L. Any items previously accumulated in OCI are recycled to P/L in the same manner as if the investee had directly disposed of the associated assets or liabilities.

Presentation in financial statements

Investments accounted for using the equity method should be presented as non-current assets (IAS 28.15) in a separate line within the statement of financial position (IAS 1.54(e)). Similarly, the share of the profit or loss of associates and joint ventures accounted for using the equity method should be presented separately in P/L and OCI (IAS 1.82(c)).

These excerpts from the financial statements of AstraZeneca may serve as an example of a common approach to the presentation of equity-accounted investees in primary financial statements:

Notably, there’s no explicit guidance regarding which section of the P/L should include the share of profit or loss from equity-accounted investments. Consequently, different entities have adopted varying methods (e.g., within operating income, just before the income tax charge, etc.). However, this line item will always be classified as investing income once IFRS 18 becomes effective.

© 2018-2024 Marek Muc

The information provided on this website is for general information and educational purposes only and should not be used as a substitute for professional advice. Use at your own risk. Excerpts from IFRS Standards come from the Official Journal of the European Union (© European Union, https://eur-lex.europa.eu). You can access full versions of IFRS Standards at shop.ifrs.org. IFRScommunity.com is an independent website and it is not affiliated with, endorsed by, or in any other way associated with the IFRS Foundation. For official information concerning IFRS Standards, visit IFRS.org.

Questions or comments? Join our Forums

International Accounting Standard 28  Investments in Associates and Joint Ventures  (IAS 28) is set out in paragraphs 1⁠–⁠47. All the paragraphs have equal authority but retain the IASC format of the Standard when it was adopted by the IASB. IAS 28 should be read in the context of its objective and the  Basis for Conclusions , the  Preface to IFRS Standards  and the  Conceptual Framework for Financial Reporting .  IAS 8  Accounting Policies, Changes in Accounting Estimates and Errors  provides a basis for selecting and applying accounting policies in the absence of explicit guidance. [ Refer: IAS 8 paragraphs 10⁠–⁠12 ]

International Accounting Standard 28 Investments in Associates and Joint Ventures

Definitions

Significant influence E1

by an entity is usually evidenced in one or more of the following ways: (a) representation on the board of directors or equivalent governing body of the investee; (b) participation in policy-making processes, including participation in decisions about dividends or other distributions; (c) material transactions between the entity and its investee; (d) interchange of managerial personnel; or (e) provision of essential technical information. ] The existence and effect of potential voting rights that are currently exercisable or convertible, including potential voting rights held by other entities, are considered when assessing whether an entity has . Potential voting rights are not currently exercisable or convertible when, for example, they cannot be exercised or converted until a future date or until the occurrence of a future event. , the entity examines all facts and circumstances (including the terms of exercise of the potential voting rights and any other contractual arrangements whether considered individually or in combination) that affect potential rights, except the intentions of management and the financial ability to exercise or convert those potential rights. over an investee when it loses the power to participate in the financial and operating policy decisions of that investee. The loss of significant influence can occur with or without a change in absolute or relative ownership levels. It could occur, for example, when an becomes subject to the control of a government, court, administrator or regulator. It could also occur as a result of a contractual arrangement. Equity method The investor’s share of the investee’s profit or loss is recognised in the investor’s profit or loss. Distributions received from an investee reduce the carrying amount of the investment. Adjustments to the carrying amount may also be necessary for changes in the investor’s proportionate interest in the investee arising from changes in the investee’s other comprehensive income. Such changes include those arising from the revaluation of property, plant and equipment [Refer: ] and from foreign exchange translation differences [Refer: , , , and ]. The investor’s share of those changes is recognised in the investor’s other comprehensive income (see IAS 1 Presentation of Financial Statements). E2 , July 2009, Agenda Decision, ‘IAS 28 Investments in Associates—Potential effect of IFRS 3 Business Combinations (as revised in 2008) and IAS 27 Consolidated and Separate Financial Statements (as amended in 2008) on equity method accounting’ . EITF 08-6 addresses several issues resulting from the joint project by the IASB and FASB on accounting for business combinations and accounting and reporting for non-controlling interest that culminated in the issue of IFRS 3 (as revised in 2008) and IAS 27 (as amended in 2008) and SFAS 141(R) and SFAS 160. At its meeting in May 2009, the IFRIC deliberated two of the issues considered in EITF 08-6: The IFRIC noted that IFRSs consistently require assets not measured at fair value through profit or loss to be measured at initial recognition at cost. Generally stated, cost includes the purchase price and other costs directly attributable to the acquisition or issuance of the asset such as professional fees for legal services, transfer taxes and other transaction costs. Therefore, the cost of an investment in an associate at initial recognition determined in accordance with paragraph 11 of IAS 28 [The equivalent requirement is now in paragraph 10] comprises its purchase price and any directly attributable expenditures necessary to obtain it. ... The IFRIC concluded that the agenda criteria were not met mainly because, given the guidance in IFRSs, it did not expect divergent interpretations in practice. Therefore, the IFRIC decided not to add these issues to its agenda.] E3 , January 2019, Agenda Decision, ‘IAS 27 Separate Financial Statements—Investment in a subsidiary accounted for at cost: Step acquisition’ In the fact pattern described in the request, the entity preparing separate financial statements:  Financial Instruments: Presentation. The investee is not an associate, joint venture or subsidiary of the entity and, accordingly, the entity applies IFRS 9 Financial Instruments in accounting for its initial investment (initial interest). The request asked: a. whether the entity determines the cost of its investment in the subsidiary as the sum of: i. the fair value of the initial interest at the date of obtaining control of the subsidiary, plus any consideration paid for the additional interest (fair value as deemed cost approach); or i. the consideration paid for the initial interest (original consideration), plus any consideration paid for the additional interest (accumulated cost approach) (Question A). Question A IAS 27 does not define ‘cost’, nor does it specify how an entity determines the cost of an investment acquired in stages. The Committee noted that cost is defined in other IFRS Standards (for example, paragraph 6 of  IAS 16   Property Plant and Equipment , paragraph 8 of  IAS 38   Intangible Assets  and paragraph 5 of  IAS 40   Investment Property ). The Committee observed that the two approaches outlined in the request arise from different views of whether the step acquisition transaction involves: a. the entity exchanging its initial interest (plus consideration paid for