Long-term Interest in Associates and Joint Ventures
The International Accounting Standards Board (IASB) has published amendments to International Accounting Standards (IAS) 28, Investments in Associates and Joint Ventures which clarifies that long term interests in an associate or joint venture – to which the equity method is not applied- must be accounted for under International Financial Reporting Standards (IFRS) 9, Financial Instruments. This shall include long term interests that, in substance, form part of the entity’s net investment in an associate or joint venture.
Background of and Main issues addressed by the Amendment
IFRS 9 excludes interests in associates and joint venture accounted for in accordance with IAS 28. However, it was not clear whether that exclusion applies only to interests in associates and joint venture to which the equity method is applied or whether it applies to all interests in associates and joint ventures.
To clarify, the IASB issued amendments to IAS 28 which states that the exclusion in IFRS 9 applies only to interests accounted for using the equity method. Therefore, a company applies IFRS 9 to other interests in associates and joint ventures, including long-term interests to which the equity method is not applied and which, in substance, form part of the net investment in those associates and joint ventures.
The IASB also published an example that illustrates how entities apply the requirements in IFRS 9 and IAS 28 to long-term interests in an associate or joint venture.
The amendments are effective from annual periods beginning on or after January 1, 2019, with earlier application permitted.
Download the Long-term Interest in Associates and Joint Ventures.