EFRAG has released its draft comment letter (DCL) on the IASB Exposure Draft IASB/ED/2024/7 Equity Method of Accounting, IAS 28 Investments in Associates and Joint Ventures (revised 202x). Feedback to the DCL is invited by 6 January 2025.
The IASB ED proposes amendments to IAS 28 to address existing application challenges related to the equity method of accounting. In addition to these amendments, the ED suggests improvements to the disclosure requirements in IFRS 12 Disclosure of Interests in Other Entities and IAS 27 Separate Financial Statements. The ED, published on 19 September 2024, remains open for public comments until 20 January 2025.
EFRAG’s Position on the ED:
EFRAG’s DCL generally supports the proposed amendments, recognizing them as a positive step towards resolving existing challenges and enhancing the application of IAS 28. Specifically, the DCL supports the ED’s proposals on:
- The measurement of the cost of an associate or joint venture.
- The treatment of gains or losses from transactions with an investee (associate or joint venture).
- The disclosure requirements.
- The impairment indicators.
However, the DCL also points out areas where further simplification, clarification, and amendment are needed:
- Simplification of the layered approach for acquiring additional ownership interests while retaining significant influence.
- Rejection of certain proposals related to changes in ownership interest, calling for a holistic, principle-based solution.
- Clarification of proposals on recognizing losses when the carrying amount of the investment has been reduced to nil.
Mixed Views on Separate Financial Statements and Transition Requirements:
EFRAG has mixed views on the ED’s proposals concerning the treatment of investments in subsidiaries within separate financial statements. The DCL seeks additional feedback, including views on the alternative position presented in the ED. Additionally, it highlights mixed opinions on the proposed transition requirements related to contingent consideration and previously unrecognized gains or losses from transactions with investees, and calls for alternative suggestions from constituents.
EFRAG invites stakeholders to review the draft comment letter and submit feedback by 6 January 2025.
Read EFRAG’s full draft comment letter.
For more information [here]