the additional interest) for a controlling interest in the investee, or b. purchasing the additional interest while retaining the initial interest. Based on its analysis, the Committee concluded that a reasonable reading of the requirements in IFRS Standards could result in the application of either one of the two approaches outlined in this agenda decision (ie fair value as deemed cost approach or accumulated cost approach). The Committee observed that an entity would apply its reading of the requirements consistently to step acquisition transactions. An entity would also disclose the selected approach applying paragraphs 117⁠–⁠124 of  IAS 1   Presentation of Financial Statements  if that disclosure would assist users of financial statements in understanding how step acquisition transactions are reflected in reporting financial performance and financial position. For Question A, the Committee considered whether to develop a narrow-scope amendment to address how an entity determines the cost of an investment acquired in stages. The Committee observed that: a. it did not have evidence to assess whether the application of the two acceptable approaches to determining cost, outlined in this agenda decision, would have a material effect on those affected. b. the matter could not be resolved without also considering the requirements in paragraph 10 of IAS 28 to initially measure an investment in an associate or joint venture at cost. The Committee did not obtain information to suggest that the Board should reconsider this aspect of IAS 28 at this stage, rather than as part of its wider consideration of IAS 28 within its research project on the Equity Method. On balance, the Committee decided not to undertake standard-setting to address Question A. Consequently, the Committee decided not to add these matters to its standard-setting agenda. [The full text of the agenda decision is reproduced after  paragraph 10(a) of IAS 27 .]] or joint venture. Because the investor has of, or over, the investee, the investor has an interest in the associate’s or joint venture’s performance and, as a result, the return on its investment. The investor accounts for this interest by extending the scope of its financial statements to include its share of the profit or loss of such an investee. As a result, application of the equity method provides more informative reporting of the investor’s net assets and profit or loss. or a joint venture is determined solely on the basis of existing ownership interests and does not reflect the possible exercise or conversion of potential voting rights and other derivative instruments, unless paragraph 13 applies. does not apply to interests in and joint ventures that are accounted for using the . When instruments containing potential voting rights in substance currently give access to the returns associated with an ownership interest in an associate or a joint venture, the instruments are not subject to IFRS 9. In all other cases, instruments containing potential voting rights in an associate or a joint venture are accounted for in accordance with IFRS 9.  to other financial instruments in an   or   to which the   is not applied. [Refer: ] These include long-term interests that, in substance, form part of the entity’s net investment in an associate or joint venture (see  ). An entity applies IFRS 9 to such long-term interests before it applies paragraph 38 and   of this Standard. In applying IFRS 9, the entity does not take account of any adjustments to the carrying amount of long-term interests that arise from applying this Standard. ]  (Amendments to IAS 28) in October 2017] or a joint venture is classified as held for sale in accordance with , [Refer: ] the investment, or any retained interest in the investment not classified as held for sale, shall be classified as a non-current asset. Application of the equity method E4 E4 , March 2009, Agenda Decision, ‘IAS 28 Investments in Associates—Potential effect of IFRS 3 Business Combinations and IAS 27 Consolidated and Separate Financial Statements (as amended in 2008) on equity method accounting’ The IFRIC noted that IAS 28 provides explicit guidance on two issues: (i) How an impairment assessment of an underlying indefinite-lived intangible asset of an equity method investment should be performed (ii) How to account for a change in an investment from the equity method to the cost method. Therefore, the IFRIC did not expect divergence in practice and decided not to add these issues to its agenda.] of, or over, an investee shall account for its investment in an or a joint venture using the except when that investment qualifies for exemption in accordance with . Exemptions from applying the equity method to its investment in an or a joint venture if the entity is a parent that is exempt from preparing by the scope exception in or if all the following apply: (a) The entity is a wholly-owned , or is a partially-owned subsidiary of another entity and its other owners, including those not otherwise entitled to vote, have been informed about, and do not object to, the entity not applying the equity method. (b) The entity’s debt or equity instruments are not traded in a public market (a domestic or foreign stock exchange or an over-the-counter market, including local and regional markets). (c) The entity did not file, nor is it in the process of filing, its financial statements with a securities commission or other regulatory organisation, for the purpose of issuing any class of instruments in a public market. (d) The ultimate or any intermediate of the entity produces financial statements available for public use that comply with IFRSs, in which subsidiaries are consolidated or are measured at fair value through profit or loss in accordance with IFRS 10. [Refer: ]  or a   is held by, or is held indirectly through, an entity that is a venture capital organisation, or a mutual fund, unit trust and similar entities including investment-linked insurance funds, the entity may elect to measure that investment at fair value through profit or loss in accordance with  . An example of an investment-linked insurance fund is a fund held by an entity as the underlying items for a group of insurance contracts with direct participation features. For the purposes of this election, insurance contracts include investment contracts with discretionary participation features. An entity shall make this election separately for each associate or joint venture, at initial recognition of the associate or joint venture. [Refer: ] (See   for terms used in this paragraph that are defined in that Standard.) , a portion of which is held indirectly through a venture capital organisation, or a mutual fund, unit trust and similar entities including investment-linked insurance funds, the entity may elect to measure that portion of the investment in the associate at fair value through profit or loss in accordance with regardless of whether the venture capital organisation, or the mutual fund, unit trust and similar entities including investment-linked insurance funds, has significant influence over that portion of the investment. If the entity makes that election, the entity shall apply the equity method to any remaining portion of its investment in an associate that is not held through a venture capital organisation, or a mutual fund, unit trust and similar entities including investment-linked insurance funds. ] Classification as held for sale or a joint venture that meets the criteria to be classified as held for sale. [Refer: ] Any retained portion of an investment in an associate or a joint venture that has not been classified as held for sale shall be accounted for using the until disposal of the portion that is classified as held for sale takes place. After the disposal takes place, an entity shall account for any retained interest in the associate or joint venture in accordance