Accounting by investment entities

Accounting by investment entities

is about the accounting requirements in IFRS 10 for investment entities that are limited to an exception from consolidation of investments in certain subsidiaries. The exception also impacts the separate financial statements of an investment entity (if these are prepared). The table summarises the key requirements:

Requirements Details
Accounting for subsidiaries held as investments

 

  • subsidiaries held as investments are measured at fair value through profit or loss in accordance with IFRS 9 instead of being consolidated [IFRS 10 31]. This accounting is mandatory not optional. Voluntary consolidated financial statements that state compliance with IFRS are not permitted
  • IFRS 3 does not apply to the obtaining of control over an exempt subsidiary
  • the consolidation exception also applies to controlling interests in another investment entity.
Accounting for service subsidiaries
  • an investment entity is still required to consolidate subsidiaries that are not themselves investment entities and whose main purpose and activities are providing services that relate to its investment activities [IFRS 10 32]
  • IFRS 3 applies on obtaining control over a service subsidiary.
Accounting in separate financial statements
  • an investment entity’s fair value accounting for its controlled investees also applies in its separate financial statements [IAS 27 11A]
  • if the consolidation exception applies to all an investment entity’s subsidiaries throughout the current and all comparative periods (ie it has no services subsidiaries) its separate financial statements are its only financial statements [IAS 27 8A].

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