IAS 28 Investments in Associates.docx

1、IAS 28 Investments in AssociatesIAS 28 Investments in AssociatesThis revised Standard supersedes IAS 28 (revised 2000) Accounting for Investments in Associates and should be applied for annual periods beginning on or after 1 January 2005. Earlier application is encouraged.ContentsIntroduction IN1-IN

2、15International Accounting Standard 28 Investments in AssociatesScope 1Definitions 2-5Significant Influence 6-10Equity Method 11-12Application of the equity method 13-34Impairment Losses 31-34Separate financial statements 35-36Disclosure 37-40Effective date 41Withdrawal of other pronouncements 42-43

3、Appendix: Amendments to Other PronouncementsApproval of IAS 28 by the BoardBasis for conclusionsTable of concordance International Accounting Standard 28 Investments in Associates (IAS 28)is set out in paragraphs 1-43 and the Appendix. All the paragraphs have equal authority but retain the IASC form

4、at of the Standard when it was adopted by the IASB. IAS 28 should be read in the context of the Basis for Conclusions, the Preface to International Financial Reporting Standards and the Framework for the Preparation and Presentation of Financial Statements. IAS 8 Accounting Policies, Changes in Acco

5、unting Estimates and Errors provides a basis for selecting and applying accounting policies in the absence of explicit guidance.IntroductionIN1. International Accounting Standard 28 Investments in Associates replaces IAS 28 Accounting for Investments in Associates (revised in 2000) and should be app

6、lied for annual periods beginning on or after 1January 2005. Earlier application is encouraged. The Standard also replaces the following Interpretations:SIC-3 Elimination of Unrealised Profits and Losses on Transactions with AssociatesSIC-20 Equity Accounting Method-Recognition of LossesSIC-33 Conso

7、lidation and Equity Method-Potential Voting Rights and Allocation of Ownership Interests.Reasons for Revising IAS 28IN2. The International Accounting Standards Board developed this revised IAS 28 as part of its project on Improvements to International Accounting Standards. The project was undertaken

8、 in the light of queries and criticisms raised in relation to the Standards by securities regulators, professional accountants and other interested parties. The objectives of the project were to reduce or eliminate alternatives, redundancies and conflicts within the Standards, to deal with some conv

9、ergence issues and to make other improvements.IN3. For IAS 28 the Boards main objective was to reduce alternatives in the application of the equity method and in accounting for investments in associates in separate financial statements. The Board did not reconsider the fundamental approach when acco

10、unting for investments in associates using the equity method contained in IAS 28.The Main ChangesIN4. The main changes from the previous version of IAS 28 are described below.ScopeIN5. The Standard does not apply to investments that would otherwise be associates or interests of venturers in jointly

11、controlled entities held by venture capital organisations, mutual funds, unit trusts and similar entities when those investments are classified as held for trading and accounted for in accordance with IAS 39 Financial Instruments: Recognition and Measurement. Those investments are measured at fair v

12、alue, with changes in fair value recognised in profit or loss in the period in which they occur.IN6. Furthermore, the Standard provides exemptions from application of the equity method similar to those provided for certain parents not to prepare consolidated financial statements. These exemptions in

13、clude when the investor is also a parent exempt in accordance with IAS 27 Consolidated and Separate Financial Statements from preparing consolidated financial statements (paragraph 13(b), and when the investor, though not such a parent, can satisfy the same type of conditions that exempt such parent

14、s (paragraph 13(c).Significant InfluencePotential voting rightsIN7. An entity is required to consider the existence and effect of potential voting rights currently exercisable or convertible when assessing whether it has the power to participate in the financial and operating policy decisions of the

15、 investee. This requirement was previously included in SIC-33, which has been superseded.Equity MethodIN8. The Standard clarifies that investments in associates over which the investor has significant influence must be accounted for using the equity method whether or not the investor also has invest

16、ments in subsidiaries and prepares consolidated financial statements. However, the investor does not apply the equity method when presenting separate financial statements prepared in accordance with IAS 27.Exemption from applying the equity methodIN9. The Standard does not require the equity method

17、to be applied when an associate is acquired and held with a view to its disposal within twelve months of acquisition. There must be evidence that the investment is acquired with the intention to dispose of it and that management is actively seeking a buyer. The words in the near future were replaced

18、 with the words within twelve months. When such an associate is not disposed of within twelve months it must be accounted for using the equity method as from the date of acquisition, except in narrowly specified circumstances.IN10. The Standard does not permit an investor that continues to have sign

19、ificant influence over an associate not to apply the equity method when the associate is operating under severe long-term restrictions that significantly impair its ability to transfer funds to the investor. Significant influence must be lost before the equity method ceases to be applicable.Eliminat

20、ion of unrealised profits and losses on transactions with associatesIN11. Profits and losses resulting from upstream and downstream transactions between an investor and an associate must be eliminated to the extent of the investors interest in the associate. The consensus in SIC-3has been incorporat

21、ed into the Standard.Non-coterminous year-endsIN12. When financial statements of an associate used in applying the equity method are prepared as of a reporting date that is different from that of the investor, the difference must be no greater than three months.Uniform accounting policiesIN13. The S

22、tandard requires an investor to make appropriate adjustments to the associates financial statements to conform them to the investors accounting policies for reporting like transactions and other events in similar circumstances. The previous version of IAS 28 provided an exception to this requirement

23、 when it was not practicable to use uniform accounting policies.Recognition of lossesIN14. An investor must consider the carrying amount of its investment in the equity of the associate and its other long-term interests in the associate when recognising its share of losses of the associate. SIC-20 l

24、imited the recognition of the investors share of losses to the carrying amount of its investment in the equity of the associate. Therefore, that Interpretationhas been superseded.Separate Financial StatementsIN15. The requirements for the preparation of an investors separate financial statements are

25、 established by reference to IAS27.Scope1. This Standard shall be applied in accounting for investments in associates. However, it does not apply to investments in associates held by:(a) venture capital organisations, or (b) mutual funds, unit trusts and similar entities including investment-linked

26、insurance funds that upon initial recognition are designated as at fair value through profit or loss or are classified as held for trading and accounted for in accordance with IAS 39 Financial Instruments: Recognition and Measurement. Such investments shall be measured at fair value in accordance wi

27、th IAS 39, with changes in fair value recognised in profit or loss in the period of the change.Definitions2. The following terms are used in this Standard with the meanings specified:An associate is an entity, including an unincorporated entity such as a partnership, over which the investor has sign

28、ificant influence and that is neither a subsidiary nor an interest in a joint venture.Consolidated financial statements are the financial statements of a group presented as those of a single economic entity.Control is the power to govern the financial and operating policies of an entity so as to obt

29、ain benefits from its activities.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 investors share of net assets of the investee. The profit or loss of the investor includes the investors

30、share of the profit or loss of the investee.Joint control is the contractually agreed sharing of control over an economic activity, and exists only when the strategic financial and operating decisions relating to the activity require the unanimous consent of the parties sharing control (the venturer

31、s).Separate financial statements are those presented by a parent, an investor in an associate or a venturer in a jointly controlled entity, in which the investments are accounted for on the basis of the direct equity interest rather than on the basis of the reported results and net assets of the inv

32、estees. Significant influence is the power to participate in the financial and operating policy decisions of the investee but is not control or joint control over those policies.A subsidiary is an entity, including an unincorporated entity such as a partnership, that is controlled by another entity (known as the parent).Editorial note: Definition of joint control substituted by IFRS 3 with effect for business combinations for which the agreement date is on or after 31 March 2004, subject to further tr