with unless the retained interest continues to be an associate or a joint venture, in which case the entity uses the equity method. or a joint venture previously classified as held for sale no longer meets the criteria to be so classified, it shall be accounted for using the equity method retrospectively as from the date of its classification as held for sale. Financial statements for the periods since classification as held for sale shall be amended accordingly. Discontinuing the use of the equity method from the date when its investment ceases to be an or a joint venture as follows: (a) If the investment becomes a , the entity shall account for its investment in accordance with and . (b) If the retained interest in the former associate or joint venture is a financial asset, the entity shall measure the retained interest at fair value [Refer: ]. The fair value of the retained interest shall be regarded as its fair value on initial recognition as a financial asset in accordance with . The entity shall recognise in profit or loss any difference between: (i) the fair value of any retained interest and any proceeds from disposing of a part interest in the associate or joint venture; and (ii) the carrying amount of the investment at the date the equity method was discontinued. When an entity discontinues the use of the equity method, the entity shall account for all amounts previously recognised in other comprehensive income in relation to that investment on the same basis as would have been required if the investee had directly disposed of the related assets or liabilities. is discontinued. For example, if an or a joint venture has cumulative exchange differences relating to a foreign operation and the entity discontinues the use of the equity method, the entity shall reclassify to profit or loss the gain or loss that had previously been recognised in other comprehensive income in relation to the foreign operation. becomes an investment in a joint venture or an investment in a joint venture becomes an investment in an associate, the entity continues to apply the and does not remeasure the retained interest. Changes in ownership interest  or a joint venture is reduced, but the investment continues to be classified either as an associate or a joint venture respectively, the entity shall reclassify to profit or loss the proportion of the gain or loss that had previously been recognised in other comprehensive income relating to that reduction in ownership interest if that gain or loss would be required to be reclassified to profit or loss on the disposal of the related assets or liabilities. E5 , July 2009, Agenda Decision, ‘IAS 28 Investments in Associates—Potential effect of IFRS 3 Business Combinations (as revised in 2008) and IAS 27 Consolidated and Separate Financial Statements (as amended in 2008) on equity method accounting’ . EITF 08-6 addresses several issues resulting from the joint project by the IASB and FASB on accounting for business combinations and accounting and reporting for non-controlling interest that culminated in the issue of IFRS 3 (as revised in 2008) and IAS 27 (as amended in 2008) and SFAS 141(R) and SFAS 160. At its meeting in May 2009, the IFRIC deliberated two of the issues considered in EITF 08-6: ... The IFRIC noted that paragraph 19A of IAS 28 [The equivalent requirement is now in paragraph 25] provides guidance on the accounting for amounts recognised in other comprehensive income when the investor’s ownership interest is reduced, but the entity retains significant influence. The IFRIC noted that there is no specific guidance on the recognition of a gain or loss resulting from a reduction in the investor’s ownership interest resulting from the issue of shares by the associate. However, the IFRIC also noted that reclassification of amounts to profit or loss from other comprehensive income is generally required as part of determining the gain or loss on a disposal. Paragraph 19A of IAS 28 applies to all reductions in the investor’s ownership interest, no matter the cause. The IFRIC concluded that the agenda criteria were not met mainly because, given the guidance in IFRSs, it did not expect divergent interpretations in practice. Therefore, the IFRIC decided not to add these issues to its agenda.] Equity method procedures  are similar to the consolidation procedures described in  . Furthermore, the concepts underlying the procedures used in accounting for the acquisition of a   are also adopted in accounting for the acquisition of an investment in an   or a  . E6 [IFRIC®  , August 2002/April 2003, Agenda Decision, ‘Reciprocal interests’ The IFRIC considered circumstances in which A owns an interest in B, and B concurrently owns an interest in A. Those investments are known as reciprocal interests (or ‘cross-holdings’). The IFRIC discussed whether it should provide guidance on the appropriate accounting when the cross-holdings are accounted for using the equity method under IAS 28. The IFRIC decided not to develop an Interpretation on this issue because paragraph 20 of IAS 28 (revised 2003) requires elimination of reciprocal interests (through application of consolidation concepts). The IFRIC was expected to reconsider these issues once the Business Combinations phase II project was finalised.] or a is the aggregate of the holdings in that associate or joint venture by the and its . The holdings of the other associates or joint ventures are ignored for this purpose. When an associate or a joint venture has subsidiaries, associates or joint ventures, the profit or loss, other comprehensive income and net assets taken into account in applying the are those recognised in the associate’s or joint venture’s financial statements (including the associate’s or joint venture’s share of the profit or loss, other comprehensive income and net assets of its associates and joint ventures), after any adjustments necessary to give effect to uniform accounting policies (see ). ) and its   or   are recognised in the entity’s financial statements only to the extent of unrelated [Note: )’ which is reproduced after paragraph 30 of IAS 28.] investors’ interests in the associate or joint venture. ‘Upstream’ transactions are, for example, sales of assets from an associate or a joint venture to the investor. The entity’s share in the associate’s or the joint venture’s gains or losses resulting from these transactions is eliminated. [Refer: ] ‘Downstream’ transactions are, for example, sales or contributions of assets from the investor to its associate or its joint venture.  and   for deferral of effective date] ] or a in exchange for an equity interest in that associate or joint venture shall be accounted for in accordance with , [Refer: ] except when the contribution lacks commercial substance, as that term is described in . If such a contribution lacks commercial substance, the gain or loss is regarded as unrealised and is not recognised unless also applies. Such unrealised gains and losses shall be eliminated against the investment accounted for using the and shall not be presented as deferred gains or losses in the entity’s consolidated statement of financial position or in the entity’s statement of financial position in which investments are accounted for using the equity method. ] E7 , January 2018, Agenda Decision, ‘Contributing property, plant and equipment to an associate (IAS 28 Investments in Associates and Joint Ventures)’ In the fact pattern described in the request: a.   three entities, collectively referred to as investors, set up a new entity. The investors are all controlled by the same government—ie they are under common control. b. the investors each contribute items of PPE to the new entity in exchange for shares in that entity. The PPE contributed by the investors is not a business (as defined in IFRS 3 Business Combinations). c.   each investor has significant influence