Wiley International Trends in Financial Reporting under IFRS: Including Comparisons with US GAAP, Chinese GAAP, and Indian GAAP

CHAPTER 17

INVESTMENTS IN ASSOCIATES (IAS 28)

1. OBJECTIVE

1.1 This Standard prescribes the accounting treatment that is to be adopted for investments in associates. However, it excludes investments in associates that are held by venture capital entities or mutual funds, unit trusts and other similar entities if they are held for trading financial assets in accordance with International Accounting Standard (IAS) 39, Financial Instruments: Recognition and Measurement.

1.2 This Standard has been amended (see Appendix B) and the amended Standard is applicable to annual reporting periods beginning on or after January 1, 2013, with an option of earlier adoption.

2. SYNOPSIS OF THE STANDARD

Next is a summary of the Standard that prescribes the accounting for investment in associates over which the investor has significant influence.

2.1 The Standard applies in cases of investments in entities where the investor has “significant influence” unless the investor is a venture capital firm, mutual fund, or unit trust, and it elects to measure such investments at fair value through profit or loss under IAS 39.

2.2 Significant influence is the power to participate in financial and operating policy decisions of an investee but is not control or joint control over those policies and is presumed in case an investor, directly or indirectly, owns 20% or more of the voting power of the investee (unless it can be clearly demonstrated that the investor does not have significant influence despite owning ...