Effective on a prospective basis to transactions occurring in annual periods beginning on or after 1 January 2016 deferred indefinitely (see below)18 December 2014 Amended by Investment Entities: Applying the Consolidation Exception (Amendments to IFRS 10, IFRS 12 and IAS 28) (project history) Show
Effective for annual periods beginning on or after 1 January 2016 17 December 2015Amended by Effective Date of Amendments to IFRS 10 and IAS 28 defer the effective date of the September 2014 amendments to these standards indefinitely 8 December 2016Amended by Annual Improvements to IFRS Standards 2014–2016 Cycle (Measuring an associate or joint venture at fair value)Click for more informationEffective for annual periods beginning on or after 1 January 201812 October 2017Amended by Long-term Interests in Associates and Joint Ventures (Amendments to IAS 28)Effective for annual periods beginning on or after 1 January 2019 Related Interpretations
Amendments under consideration by the IASB
Summary of IAS 28 (as amended in 2011)The summary below applies to IAS 28 Investments in Associates and Joint Ventures, issued in May 2011 and applying to annual reporting periods beginning on or after 1 January 2013. For earlier reporting periods, refer to our summary of IAS 28 Investments in Associates. Objective of IAS 28The objective of IAS 28 (as amended in 2011) 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. [IAS 28(2011).1] Scope of IAS 28IAS 28 applies to all entities that are investors with joint control of, or significant influence over, an investee (associate or joint venture). [IAS 28(2011).2] Key definitions[IAS 28.3] AssociateAn entity over which the investor has significant influenceSignificant influenceThe power to participate in the financial and operating policy decisions of the investee but is not control or joint control of those policiesJoint arrangementAn arrangement of which two or more parties have joint controlJoint controlThe contractually agreed sharing of control of an arrangement, which exists only when decisions about the relevant activities require the unanimous consent of the parties sharing controlJoint ventureA joint arrangement whereby the parties that have joint control of the arrangement have rights to the net assets of the arrangementJoint venturerA party to a joint venture that has joint control of that joint ventureEquity methodA method of accounting whereby the investment is initially recognised at cost and adjusted thereafter for the post-acquisition change in the investor's share of the investee's net assets. The investor's profit or loss includes its share of the investee's profit or loss and the investor's other comprehensive income includes its share of the investee's other comprehensive incomeSignificant influenceWhere an entity holds 20% or more of the voting power (directly or through subsidiaries) on an investee, it will be presumed the investor has significant influence unless it can be clearly demonstrated that this is not the case. If the holding is less than 20%, the entity will be presumed not to have significant influence unless such influence can be clearly demonstrated. A substantial or majority ownership by another investor does not necessarily preclude an entity from having significant influence. [IAS 28(2011).5] The existence of significant influence by an entity is usually evidenced in one or more of the following ways: [IAS 28(2011).6]
The existence and effect of potential voting rights that are currently exercisable or convertible, including potential voting rights held by other entities, are considered when assessing whether an entity has significant influence. In assessing whether potential voting rights contribute to significant influence, the entity examines all facts and circumstances that affect potential rights [IAS 28(2011).7, IAS 28(2011).8] An entity loses significant influence over an investee when it loses the power to participate in the financial and operating policy decisions of that investee. The loss of significant influence can occur with or without a change in absolute or relative ownership levels. [IAS 28(2011).9] The equity method of accountingBasic principle. Under the equity method, on initial recognition the investment in an associate or a joint venture is recognised at cost, and the carrying amount is increased or decreased to recognise the investor's share of the profit or loss of the investee after the date of acquisition. [IAS 28(2011).10] Distributions and other adjustments to carrying amount. The investor's share of the investee's profit or loss is recognised in the investor's profit or loss. Distributions received from an investee reduce the carrying amount of the investment. Adjustments to the carrying amount may also be necessary for changes in the investor's proportionate interest in the investee arising from changes in the investee's other comprehensive income (e.g. to account for changes arising from revaluations of property, plant and equipment and foreign currency translations.) [IAS 28(2011).10] Potential voting rights. An entity's interest in an associate or a joint venture is determined solely on the basis of existing ownership interests and, generally, does not reflect the possible exercise or conversion of potential voting rights and other derivative instruments. [IAS 28(2011).12] Interaction