over the new entity. Accordingly, the new entity is an associate of each of the investors. The investors do not have control or joint control of the entity. d.   the transaction is carried out on terms equivalent to those that would prevail in an orderly transaction between market participants. The request asked: a. about the application of IFRS Standards to transactions involving entities under common control (common control transactions)—ie whether IFRS Standards provide a general exception or exemption from applying the requirements in a particular Standard to common control transactions (Question A). b. whether an investor recognises any gain or loss on contributing PPE to the associate to the extent of other investors’ interests in the associate (Question B). c.   how an investor determines the gain or loss on contributing PPE to the associate and the cost of its investment in the associate. In particular, the request asked whether the cost of each investor’s investment in the associate is based on the fair value of the PPE contributed or the fair value of the acquired interest in the associate (Question C). In analysing the request, the Committee assumed the contribution of PPE to the associate has commercial substance as described in paragraph 25 of  IAS 16   Property, Plant and Equipment . Paragraph 7 of  IAS 8   Accounting Policies, Changes in Accounting Estimates and Errors  requires an entity to apply an IFRS Standard to a transaction when that Standard applies specifically to the transaction. The Committee observed, therefore, that unless a Standard specifically excludes common control transactions from its scope, an entity applies the applicable requirements in the Standard to common control transactions. Question B Paragraph 28 of IAS 28 requires an entity to recognise gains and losses resulting from upstream and downstream transactions with an associate only to the extent of unrelated investors’ interests in the associate. Paragraph 28 includes as an example of a downstream transaction the contribution of assets from an entity to its associate. The Committee observed that the term ‘unrelated investors’ in paragraph 28 of IAS 28 refers to investors other than the entity (including its consolidated subsidiaries)—ie the word ‘unrelated’ does not mean the opposite of ‘related’ as it is used in the definition of a related party in  IAS 24   Related Party Disclosures . This is consistent with the premise that financial statements are prepared from the perspective of the reporting entity, which in the fact pattern described in the request is each of the investors. Accordingly, the Committee concluded that an entity recognises any gain or loss on contributing PPE to an associate to the extent of other investors’ interests in the associate. Question C This question has an effect only if the fair value of the PPE contributed differs from the fair value of the equity interest in the associate received in exchange for that PPE. The Committee observed that in the fact pattern described in the request, it would generally expect the fair value of PPE contributed to be the same as the fair value of the equity interest in the associate that an entity receives in exchange. If there is initially any indication that the fair value of the PPE contributed might differ from the fair value of the acquired equity interest, the investor first assesses the reasons for this difference and reviews the procedures and assumptions it has used to determine fair value. The Committee observed that applying the requirements in IFRS Standards, an entity recognises a gain or loss on contributing PPE and a carrying amount for the investment in the associate that reflects the determination of those amounts based on the fair value of the PPE contributed—unless the transaction provides objective evidence that the entity’s interest in the associate might be impaired. If this is the case, the investor also considers the impairment requirements in  IAS 36   Impairment of Assets . If, having reviewed the procedures and assumptions used to determine fair value, the fair value of the PPE is more than the fair value of the acquired interest in the associate, this would provide objective evidence that the entity’s interest in the associate might be impaired. For all three questions, the Committee concluded that the principles and requirements in IFRS Standards provide an adequate basis for an entity to account for the contribution of PPE to an associate in the fact pattern described in the request. Consequently, the Committee decided not to add this matter to its standard-setting agenda.] or a , an entity receives monetary or non-monetary assets, the entity recognises in full in profit or loss the portion of the gain or loss on the non-monetary contribution relating to the monetary or non-monetary assets received. ] or is recognised in full in the investor’s financial statements. and, for deferral of effective date, and ] and for deferral of effective date] from the date on which it becomes an or a joint venture. On acquisition of the investment, any difference between the cost of the investment and the entity’s share of the net fair value [Refer: ] of the investee’s identifiable assets and liabilities is accounted for as follows: (a) Goodwill relating to an associate or a joint venture is included in the carrying amount of the investment. of that goodwill is not permitted. (b) Any excess of the entity’s share of the net fair value of the investee’s identifiable assets and liabilities over the cost of the investment is included as income in the determination of the entity’s share of the associate or joint venture’s profit or loss in the period in which the investment is acquired. Appropriate adjustments to the entity’s share of the associate’s or joint venture’s profit or loss after acquisition are made in order to account, for example, for depreciation of the depreciable assets based on their fair values at the acquisition date. Similarly, appropriate adjustments to the entity’s share of the associate’s or joint venture’s profit or loss after acquisition are made for impairment losses such as for goodwill or property, plant and equipment. or joint venture are used by the entity in applying the . When the end of the reporting period of the entity is different from that of the associate or joint venture, the associate or joint venture prepares, for the use of the entity, financial statements as of the same date as the financial statements of the entity unless it is impracticable to do so. ] , the financial statements of an or a joint venture used in applying the are prepared as of a date different from that used by the entity, adjustments shall be made for the effects of significant transactions or events that occur between that date and the date of the entity’s financial statements. In any case, the difference between the end of the reporting period of the associate or joint venture and that of the entity shall be no more than three months. The length of the reporting periods and any difference between the ends of the reporting periods shall be the same from period to period. or a uses accounting policies other than those of the entity for like transactions and events in similar circumstances, adjustments shall be made to make the associate’s or joint venture’s accounting policies conform to those of the entity when the associate’s or joint venture’s financial statements are used by the entity in applying the .  