FRS28.docx

FRS28.docx

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FRS28

Financial

ReportingStandard

FRS28

InvestmentsinAssociates

FRS28AccountingforInvestmentsinAssociateswasissuedbytheCCDGinJanuary2003andwasoperativeforfinancialstatementscoveringperiodsbeginningonorafter1January1991.

ThisStandardwasrevisedinJuly2004andsupersedesFRS28forInvestmentsinAssociatesissuedinJanuary2003.AnentityshallapplythisStandardforannualperiodsbeginningonorafter1January2005.Earlierapplicationisencouraged.

ConsequentialamendmentsweremadeinSeptember2004,March2008,October2008andJune2009.

Contents

Paragraphs

INTRODUCTIONIN1-IN15

FinancialReportingStandard28

InvestmentsinAssociates

SCOPE1

DEFINITIONS2-12

SignificantInfluence6-10

EquityMethod11-12

APPLICATIONOFTHEEQUITYMETHOD13-34

ImpairmentLosses31-34

SEPARATEFINANCIALSTATEMENTS35-36

DISCLOSURE37-40

EFFECTIVEDATEANDTRANSITION41–41C

WITHDRAWALOFOTHERPRONOUNCEMENTS42-43

APPENDIX:

AmendmentstoOtherPronouncements

TABLEOFCONCORDANCE

FinancialReportingStandard28InvestmentsinAssociates（FRS28）issetoutinparagraphs1-43andtheAppendix.Alltheparagraphshaveequalauthority.FRS28shouldbereadinthecontextofthePrefacetoFinancialReportingStandardsandtheFrameworkforthePreparationandPresentationofFinancialStatements.FRS8AccountingPolicies,ChangesinAccountingEstimatesandErrorsprovidesabasisforselectingandapplyingaccountingpoliciesintheabsenceofexplicitguidance.

Introduction

IN1.FinancialReportingStandard28InvestmentsinAssociatesreplacesFRS28AccountingforInvestmentsinAssociates（issuedin2003）andshouldbeappliedforannualperiodsbeginningonorafter1January2005.Earlierapplicationisencouraged.TheStandardalsoreplacesthefollowingInterpretations:

•INTFRS3EliminationofUnrealisedProfitsandLossesonTransactionswithAssociates

•INTFRS20EquityAccountingMethod—RecognitionofLosses

•INTFRS33ConsolidationandEquityMethod—PotentialVotingRightsandAllocationofOwnershipInterests.

ReasonsforRevisingFRS28

IN2.TheCouncilonCorporateDisclosureandGovernanceissuedthisrevisedFRS28aspartofimprovementstoFinancialReportingStandards.Theobjectivesoftheimprovementsweretoreduceoreliminatealternatives,redundanciesandconflictswithintheStandards,todealwithsomeconvergenceissuesandtomakeotherimprovements.

IN3.ForFRS28themainobjectivewastoreducealternativesintheapplicationoftheequitymethodandinaccountingforinvestmentsinassociatesinseparatefinancialstatements.ThefundamentalapproachwhenaccountingforinvestmentsinassociatesusingtheequitymethodcontainedinFRS28wasnotconsidered.

TheMainChanges

IN4.ThemainchangesfromthepreviousversionofFRS28aredescribedbelow.

Scope

IN5.TheStandarddoesnotapplytoinvestmentsthatwouldotherwisebeassociatesorinterestsofventurersinjointlycontrolledentitiesheldbyventurecapitalorganisations,mutualfunds,unittrustsandsimilarentitieswhenthoseinvestmentsareclassifiedasheldfortradingandaccountedforinaccordancewithFRS39FinancialInstruments:

RecognitionandMeasurement.Thoseinvestmentsaremeasuredatfairvalue,withchangesinfairvaluerecognisedinprofitorlossintheperiodinwhichtheyoccur.

IN6.Furthermore,theStandardprovidesexemptionsfromapplicationoftheequitymethodsimilartothoseprovidedforcertainparentsnottoprepareconsolidatedfinancialstatements.TheseexemptionsincludewhentheinvestorisalsoaparentexemptinaccordancewithFRS27ConsolidatedandSeparateFinancialStatementsfrompreparingconsolidatedfinancialstatements（paragraph13（b））,andwhentheinvestor,thoughnotsuchaparent,cansatisfythesametypeofconditionsthatexemptsuchparents（paragraph13（c））.

SignificantInfluence

Potentialvotingrights

IN7.Anentityisrequiredtoconsidertheexistenceandeffectofpotentialvotingrightscurrentlyexercisableorconvertiblewhenassessingwhetherithasthepowertoparticipateinthefinancialandoperatingpolicydecisionsoftheinvestee.ThisrequirementwaspreviouslyincludedinINTFRS33,whichhasbeensuperseded.

EquityMethod

IN8.TheStandardclarifiesthatinvestmentsinassociatesoverwhichtheinvestorhassignificantinfluencemustbeaccountedforusingtheequitymethodwhetherornottheinvestoralsohasinvestmentsinsubsidiariesandpreparesconsolidatedfinancialstatements.However,theinvestordoesnotapplytheequitymethodwhenpresentingseparatefinancialstatementspreparedinaccordancewithFRS27.

