IAS 28 Investments in Associates and Joint Ventures

Objective

To define significant influence for investments in associates and to prescribe investor’s accounting for investments in associates and joint ventures.

Summary

Applies to all investments in which an investor has significant influence and joint ventures unless the investor is a venture capital firm, mutual fund, unit trust or a similar entity, and it elects to measure such investments at fair value through profit or loss in accordance with# IFRS 9 or IAS 39.Otherwise,
the equity method is used for all investments in associates over which the entity has significant influence and in joint ventures.

• Interests in associates and joint ventures that are classified as held for sale in accordancewith the ifrs 5 are accounted for in accordance with that Standard.
• Otherwise, the equity method is used for all investments in associates over which the entity has significant influence and in joint ventures.
• Rebuttable presumption of significant influence if investment held, directly and indirectly, is 20% or more of the voting power of the investee.
• Under the equity method, the investment is initially recorded at cost. It is subsequently adjusted by the investor’s share of the investee’s post acquisition change in net assets.

• Investor’s statement of comprehensive income reflects its share of the investee’s post-acquisition profit or loss

• Associate’s and joint venture’s accounting policies shall be the same as those of the investor for like transactions and events in similar circumstances. However, if an entity that is not itself an investment entity but has an interest in an associate or joint venture that is an investment entity, the entity is permitted to retain the fair value measurements applied by an investment entity associate, or joint venture to its interests in subsidiaries.

• The end of the reporting period of an associate or a joint venture cannot be more than a three months difference from the investor’s end of the reporting period.

• An investment in an associate or a joint venture shall be accounted for in the entity’s separate financial statements in accordance with IAS 27 Separate Financial Statements.

• Impairment is tested in accordance with IAS 36. The impairment indicators in IFRS 9 or IAS 39 apply. An investment in an associate or joint venture is treated as a single asset for impairment purposes.

• When an entity discontinues the use of the equity method (for example, as a result of a change in ownership), the investment retained is remeasured to its fair value, with the gain or loss recognized in profit or loss. For transactions involving assets that do constitute a business (IFRS 3), the gain or loss is recognized in full. Thereafter,# IFRS 9 or IAS 39 is applied to the remaining holding unless the investment becomes a subsidiary in which case the investment is accounted for in accordance

Interpretations

None.