or   that is an investment entity, the entity may, when applying the  , elect to retain the fair value measurement applied by that investment entity associate or joint venture to the investment entity associate’s or joint venture’s interests in subsidiaries. [Refer: ] This election is made separately for each investment entity associate or joint venture, at the later of the date on which (a) the investment entity associate or joint venture is initially recognised; (b) the associate or joint venture becomes an investment entity; and (c) the investment entity associate or joint venture first becomes a  . [Refer: ]  or a joint venture equals or exceeds its interest in the associate or joint venture, the entity discontinues recognising its share of further losses. The interest in an associate or a joint venture is the carrying amount of the investment in the associate or joint venture determined using the   together with any long-term interests that, in substance, form part of the entity’s net investment in the associate or joint venture. For example, an item for which settlement is neither planned nor likely to occur in the foreseeable future is, in substance, an extension of the entity’s investment in that associate or joint venture. Such items may include preference shares and long-term receivables or loans, but do not include trade receivables, trade payables or any long-term receivables for which adequate collateral exists, such as secured loans. [Refer: ] Losses recognised using the equity method in excess of the entity’s investment in ordinary shares are applied to the other components of the entity’s interest in an associate or a joint venture in the reverse order of their seniority (ie priority in liquidation).  (Amendments to IAS 28) in October 2017] or joint venture. If the associate or joint venture subsequently reports profits, the entity resumes recognising its share of those profits only after its share of the profits equals the share of losses not recognised. ] Impairment losses or losses in accordance with , the entity applies paragraphs 41A⁠–⁠41C to determine whether there is any objective evidence that its net investment in the associate or joint venture is impaired. (a) significant financial difficulty of the associate or joint venture; (b) a breach of contract, such as a default or delinquency in payments by the associate or joint venture; (c) the entity, for economic or legal reasons relating to its associate’s or joint venture’s financial difficulty, granting to the associate or joint venture a concession that the entity would not otherwise consider; (d) it becoming probable that the associate or joint venture will enter bankruptcy or other financial reorganisation; or (e) the disappearance of an active market for the net investment because of financial difficulties of the associate or joint venture. E8 , June 2005, Agenda Decision, ‘IAS 39 Financial Instruments: Recognition and Measurement— Impairment of an Equity Security’ The IFRIC considered whether to develop guidance on how to determine whether under paragraph 61 of IAS 39 (as revised in March 2004) [now paragraph 41C of IAS 28] there has been a ‘significant or prolonged decline’ in the fair value of an equity instrument below its cost in the situation when an impairment loss has previously been recognised for an investment classified as available for sale. The IFRIC decided not to develop any guidance on this issue. The IFRIC noted that IAS 39 referred to original cost on initial recognition and did not regard a prior impairment as having established a new cost basis. The IFRIC also noted that IAS 39 Implementation Guidance E.4.9 states that further declines in value after an impairment loss is recognised in profit or loss are also recognised in profit or loss. Therefore, for an equity instrument for which a prior impairment loss has been recognised, ‘significant’ should be evaluated against the original cost at initial recognition and ‘prolonged’ should be evaluated against the period in which the fair value of the investment has been below original cost at initial recognition. The IFRIC was of the view that IAS 39 is clear on these points when all of the evidence in the requirements and the implementation guidance of IAS 39 are viewed together.] E9 , July 2009, Agenda Decision, ‘IAS 39 Financial Instruments: Recognition and Measurement—Meaning of "significant or prolonged"’  were added to IAS 28 as a consequential amendment when the Board issued IFRS 9. The requirements in paragraphs 41A-41C are similar to those in paragraphs 59⁠–⁠61 of IAS 39.] The IFRIC received a request to provide guidance on the meaning of ‘significant or prolonged’ (as described in paragraph 61 [now  ]) in recognising impairment on available-for-sale equity instruments in accordance with IAS 39. The IFRIC agreed with the submission that significant diversity exists in practice on this issue. The IFRIC concluded that some of this diversity is the result of differing ways the requirements of IAS 39 are being implemented, some of which were identified in the submission. The IFRIC noted some applications in particular that are not in accordance with the requirements of IAS 39. For example:  prolonged. Thus, either a significant or a prolonged decline is sufficient to require the recognition of an impairment loss. The IFRIC noted that in finalising the 2003 amendments to IAS 39, the Board deliberately changed the word from ‘and’ to ‘or’.   also objective evidence of impairment.’ [emphasis added] Consequently, the IFRIC concluded that when such a decline exists, recognition of an impairment loss is required.  The IFRIC noted that the applications that are not in accordance with the requirements of IAS 39 it discussed were examples only and were unlikely to be an exhaustive list of all the inconsistencies with the standard that might exist in practice.  The IFRIC also noted that the determination of what constitutes a significant or prolonged decline is a matter of fact that requires the application of judgement. The IFRIC noted that this is true even though an entity may develop internal guidance to assist it in applying that judgement consistently. The IFRIC further noted that an entity would provide disclosure about the judgements it made in determining the existence of objective evidence and the amounts of impairment in accordance with paragraphs 122 and 123 of IAS 1 Presentation of Financial Statements and paragraph 20 of IFRS 7 Financial Instruments: Disclosures [IFRS 7 is not applicable to interests in associates and joint ventures accounted for in accordance with IAS 28].  Although the IFRIC recognised that significant diversity exists in practice, it noted that the Board has accelerated its project to develop a replacement for IAS 39 and expects to issue a new standard soon. Therefore, the IFRIC decided not to add this issue to its agenda.] ] that forms part of the carrying amount of the net investment in an associate or a joint venture is not separately recognised, it is not tested for impairment separately by applying the requirements for impairment testing goodwill in IAS 36 Impairment of Assets. Instead, the entire carrying amount of the investment is tested for impairment in accordance with IAS 36 as a single asset, by comparing its recoverable amount (higher of value in use and fair value less costs of disposal) with its carrying amount whenever application of paragraphs 41A⁠–⁠41C indicates that the net investment may be impaired. An impairment loss recognised in those circumstances is not allocated to any asset, including goodwill, that forms part of the carrying amount of the net investment in the associate or joint venture. [Refer: ] Accordingly, any reversal of that impairment loss is recognised in accordance with IAS 36 to the extent that the recoverable amount of the net investment subsequently increases. [Refer: ] In determining the value in use of the net investment, an entity estimates: (a) its share of the present value of the estimated future cash flows expected to be generated by the associate or joint venture, including the cash flows from the operations of the associate or joint venture and the proceeds from the ultimate disposal of the investment; or (b) the present value of the estimated future cash flows expected to arise from dividends