IFRS Standard: IAS 28 Investments in Associates and Joint Ventures

IAS 28 Investments in Associates and Joint Ventures 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 (but not joint control or control of those

IAS 28 Objective Scope Definitions

Objective

1 The objective of this Standard 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.

Scope

2 This Standard shall be applied by all entities that are investors with joint control of, or significant influence over, …

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IAS 28 Significant influence

5 If an entity holds, directly or indirectly (eg through subsidiaries), 20 per cent or more of the voting power of the investee, it is presumed that the entity has significant influence, unless it can be clearly demonstrated that this is not the case. Conversely, if the entity holds, directly or indirectly (eg through subsidiaries), less than 20 per …

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IAS 28 Equity method

10 Under the equity method, on initial recognition the investment in an associate or a joint venture is recognised at cost, and the carrying amount is increased or decreased to recognise the investor’s share of the profit or loss of the investee after the date of acquisition. The investor’s share of the investee’s profit or loss is recognised …

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IAS 28 Using the equity method

Application of the equity method

16 An entity with joint control of, or significant influence over, an investee shall account for its investment in an associate or a joint venture using the equity method except when that investment qualifies for exemption in accordance with paragraphs 17–19.

Exemptions from applying the equity method

17 An entity need not apply the equity …

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IAS 28 Separate financial statements

44 An investment in an associate or a joint venture shall be accounted for in the entity’s separate financial statements in accordance with paragraph 10 of IAS 27 (as amended in 2011).…

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IAS 28 Long-term Interests in Associates and Joint Ventures

Illustrative Example

Long-term Interests in Associates and Joint Ventures

This example portrays a hypothetical situation illustrating how an entity (investor) accounts for long-term interests that, in substance, form part of the entity’s net investment in an associate (long-term interests) applying IFRS 9 and IAS 28 based on the assumptions presented. The entity applies IFRS 9 in accounting for long-term interests. …

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