Exemptionfromapplyingtheequitymethod

IN9.TheStandarddoesnotrequiretheequitymethodtobeappliedwhenanassociateisacquiredandheldwithaviewtoitsdisposalwithintwelvemonthsofacquisition.Theremustbeevidencethattheinvestmentisacquiredwiththeintentiontodisposeofitandthatmanagementisactivelyseekingabuyer.Thewords“inthenearfuture”werereplacedwiththewords“withintwelvemonths”.Whensuchanassociateisnotdisposedofwithintwelvemonthsitmustbeaccountedforusingtheequitymethodasfromthedateofacquisition,exceptinnarrowlyspecifiedcircumstances.1

IN10.TheStandarddoesnotpermitaninvestorthatcontinuestohavesignificantinfluenceoveranassociatenottoapplytheequitymethodwhentheassociateisoperatingunderseverelong-termrestrictionsthatsignificantlyimpairitsabilitytotransferfundstotheinvestor.Significantinfluencemustbelostbeforetheequitymethodceasestobeapplicable.

Eliminationofunrealisedprofitsandlossesontransactionswithassociates

IN11.Profitsandlossesresultingfrom‘upstream’and‘downstream’transactionsbetweenaninvestorandanassociatemustbeeliminatedtotheextentoftheinvestor’sinterestintheassociate.TheconsensusinINTFRS3hasbeenincorporatedintotheStandard.

Non-coterminousyear-ends

IN12.Whenfinancialstatementsofanassociateusedinapplyingtheequitymethodarepreparedasattheendofthereportingperiodthatisdifferentfromthatoftheinvestor,thedifferencemustbenogreaterthanthreemonths.

Uniformaccountingpolicies

IN13.TheStandardrequiresaninvestortomakeappropriateadjustmentstotheassociate’sfinancialstatementstoconformthemtotheinvestor’saccountingpoliciesforreportingliketransactionsandothereventsinsimilarcircumstances.ThepreviousversionofFRS28providedanexceptiontothisrequirementwhenitwas“notpracticabletouseuniformaccountingpolicies”.

Recognitionoflosses

IN14.Aninvestormustconsiderthecarryingamountofitsinvestmentintheequityoftheassociateanditsotherlong-terminterestsintheassociatewhenrecognisingitsshareoflossesoftheassociate.INTFRS20limitedtherecognitionoftheinvestor’sshareoflossestothecarryingamountofitsinvestmentintheequityoftheassociate.Therefore,thatInterpretationhasbeensuperseded.

SeparateFinancialStatements

IN15.Therequirementsforthepreparationofaninvestor’sseparatefinancialstatementsareestablishedbyreferencetoFRS27.

FOOTNOTES

1InSeptember2004,FRS105Non-currentAssetsHeldforSaleandDiscontinuedOperationswasissued.FRS105removesthisscopeexclusionandnoweliminatestheexemptionfromapplyingtheequitymethodwhensignificantinfluenceoveranassociateisintendedtobetemporary.

FINANCIALREPORTINGSTANDARDFRS28

InvestmentsinAssociates

Scope

1.ThisStandardshallbeappliedinaccountingforinvestmentsinassociates.However,itdoesnotapplytoinvestmentsinassociatesheldby:

（a）venturecapitalorganisations,or

（b）mutualfunds,unittrustsandsimilarentitiesincludinginvestment-linkedinsurancefunds

thatuponinitialrecognitionaredesignatedasatfairvaluethroughprofitorlossorareclassifiedasheldfortradingandaccountedforinaccordancewithFRS39FinancialInstruments:

RecognitionandMeasurement.SuchinvestmentsshallbemeasuredatfairvalueinaccordancewithFRS39,withchangesinfairvaluerecognisedinprofitorlossintheperiodofthechange.Anentityholdingsuchaninvestmentshallmakethedisclosuresrequiredbyparagraph37（f）.

Definitions

2.ThefollowingtermsareusedinthisStandardwiththemeaningsspecified:

Anassociateisanentity,includinganunincorporatedentitysuchasapartnership,overwhichtheinvestorhassignificantinfluenceandthatisneitherasubsidiarynoraninterestinajointventure.

Consolidatedfinancialstatementsarethefinancialstatementsofagrouppresentedasthoseofasingleeconomicentity.

Controlisthepowertogovernthefinancialandoperatingpoliciesofanentitysoastoobtainbenefitsfromitsactivities.

Theequitymethodisamethodofaccountingwherebytheinvestmentisinitiallyrecognisedatcostandadjustedthereafterforthepost-acquisitionchangeintheinvestor’sshareofnetassetsoftheinvestee.Theprofitorlossoftheinvestorincludestheinvestor'sshareoftheprofitorlossoftheinvestee.

Jointcontrolisthecontractuallyagreedsharingofcontroloveraneconomicactivity,andexistsonlywhenthestrategicfinancialandoperatingdecisionsrelatingtotheactivityrequiretheunanimousconsentofthepartiessharingcontrol（theventurers）.

Separatefinancialstatementsarethosepresentedbyaparent,aninvestorinanassociateoraventurerinajointlycontrolledentity,inwhichtheinvestmentsareaccountedforonthebasisofthedirectequityinterestratherthanonthebasisofthereportedresultsandnetassetsoftheinvestees.

Significantinfluenceisthepowertoparticipateinthefinancialandop