to be received from the investment and from its ultimate disposal. Using appropriate assumptions, both methods give the same result. or a joint venture shall be assessed for each associate or joint venture, unless the associate or joint venture does not generate cash inflows from continuing use that are largely independent of those from other assets of the entity. Separate financial statements or a joint venture shall be accounted for in the entity’s separate financial statements in accordance with (as amended in 2011). Effective date and transition , , and (as amended in 2011) at the same time. ] , as issued in July 2014, amended paragraphs 40⁠–⁠42 and added paragraphs 41A⁠–⁠41C. An entity shall apply those amendments when it applies IFRS 9. (Amendments to IAS 27), issued in August 2014, amended paragraph 25. An entity shall apply that amendment for annual periods beginning on or after 1 January 2016 retrospectively in accordance with IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors [Refer: and ]. Earlier application is permitted. If an entity applies that amendment for an earlier period, it shall disclose that fact. (Amendments to IFRS 10 and IAS 28), issued in September 2014, amended paragraphs 28 and 30 and added paragraphs 31A⁠–⁠31B. An entity shall apply those amendments prospectively to the sale or contribution of assets occurring in annual periods beginning on or after a date to be determined by the IASB. Earlier application is permitted. If an entity applies those amendments earlier, it shall disclose that fact. ] (Amendments to IFRS 10, IFRS 12 and IAS 28), issued in December 2014, amended paragraphs 17, 27 and 36 and added paragraph 36A. An entity shall apply those amendments for annual periods beginning on or after 1 January 2016. Earlier application is permitted. If an entity applies those amendments for an earlier period, it shall disclose that fact. ] , issued in December 2016, amended and . An entity shall apply those amendments retrospectively in accordance with [Refer: and ] for annual periods beginning on or after 1 January 2018. Earlier application is permitted. If an entity applies those amendments for an earlier period, it shall disclose that fact. ] , issued in May 2017, amended paragraph 18. An entity shall apply that amendment when it applies IFRS 17. , issued in October 2017, added and deleted paragraph 41. An entity shall apply those amendments retrospectively in accordance with [Refer: ] for annual reporting periods beginning on or after 1 January 2019, except as specified in . Earlier application is permitted. If an entity applies those amendments earlier, it shall disclose that fact. ] at the same time it first applies shall apply the transition requirements in IFRS 9 to the long-term interests described in . ] after it first applies shall apply the transition requirements in IFRS 9 necessary for applying the requirements set out in to long-term interests. For that purpose, references to the date of initial application in IFRS 9 [Refer: ] shall be read as referring to the beginning of the annual reporting period in which the entity first applies the amendments (the date of initial application of the amendments). [Refer: ] The entity is not required to restate prior periods to reflect the application of the amendments. The entity may restate prior periods only if it is possible without the use of hindsight. [Refer: ] , an entity that applies the temporary exemption from IFRS 9 in accordance with IFRS 4 Insurance Contracts is not required to restate prior periods to reflect the application of the amendments. [Refer: ] The entity may restate prior periods only if it is possible without the use of hindsight. [Refer: ] or , at the date of initial application of the amendments [Refer: (second sentence) and (final sentence) regarding the date of initial application of the amendments] it shall recognise in the opening retained earnings (or other component of equity, as appropriate) any difference between: (a) the previous carrying amount of long-term interests described in at that date; and (b) the carrying amount of those long-term interests at that date. References to IFRS 9 , any reference to IFRS 9 shall be read as a reference to . Withdrawal of IAS 28 (2003) (as revised in 2003). Board Approvals Approval by the board of ias 28 issued in december 2003. International Accounting Standard 28  Investments in Associates  (as revised in 2003) was approved for issue by the fourteen members of the International Accounting Standards Board. Sir David Tweedie Chairman Thomas E Jones Vice-Chairman Mary E Barth Hans-Georg Bruns Anthony T Cope Robert P Garnett Gilbert Gélard James J Leisenring Warren J McGregor Patricia L O’Malley Harry K Schmid John T Smith Geoffrey Whittington Tatsumi Yamada Approval by the Board of  Sale or Contribution of Assets between an Investor and its Associate or Joint Venture  (Amendments to IFRS 10 and IAS 28) issued in September 2014 Sale or Contribution of Assets between an Investor and its Associate or Joint Venture  was approved for issue by eleven of the fourteen members of the International Accounting Standards Board. Mr Kabureck, Ms Lloyd and Mr Ochi dissented 1  from the issue of the amendments to IFRS 10 and IAS 28. Their dissenting opinions are set out after the Basis for Conclusions. Hans Hoogervorst Chairman Ian Mackintosh Vice-Chairman Stephen Cooper Philippe Danjou Martin Edelmann Patrick Finnegan Amaro Luiz de Oliveira Gomes Gary Kabureck Suzanne Lloyd Takatsugu Ochi Darrel Scott Chungwoo Suh Mary Tokar Wei-Guo Zhang Approval by the Board of Investment Entities: Applying the Consolidation Exception (Amendments to IFRS 10, IFRS 12 and IAS 28) issued in December 2014 Investment Entities: Applying the Consolidation Exception was approved for issue by the fourteen members of the International Accounting Standards Board. Hans Hoogervorst Chairman Ian Mackintosh Vice-Chairman Stephen Cooper Philippe Danjou Amaro Luiz De Oliveira Gomes Martin Edelmann Patrick Finnegan Gary Kabureck Suzanne Lloyd Takatsugu Ochi Darrel Scott Chungwoo Suh Mary Tokar Wei-Guo Zhang Approval by the Board of Effective Date of Amendments to IFRS 10 and IAS 28 issued in December 2015 Effective Date of Amendments to IFRS 10 and IAS 28 was approved for publication by the fourteen members of the International Accounting Standards Board. Hans Hoogervorst Chairman Ian Mackintosh Vice-Chairman Stephen Cooper Philippe Danjou Martin Edelmann Patrick Finnegan Amaro Gomes Gary Kabureck Suzanne Lloyd Takatsugu Ochi Darrel Scott Chungwoo Suh Mary Tokar Wei-Guo Zhang Approval by the Board of   Long-term Interests in Associates and Joint Ventures  (Amendments to IAS 28) issued in October 2017 Long-term Interests in Associates and Joint Ventures  (Amendments to IAS 28) was approved for issue by 10 of 14 members of the International Accounting Standards Board (Board). Mr Ochi dissented. His dissenting opinion is set out after the Basis for Conclusions. Messrs Anderson and Lu and Ms Tarca abstained in view of their recent appointments to the Board. Hans Hoogervorst  Chairman Suzanne Lloyd Vice-Chair Nick Anderson Martin Edelmann Françoise Flores Amaro Luiz de Oliveira Gomes Gary Kabureck Jianqiao Lu Takatsugu Ochi Darrel Scott Thomas Scott Chungwoo Suh Ann Tarca Mary Tokar 1 Ms Patricia McConnell (former IASB member) intended to dissent from the issue of the amendments to IFRS 10 and IAS 28 for the same reasons as Ms Lloyd and Mr Ochi. Her dissenting opinion is not included in these amendments, because her term as an IASB member expired on 30 June 2014. Investment in associates Investment in associates journal entries, acquisition of associate journal entry. Account Debit Credit Investment in associates 000 Cash 000 Income or loss on investment in associates journal entry Income from investment in associates Account Debit Credit Investment in associates 000 Income from investments 