with IFRS 9. IFRS 9 Financial Instruments does not apply to interests in associates and joint ventures that are accounted for using the equity method. An entity applies IFRS 9, including its impairment requirements, to long-term interests in an associate or joint venture that form part of the net investment in the associate or joint venture but to which the equity method is not applied. Instruments containing potential voting rights in an associate or a joint venture are accounted for in accordance with IFRS 9, unless they currently give access to the returns associated with an ownership interest in an associate or a joint venture. [IAS 28(2011).14-14A] Classification as non-current asset. An investment in an associate or a joint venture is generally classified as non-current asset, unless it is classified as held for sale in accordance with IFRS 5 Non-current Assets Held for Sale and Discontinued Operations. [IAS 28(2011).15] Application of the equity method of accountingBasic principle. In its consolidated financial statements, an investor uses the equity method of accounting for investments in associates and joint ventures. [IAS 28(2011).16] Many of the procedures that are appropriate for the application of the equity method are similar to the consolidation procedures described in IFRS 10. Furthermore, the concepts underlying the procedures used in accounting for the acquisition of a subsidiary are also adopted in accounting for the acquisition of an investment in an associate or a joint venture. [IAS 28.(2011).26] Exemptions from applying the equity method. An entity is exempt from applying the equity method if the investment meets one of the following conditions:
Classification as held for sale. When the investment, or portion of an investment, meets the criteria to be classified as held for sale, the portion so classified is accounted for in accordance with IFRS 5. Any remaining portion is accounted for using the equity method until the time of disposal, at which time the retained investment is accounted under IFRS 9, unless the retained interest continues to be an associate or joint venture. [IAS 28(2011).20] Discontinuing the equity method. Use of the equity method should cease from the date that significant influence or joint control ceases: [IAS 28(2011).22]
Changes in ownership interests. If an entity's interest in an associate or joint venture is reduced, but the equity method is continued to be applied, the entity reclassifies to profit or loss the proportion of the gain or loss previously recognised in other comprehensive income relative to that reduction in ownership interest. [IAS 28(2011).25] Equity method procedures.
Impairment. After application of the equity method an entity applies IAS 39 Financial Instruments: Recognition and Measurement to determine whether it is necessary to recognise any additional impairment loss with respect to its net investment in the associate or joint venture. If impairment is indicated, the amount is calculated by reference to IAS 36 Impairment of Assets. The entire carrying amount of the investment is tested for impairment as a single asset, that is, goodwill is not tested separately. The recoverable amount of an investment in an associate is assessed for each individual associate or joint venture, unless the associate or joint venture does not generate cash flows independently. [IAS 28(2011).40, IAS 28(2011).42, IAS 28(2011).43] Separate financial statementsAn investment in an associate or a joint venture shall be accounted for in the entity's separate financial statements in accordance with IAS 27 Separate Financial Statements (as amended in 2011). DisclosureThere are no disclosures specified in IAS 28. Instead, IFRS 12 Disclosure of Interests in Other Entities outlines the disclosures required for entities with joint control of, or significant influence over, an investee. Applicability and early adoptionIAS 28 (2011) is applicable to annual reporting periods beginning on or after 1 January 2013. [IAS 28(2011).45] An entity may apply IAS 28 (2011) to an earlier accounting period, but if doing so it must disclose the fact that is has early adopted the standard and also apply: [IAS 28(2011).45] What is true about a joint venture?A joint venture is a combination of two or more parties that seek the development of a single enterprise or project for profit, sharing the risks associated with its development. The parties to the joint venture must be at least a combination of two natural persons or entities.
Which of the following is true of a joint venture corporation quizlet?Which of the following is true of a joint venture? Two existing companies collaborate to form a third company, with both the companies remaining intact and unchanged.
Which of the following is an advantage of joint ventures quizlet?Which of the following is an advantage of joint ventures? They help companies avoid tariff and non-tariff barriers to entry. Which of the following is a disadvantage of exporting? Transportation costs can significantly increase the price of an exported product.
Which of the following are characteristics of a joint venture?Characteristics of a Joint Venture. Creates Synergy. A joint venture is entered between two or more parties to extract the qualities of each other. ... . Risk and Rewards can be Shared. ... . No Separate Laws.. |