IASB proposes amendments on applying equity method

The International Accounting Standards Board has begun a public consultation on proposed amendments to International Financial Reporting Standards to help companies account for their investments in associates and joint ventures.

The proposals come in response to questions from stakeholders' on how to apply the equity method to account for such investments. Associates are investments in which an investor has significant influence. Joint ventures are arrangements in which two or more parties share joint control and have rights to the net assets.

When applying the equity method, an investment is initially recognized at cost and then adjusted thereafter for the post-acquisition changes in the investor's share of the investee's net assets. 

IAS 28, Investments in Associates and Joint Ventures, sets out how companies report on these investments applying the equity method. The proposed amendments would add to as well as clarify how to apply the equity method by answering application questions received by the IASB for years. 

The IASB is also proposing new disclosure requirements to enhance the information companies offer about these investments. The IASB anticipates the proposed amendments will reduce diversity in practice and give users of financial statements more comparable and useful information.

IAS 28 was first published in 1989 and the IASB has taken this opportunity to reorder the standard in a logical, consistent way to help companies with its application.

There's a snapshot document on the proposed changes along with an exposure draft, The IASB is asking its stakeholders to send feedback on the proposed amendments by Jan. 20, 2025. Comment letters on the exposure draft can be submitted here. After the consultation period, the IASB will consider the feedback and decide how to proceed.