Measurement of long-term interests in associates and joint ventures

On 12 October 2017, the IASB published an amendment to IAS 28 on the “other interests” in an associate or joint venture to which the equity method is not applied: for example, long-term loans which, in substance, form part of the net investment in the associate or the joint venture.

Keywords: Mazars, Thailand, IFRS, IASB, IAS 28, IFRS 9

19 December 2017

This amendment clarifies that such a financial instrument must first be recognised under IFRS 9, including its provisions on the impairment of financial assets, before applying any reduction of its carrying value by allocating the accumulated losses of the equity-accounted entity, where the equity value has already been reduced to zero.

The amendment is accompanied by an illustrative example setting out the accounting consequences of a period of losses followed by a return to profitability of the equity-accounted entity.

This amendment is to be applied retrospectively for reporting periods from 1 January 2019. In the event of early application at the same time as IFRS 9, the IFRS 9 transitional arrangements must be applied.