(Summary) Ind AS 28
Investments in Associates and Joint Ventures
Is to prescribe the accounting for investments in associates and to set out the requirements for the application of the equity method when accounting for investments in associates and joint ventures.
Applies to all entities that are investors with joint control of, or significant influence over, an investee.
- Significant influence
- Joint arrangement
- Joint control
- Joint venture
- Equity method
Associates: Entity over which the investor has significant influence
Joint arrangement: An arrangement of which two or more parties have joint control.
Significant influence: The power to participate in the financial and operating policy decisions of the investee but is not control or joint control of those policies.
If entity holds voting power in investee
|20% or more||Entity has significant influence|
|Less than 20% – presumed that:||Entity does not have significant influence (unless clearly demonstrated otherwise)|
The existence of significant influence by an entity is usually evidenced in one or more of the following ways:
- Representation on the board of directors or equivalent governing body of the investee;
- Participation in the policy-making process, including participation in decisions about dividends or other distributions;
- Material transactions between the entity and the investee;
- Interchange of managerial personnel; or
- Provision of essential technical information
- Basic principle: Investment in Associates or JV is initially recognized at cost and the carrying amount is increased / decreased to recognise the investor’s share of the profit or loss after the date of acquisition, which is recognized in Investor’s Profit or Loss.
- Distributions and other adjustments to carrying amount: Distributions received from an investee- reduce the carrying amount of the investment.
- Exemptions from applying the equity method: if the entity is a parent that is exempt from preparing CFS or if the given conditions are satisfied.
- Classification as held for sale: Apply Ind AS 105 to Investment that meets the criteria to be classified as held for sale. Apply Ind AS 28 to any Retained portion of an investment that has not been classified as held for sale.
- Discontinue the equity method: from the date when its investment ceases to be an associates, or JV. If an investment in an associates becomes an investment in a JV or vice versa, continue to apply the equity method and do not remeasure the retained interest.
- Equity method procedures: The most recent available FS of the associates or JV are used by the entity in applying the equity method. The entity’s FS shall be prepared using uniform accounting policies for like transactions and events in similar circumstances unless, in case of associates, it is impracticable to do so.
- Separate financial statements: An investment in an associates or a JV should be accounted for in the entity’s separate FS in accordance with para 10 of Ind AS 27.