000 Loss on investment in associates Account Debit Credit Loss on investments 000 Investment in associates 000 Dividend received from associates Account Debit Credit Cash 000 Investment in associates 000 Investment in associates example For example, on January 1, 2020, the company ABC acquires 30% shares of the common stock of the XYZ corporation for $240,000. At the end of 2020, XZY corporation reports a net income of $150,000. And at the same time, it also declares and pays the cash dividend of $60,000 to its shareholders. Account Debit Credit Investment in associates 240,000 Cash 240,000 Account Debit Credit Investment in associates 45,000 Income from investments 45,000 Account Debit Credit Cash 18,000 Investment in associates 18,000 Related posts: Today's news Reviews and deals Climate change 2024 election Newsletters Fall allergies Health news Mental health Sexual health Family health So mini ways Unapologetically Buying guides Entertainment How to Watch My Portfolio Latest News Stock Market Biden Economy Stocks: Most Actives Stocks: Gainers Stocks: Losers Trending Tickers World Indices US Treasury Bonds Rates Top Mutual Funds Options: Highest Open Interest Options: Highest Implied Volatility Basic Materials Communication Services Consumer Cyclical Consumer Defensive Financial Services Industrials Real Estate Stock Comparison Advanced Chart Currency Converter Credit Cards Balance Transfer Cards Cash-back Cards Rewards Cards Travel Cards Credit Card Offers Best Free Checking Student Loans Personal Loans Car insurance Mortgage Refinancing Mortgage Calculator Morning Brief Market Domination Market Domination Overtime Asking for a Trend Opening Bid Stocks in Translation Lead This Way Good Buy or Goodbye? Financial Freestyle Capitol Gains Living Not So Fabulously Decoding Retirement Fantasy football Pro Pick 'Em College Pick 'Em Fantasy baseball Fantasy hockey Fantasy basketball Download the app Daily fantasy Scores and schedules GameChannel World Baseball Classic Premier League CONCACAF League Champions League Motorsports Horse racing New on Yahoo Privacy Dashboard Yahoo Finance SIT Investment Associates Inc's Strategic Acquisition in Putnam Premier Income Trust In this article:, overview of the recent transaction. On September 6, 2024, SIT Investment Associates Inc made a significant addition to its portfolio by acquiring 1,138,295 shares of Putnam Premier Income Trust ( NYSE:PPT ). This transaction, priced at $3.70 per share, increased the firm's total holdings in PPT to 20,168,565 shares, marking a substantial influence on its investment strategy with a portfolio position of 1.72% and a holding percentage of 20.95% in the traded stock. Profile of SIT Investment Associates Inc Warning! GuruFocus has detected 6 Warning Sign with CEV. Founded in 1981 by Eugene C. Sit, SIT Investment Associates Inc has grown from a modest beginning to managing over $6.6 billion in assets. The firm, headquartered in Minneapolis, employs a mix of quantitative and fundamental analysis across its diversified investment portfolio, primarily focusing on the financial services and technology sectors. With a strong emphasis on fixed income and public equity markets globally, SIT Investment Associates caters to a varied clientele, including high net worth individuals and institutional investors. Details of the Trade Action The recent acquisition by SIT Investment Associates Inc not only reflects a strategic addition of 1,138,295 shares but also demonstrates the firm's confidence in Putnam Premier Income Trust's potential. This move has a modest impact of 0.1% on the firm's portfolio, consolidating its position in the asset management industry. Financial Overview of Putnam Premier Income Trust Putnam Premier Income Trust, a Massachusetts-based investment company, focuses on high current income consistent with capital preservation, primarily through investments in the U.S. government sector. Despite a challenging market, evidenced by a 63.1% decline since its IPO and a modest year-to-date gain of 1.65%, PPT maintains a market capitalization of approximately $355.23 million with a PE ratio of 18.27. Market Position and Performance Metrics Putnam Premier Income Trust's market position is reflected in its GF Score of 34/100, indicating potential challenges in future performance. The stock's financial strength and Profitability Rank are areas of concern, with scores of 7/10 and 3/10, respectively. Additionally, its Growth Rank and GF Value Rank stand at 0/10, highlighting significant hurdles in these areas. Sector and Industry Analysis The asset management industry, where Putnam Premier Income Trust operates, is highly competitive and sensitive to market fluctuations. SIT Investment Associates Inc's focus on this sector aligns with its largest allocations, primarily in financial services and technology, indicating a strategic alignment with its core investment philosophy. Implications of the Trade The decision by SIT Investment Associates Inc to increase its stake in Putnam Premier Income Trust may be driven by the firm's long-term income generation strategy and its expertise in fixed income investments. This move is expected to bolster the firm's position in the asset management sector, potentially benefiting its diverse clientele through enhanced portfolio diversification and income opportunities. This acquisition by SIT Investment Associates Inc underscores its strategic investment approach and belief in the potential of Putnam Premier Income Trust. By increasing its stake, the firm not only reinforces its presence in the asset management industry but also aligns its portfolio to benefit from potential future income streams, reflecting a well-calculated move in its broader investment strategy. This article, generated by GuruFocus, is designed to provide general insights and is not tailored financial advice. Our commentary is rooted in historical data and analyst projections, utilizing an impartial methodology, and is not intended to serve as specific investment guidance. It does not formulate a recommendation to purchase or divest any stock and does not consider individual investment objectives or financial circumstances. Our objective is to deliver long-term, fundamental data-driven analysis. Be aware that our analysis might not incorporate the most recent, price-sensitive company announcements or qualitative information. GuruFocus holds no position in the stocks mentioned herein. This article first appeared on GuruFocus . Recommended Stories 113 IMAGES Key Investment PowerPoint Presentation Template Finance & Investment PowerPoint Template Investment in Associates (Definition, Accounting) 1342+ Free Editable Investment Strategy Templates for PowerPoint Investment in Associate Investment Proposal Template VIDEO Investments concepts that we should all know about as new or ongoing investors IA1 Investment in associate Top 5 Future Business Ideas 2024 Revealed by Tahir Rajpoot Arkam Ventures' take on India's GenAI Story What is Investment Banking? Bank of England Presentation COMMENTS IAS 28 IAS 28 outlines the accounting for investments in associates. An associate is an entity over which an investor has significant influence, being the power to participate in the financial and operating policy decisions of the investee (but not control or joint control), and investments in associates are, with limited exceptions, required to be accounted for using the equity method. IAS 28 Overview. IAS 28 Investments in Associates and Joint Ventures (as amended in 2011) outlines how to apply, with certain limited exceptions, the equity method to investments in associates and joint ventures. The standard also defines an associate by reference to the concept of "significant influence", which requires power to participate in financial and operating policy decisions of an investee ... PDF Module 14—Investments in Associates including the