IASB publishes Exposure Draft Investment Entities–Applying the Consolidation Exception (Proposed amendments to IFRS 10 and IAS 28)

The International Accounting Standards Board (IASB) today published for public comment the Exposure Draft Investment Entities–Applying the Consolidation Exception (Proposed amendments to IFRS 10 and IAS 28).

The proposed amendments to IFRS 10 Consolidated Financial Statements and IAS 28 Investments in Associates and Joint Ventures are designed to clarify three issues about the application of the requirement for investment entities to measure subsidiaries at fair value instead of consolidating them.  The proposed amendments: 

• confirm that the exemption from presenting consolidated financial statements continues to apply to subsidiaries of an investment entity that are themselves parent entities;
• clarify when an investment entity parent should consolidate a subsidiary that provides investment-related services instead of measuring that subsidiary at fair value; and
• simplify the application of the equity method for an entity that is not itself an investment entity but that has an interest in an associate that is an investment entity.

The issues originated from submissions to the IFRS Interpretations Committee, which recommended that the IASB should amend the Standards to clarify the requirements in order to reduce the risk of diversity developing in practice.

The proposals are open for public comment for 96 days.  This is shorter than the normal comment period, reflecting the 1 January 2014 effective date of the original requirements in IFRS 10 for investment entities.  The Exposure Draft is available to download from here.