IFRS Essentials

IAS 28 INVESTMENTS IN ASSOCIATES AND IAS 28 (2011) INVESTMENTS IN ASSOCIATES AND JOINT VENTURES

1 INTRODUCTION

IAS 28 prescribes the accounting treatment of investments in associates. Associates are generally accounted for according to the equity method in the investor's consolidated financial statements.

In May 2011, the IASB amended IAS 28. The new version of the standard has to be applied in the financial statements as at Dec 31, 2013 (if the entity's reporting periods start on Jan 01 and end on Dec 31). Earlier application is permitted by the IASB (IAS 28.45). However, in the European Union, new IFRSs have to be endorsed by the European Union before they can be applied. There has been no endorsement with regard to the new version of IAS 28 as yet.

This chapter of the book is structured as follows:

• Section 2 discusses the rules applicable if the entity decides not to apply the new version of IAS 28 early.
• Section 3 discusses the main differences between the “old” and the “new” version of IAS 28.

2 FINANCIAL REPORTING WITHOUT EARLY APPLICATION OF THE AMENDMENTS TO IAS 28 ISSUED IN MAY 2011

2.1 The Term “Associate” and Scope of IAS 28

IAS 28 is applied in accounting for investments in associates (IAS 28.1). An associate is an entity (IAS 28.2).

• over which the investor has significant influence, and
• that is neither a subsidiary nor a joint venture.

Significant influence is the power to participate in the financial and operating policy decisions of the investee. However, if ...