On Sept. 19, the International Accounting Standards Board (IASB) announced a public consultation on proposed amendments to help firms account for their investments in associates and joint ventures.
In a release, the IASB said the proposals respond to stakeholders’ questions about how to apply the equity method to these investments. Under the equity method, investments in an associate or a joint venture are initially recognized at cost. The carrying amount is then increased or decreased accordingly to recognize the investors’ share of the investees’ subsequent profit or loss, which is then included in the investor’s profit or loss.
The IASB explained that an associate is an entity over which the investor has significant influence. This influence includes the power to participate in the financial and operating policy of the investee’s decisions. However, the investor does not have the power to control or jointly control those policies.
According to Deloitte, joint ventures are arrangements in which the parties have rights to the net assets and should be accounting for their interests utilizing the equity method.
In the release, the IASB stated that the proposed amendments add to and clarify how to apply the equity method laid out in IAS 28 Investments in Associates and Joint Ventures by answering application questions the agency has received over the years.
In addition, the IASB is proposing new disclosure requirements to enhance the information firms offer regarding these investments. The IASB believes the proposed amendments will limit practice diversity while providing financial statement users with more comparable and valuable information.
IAS 28 was initially published in 1989, and the IASB has taken this opportunity to reorder the Standard logically and consistently to assist firms with its application.
The IASB released a snapshot document and an exposure draft regarding the proposed changes. The deadline for feedback on the proposed amendments is Jan. 20, 2025, and the login to submit comments is located on this page.
After the consultation period, the IASB will consider the feedback while deciding how to proceed.