full text of Section 14 Investments in Associates of the IFRS for SMEs Standard issued by the International Accounting Standards Board in October 2015. with extensive explanations, self-assessment questions and case studies. IFRS® Foundation Columbus Building 7 Westferry Circus Canary Wharf London E14 4HD United Kingdom. IAS 28 Investments in Associates and Joint Ventures In May 2011 the Board issued a revised IAS 28 with a new title— Investments in Associates and Joint Ventures. In September 2014 IAS 28 was amended by Sale or Contribution of Assets between an Investor and its Associate or Joint Venture (Amendments to IFRS 10 and IAS 28). These amendments addressed the conflicting accounting requirements for ... PDF IAS 28 Investments in Associates and Joint Ventures Investments in Associates and Joint Ventures. (IAS 28) is set out in paragraphs 1-47. All the paragraphs have equal authority but retain the IASC format of the Standard when it was adopted by the IASB. IAS 28 should be read in the context of its objective and the Basis for Conclusions, the. Preface to IFRS Standards. IAS 28 Investments in Associates and Joint Ventures The objective of IAS 28 Investments in Associates and Joint Ventures is: To set out the requirements for the application of the equity method when accounting for investments in associates and joint ventures. Let me remind you a couple of terms: An associate is an entity over which an investor has significant influence. IAS 28 Investments in Associates and Joint Ventures Library and Information Service. Expert help with research and access to trustworthy, professional sources. +44 (0)20 7920 8620. [email protected]. IAS 28 Investments in Associates and Joint Ventures prescribes the accounting for investments in associates and sets out the requirements for the application of the equity method when accounting for ... IAS 28 Investments in associates and joint ventures Upon completion of this module you will be able to identify investments that must be accounted for using the equity method under IAS 28, calculate the carrying value of the investment and share of the profit or loss of associate or joint venture applying the equity method and define disclosure requirements. Topics covered in the e-learning: PDF International Accounting Standard 28 Investments in Associates and investor's other comprehensive income (see IAS 1 Presentation of Financial Statements). ... 18 When an investment in an associate or a joint venture is held by, or is held indirectly through, an entity that is a venture capital organisation, or a mutual fund, unit trust and similar entities including investment-linked ... Investment in Associates (Definition, Accounting) Practical Example - Nestle's Investment in Associates. Nestle is a Swiss multinational company headquartered in Switzerland. Nestle, the largest food company, globally had around CHF 91.43 billion in revenue in 2018. Below is the income statement of Nestle as per the 2018 annual report. Source: www.nestle.com. IPSAS 36, Investments in Associates and Joint Ventures IPSAS 36 explains the application of the equity method of accounting, which is used to account for investments in associates and joint ventures. The requirements are very similar to the current guidance in IPSAS 7, Investment in Associates. Because equity accounting must now be used when accounting for joint ventures, the title of the standard now also refers to joint ventures.In contrast with ... Equity Method The equity method, governed by IAS 28, is a simplified form of consolidation used to account for investments in associates and joint ventures, with one key distinction: investee's financials are not incorporated line-by-line into the investor's financial statements. Instead, a solitary asset, representative of the equity-accounted ... PDF Investments in Associates and Joint Ventures investor's other comprehensive income (see AASB 101 Presentation of Financial Statements). 11 The recognition of income on the basis of distributions received may not be an adequate measure of the income earned by an investor on an investment in an associate or a joint venture because the distributions International Accounting Standard 28 Investments in Associates ... Approval by the Board of Long-term Interests in Associates and Joint Ventures (Amendments to IAS 28) issued in October 2017. Long-term Interests in Associates and Joint Ventures (Amendments to IAS 28) was approved for issue by 10 of 14 members of the International Accounting Standards Board (Board). Mr Ochi dissented. 17 17 - Investment-in Associate (Basic Principles) - Free download as Powerpoint Presentation (.ppt / .pptx), PDF File (.pdf), Text File (.txt) or view presentation slides online. The document discusses accounting for investments in associates under the equity method. Key points include: 1. An associate is an entity over which an investor has significant influence, generally presumed between 20 ... Investment in Associate Investment in Associate - Free download as Powerpoint Presentation (.ppt / .pptx), PDF File (.pdf), Text File (.txt) or view presentation slides online. The document discusses investment in associates and the equity method of accounting. It defines an associate as an entity over which an investor has significant influence, usually through 20% or more ownership. 1a. Investment in Associate 1a. Investment in Associate - Lecture - Free download as Powerpoint Presentation (.ppt / .pptx), PDF File (.pdf), Text File (.txt) or view presentation slides online. The document discusses accounting for investments in associates using the equity method. It defines an associate as an investment where an entity has significant influence, generally meaning 20-50% voting rights. Investment in associates Solution: On January 1, 2020. As the 30% share of the common stock of XZY corporation represents the investment in associates, the company ABC can make the journal entry for the acquisition of associate for $240,000 on January 1, 2020, as below: Account. Debit. PDF Investments in Associates and Joint Ventures of the entity.Separate financial statements44 An investment in an associate or a joint venture shall be accounted for in the entity's separate financial statements in accordance with pa. ed in 2011). Effective date and transition45 An entity shall apply this Standard for annual. eriods beginning on or after 1 Ja. SIT Investment Associates Inc's Strategic Acquisition in Putnam Premier On September 6, 2024, SIT Investment Associates Inc made a significant addition to its portfolio by acquiring 1,138,295 shares of Putnam Premier Income Trust (NYSE:PPT). This transaction, priced ... IAS 28 IAS 28 outlines the accounting for investments in associates. An associate is an entity over which an investor has significant influence, being the power to participate in the financial and operating policy decisions of the investee (but not control or joint control), and investments in associates are, with limited exceptions, required to be accounted for using the equity method. PDF Investments in Associates and Joint Ventures Presentation of Financial Statements). 11 The recognition of income on the basis of distributions received may not be an adequate ... 18 When an investment in an associate or a joint venture is held by, or is held indirectly through, an entity that is a venture capital organisation, or a mutual fund, unit trust and ... Chapter 13 Investment in Associates Chapter 13 Investment in Associates - Free download as Powerpoint Presentation (.ppt / .pptx), PDF File (.pdf), Text File (.txt) or view presentation slides online. The document discusses accounting for investments in associates under PAS 28. It defines an associate as an entity over which an investor has significant influence, which is presumed to exist if the investor holds 20% or more of ... essay homework paper phd project resume review study thesis