Background
Constituent feedback in the IASB' Agenda consultation 2011 revealed a level of criticism of the equity method of accounting.
Concerns raised by constituents include:
- whether the information provided by the equity method is useful to users
- complexities and inconsistencies with other IFRS requirements, e.g. goodwill impairment, share-based payments and joint arrangements.
IAS28 Investments in Associates and Joint Ventures (2011) defines the equity method as follows:
The equity method is a method of accounting whereby the investment is initially recognised at cost and adjusted thereafter for the post-acquisition change in the investor's share of the investee's net assets. The investor's profit or loss includes its share of the investee's profit or loss and the investor's other comprehensive income includes its share of the investee's other comprehensive income.
This research project is designed to undertake a fundamental assessment of the equity method of accounting in terms of usefulness to investors and difficulties for preparers.
Current status of the project
In December 2012, as part of its response to the Agenda consultation 2011, the IASB formally added this project to its work programme as an IASB-only research project. Board discussions are expected in the fourth quarter of 2014 and first half of 2015.
Project milestones
| Date | Development | Comments |
|---|---|---|
| December2012 | Added to the IASB work programme as a research project |
20 Mar 2024 The purpose of this session was to ask the IASB to clarify its tentative decision regarding transitional requirements for the proposed amendments to IAS 28 and to agree on the due process steps for the exposure draft. 19 Feb 2024 The purpose of this meeting was to discuss several matters arising from the IASB’s tentative decisions and decide whether to propose amendments to IFRS Accounting Standards. 14 Nov 2023 The purpose of this meeting was to discuss whether to propose improvements to the disclosure requirements for investments in joint ventures, and when a parent elects to use the equity method to account for its investments in subsidiaries in separate financial statements. 26 Oct 2023 The purpose of this meeting was to discuss whether the IASB’s tentative decisions on application questions for investments in associates apply when parents elect to use the equity method to investments in subsidiaries in their separate financial statements and to investments in joint ventures. 21 Sep 2023 The purpose of this meeting was to discuss the implications of applying the IASB’s tentative decisions (for investments in associates) to investments in subsidiaries in separate financial statements, and joint ventures; whether to propose amendments to improve the disclosure requirements for investments in associates; and whether to expand the project’s scope. 26 Jul 2023 The purpose of this meeting was to decide how to answer an application question relating to the assessment of impairment and whether to expand the project’s scope for five of the application questions that were not selected but are considered resolved by the IASB’s tentative decisions. 20 Jun 2023 In this session, the IASB discussed whether it should develop proposals on how an investor applies the equity method when an associate issues an equity-settled share-based payment or a share warrant, and how to, initially and subsequently, recognise and measure contingent consideration on acquisition of an investment in an associate applying IAS 28. 27 Apr 2023 In this meeting, the IASB discussed the perceived conflict between IFRS 10 and IAS 28 when an entity sells a subsidiary to an associate. 21 Mar 2023 In this session, the IASB discussed three application questions on its project to revise IAS 28. 24 Jan 2023 In this session, the IASB discussed the perceived conflict between IFRS 10 and IAS 28 when an entity sells a subsidiary to an associate. 14 Dec 2022 In this session, the IASB discussed applying the preferred approach after purchase of an additional interest in an associate and two application questions. 18 Oct 2022 In this session, the Board reviewed the progress of the project. 20 Sep 2022 The purpose of this meeting was to continue discussions from the June 2022 meeting on the disposal of an interest in an associate while retaining significant influence, to continue the discussion on other changes in an associate’s net assets, and to introduce the application question on transactions between an investor and its associate. 21 Jun 2022 in this session, the Board discussed the staff’s analysis applying the IASB’s preferred approach and to consider the implications for an alternative approach, to other transactions and events that change the investor’s ownership interest in an associate, including an investor purchasing an additional interest that is a bargain, and making a partial disposal of the associate, while retaining significant influence; and changes arising from equity transactions of the associate. 27 Apr 2022 In this session, the Board discussed the staff analysis on purchases of an additional interest in an associate without a change in significant influence and will be presented with a summary of the research findings on changes made to IFRS Accounting Standards arising from the Conceptual Framework, Business Combinations and Joint Arrangements project. 26 Oct 2021 In this session, the Board discussed the direction of the project and next steps. 22 Jun 2021 In this session, the Board discussed the principles identified in the analysis of IAS 28. 23 Mar 2021 In this session, the IASB was provided with an update on the research project. 27 Oct 2020 In this session, the Board discussed application problems within IAS 28. 15 Dec 2015 In this session, the Director of Research informed the IASB about changes to the research programme since the last update in September 2015. 19 Nov 2015 The regular update summary paper on the most recent IFRS Interpretations Committee meeting was discussed with the board. Major topics included IFRS 2 and classification and measurement of share-based payment transactions and the deferral of the effective date of the September 2014 amendment to IFRS 10 and IAS 28. 24 Jun 2015 The Board discussed a staff proposal to undertake a limited scope research project to address equity accounting requirements for Investments in Associates and Joint Ventures. The Board approved the staff recommendation which also included setting aside the application of the equity method for investment in subsidiaries in separate financial statements. 18 Mar 2015 The Board reviewed projects on the research agenda, including the scope and timing. 23 Jul 2014 The Board was presented a paper setting out how the IASB should prioritise the projects in the research programme. 21 May 2014 The staff presented the first agenda paper on the Equity method of accounting research project. The Board discussed various issues around the scope of the project. 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