Link with IFRS 9

Learning objectives

• Explain that long-term interests are subject to IFRS 9 and that a retained interest without significant influence is a financial asset.L4

Normative references

• IAS 28 §14AThe entity also applies IFRS 9 to other financial instruments in an associate or joint venture to which the equity method is not applied, including long-term interests that, in substance, form part of the net investment (para. 38); it applies IFRS 9 to those interests before applying paras. 38 and 40 to 43, without taking into account adjustments to their carrying amount arising from IAS 28. Paragraph added in October 2017, applicable since 1 January 2019 (para. 45G).
• IAS 28 §22The entity discontinues the use of the equity method from the date when its investment ceases to be an associate or a joint venture: (a) if it becomes a subsidiary, the entity applies IFRS 3 and IFRS 10; (b) if the retained interest is a financial asset, the entity measures it at fair value, which is its fair value on initial recognition under IFRS 9, and recognises in profit or loss the difference between the fair value of the retained interest plus the proceeds from disposing of a part interest and the carrying amount of the investment at the date the equity method was discontinued; (c) amounts previously recognised in other comprehensive income in relation to that investment are accounted for as if the investee had directly disposed of the related assets or liabilities (reclassification to profit or loss where applicable, para. 23).

Original summaries of the paragraphs (reference register), never a quotation of the standard.

1 question

• After a loss of significant influence, the retained interest that is a financial asset remains measured under the equity method at its previous carrying amount.L4