Interests in Other Entities
This factsheet guides you through the accounting and disclosure requirements for investments in subsidiaries, joint ventures and associates.
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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.
All amendments issued up to and including the publication date of 1 January 2022 are included within the IFRS Foundation’s latest version of the issued standard: 2022 Issued Standard – IAS 28. Issued amendments may, therefore, have a mandatory effective date that is later than 1 January 2022 – see below for details.
Any amendments issued after 1 January 2022 will not be included in the IFRS Foundation’s 2022 Issued Standards but will be listed below and identified as such.
See the Corporate Reporting Faculty’s annual IFRS factsheets for a more detailed discussion of recent IFRS amendments.
IFRS 17 Insurance Contracts amendment to IAS 28
Mandatory date: Annual periods beginning on or after 1 January 2023. Earlier application is permitted.
IAS 28 provides an exemption from applying the equity method to investment-linked insurance funds. The standard is amended to clarify that a fund held by an entity as the underlying items for a group of insurance contracts with direct participation features is an example of an investment-linked insurance fund.
Related IFRIC interpretations
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.
ICAEW factsheets and guides
The Corporate Reporting Faculty's annual IFRS factsheets provide a more detailed discussion of recent IFRS amendments.
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