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WorkpaperIAS 28 — Investments in Associates and Joint VenturesL3 · L4

Losses, impairment and discontinuing the equity method: cap on losses, long-term interests, test of the net investment, loss of influence, partial disposal and associate becoming a subsidiary

7 missions10 sections to document80 min

Prepared by: AI-assisted draft
Reviewed by: Not reviewed — human review required
Status: Published

Objective of the workpaper

List the share of losses, the carrying amount of the investment and the long-term interests that form part of the net investment, cap the losses recognised and track the unrecognised losses; test the net investment as a single asset when there is objective evidence; deal with the partial disposal (proportionate reclassification of other comprehensive income) and the loss of influence. Values in use, fair values and consideration are case data; the 2024 and 2026 proposals are not applied.

10 sections · 49 blocks · 12 calculations · 6 entries

IAS 28 §38
IAS 28 §39
IAS 28 §40
IAS 28 §41A
IAS 28 §42
IAS 28 §41C
IAS 28 §22
IAS 28 §25

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File and entity

Losses beyond the interest, long-term interests, possible liability, impairment indicators and test of the net investment as a single asset

Case tasks documented here

Rovane: is the loan of 250,000 part of the net investment? Compute Hexor’s interest used to cap the losses.
Rovane: compute the share of losses to recognise.
Rovane: compute the unrecognised losses.
Rovane: in which order are the losses charged to the components of the interest, and must Hexor recognise a liability for the unrecognised losses?
Sendral: is there objective evidence of impairment of the net investment? Is the test required?
Sendral: determine the recoverable amount.
Sendral: compute the impairment loss on the net investment.
Rovane: record the loss charged to the investment.
Rovane: record the loss charged to the long-term interests.
Sendral: record the impairment loss.

Facts and data

Inputs

Associate: result of the period, investor’s interest, legal or constructive obligations, payments on its behalf
TextRequired
FORTY_PERCENT_ASSOCIATE_LOSS_ABOVE_THE_INTEREST_NO_OBLIGATION_NO_PAYMENT_ON_ITS_BEHALF
Carrying amount of the investment under the equity method
Number
600,000
Long-term interests forming part of the net investment (excluding trade receivables)
Number
250,000
Investor’s share of the losses of the period
Number
1,000,000
Loss charged to the investment (first)
Number
600,000
Excess loss charged to the long-term interests (reverse order of seniority)
Number
250,000
Value in use of the net investment
Number
Fair value of the investment less costs of disposal
Number
Entire carrying amount of the investment tested, goodwill included
Number
Accumulated other comprehensive income relating to the associate
Number
Proportion of the reduction in the interest (%)
Number
Carrying amount of the investment at the date of the partial disposal
Number
Price received for the portion sold (significant influence retained)
Number
Fair value of the consideration received on the loss of influence
Number
Fair value of the retained interest on the loss of influence
Number
Carrying amount of the investment at the date of loss of influence
Number
Nature of the long-term interests: settlement neither planned nor likely in the foreseeable future, instruments subject to IFRS 9
Text
LOAN_NEITHER_PLANNED_NOR_LIKELY_TO_BE_REPAID_NOT_A_TRADE_RECEIVABLE
Objective evidence of impairment: financial difficulty of the associate, adverse market, legal or technological changes
Text
Facts on influence after the disposal: percentage, board, policy decisions, nature of the retained interest
Text

Supporting documents

Evidence

Documents obtained and referenced (associate’s statements, loan agreements, impairment tests, sale agreements, valuation of the retained interest)
EvidenceRequired

Analysis of losses, impairment and discontinuance

Analysis

IAS 28 §38IAS 28 §39IAS 28 §40IAS 28 §41AIAS 28 §42IAS 28 §41CIAS 28 §22IAS 28 §25IAS 28IAS 28IAS 28IAS 28IAS 28IAS 28

Points reviewed: losses, impairment and discontinuance
ChecklistRequired
- Share of losses stopped when it equals or exceeds the investor’s interest
- Interest = carrying amount of the investment + long-term interests forming part of the net investment
- Excess losses charged to the other components in reverse order of seniority; IFRS 9 applied to long-term interests
- Additional liability only for a legal or constructive obligation or payments on the associate’s behalf; unrecognised losses tracked off the books
- Objective evidence of impairment from events after initial recognition
- Entire carrying amount tested as a single asset, goodwill not tested separately, recoverable amount = higher of value in use and fair value less costs of disposal
- Loss of influence: equity method stopped, retained interest at fair value, gain or loss in profit or loss
- Partial disposal with influence retained: proportionate reclassification of other comprehensive income
- Associate becoming a subsidiary: equity method ends, consolidation (detail not described here)
- Interest retained after loss of control: its fair value is the cost of the associate
- Proposals of 2024 (unrecognised losses, presentation) and of 2026 (impairment indicators): not applied

Calculations

IAS 28 §38IAS 28 §42IAS 28 §22IAS 28 §25

Investor’s interest (carrying amount + long-term interests forming part of the net investment)
Calculation
850,000
Carrying amount of the investment under the equity method ; Long-term interests forming part of the net investment (excluding trade receivables)
Share of losses recognised (the lower of the share of losses and the interest)
Calculation
850,000
Investor’s share of the losses of the period ; Investor’s interest (carrying amount + long-term interests forming part of the net investment)
Unrecognised losses (share of losses − losses recognised)
Calculation
150,000
Investor’s share of the losses of the period ; − Share of losses recognised (the lower of the share of losses and the interest)
Recoverable amount (the higher of value in use and fair value less costs of disposal)
Calculation
Value in use of the net investment ; Fair value of the investment less costs of disposal
Impairment loss on the net investment (entire carrying amount − recoverable amount, if positive)
Calculation
0
Entire carrying amount of the investment tested, goodwill included ; − Recoverable amount (the higher of value in use and fair value less costs of disposal)
Other comprehensive income reclassified (accumulated amount × proportion of the reduction)
Calculation
Accumulated other comprehensive income relating to the associate ; Proportion of the reduction in the interest (%)
Carrying amount disposed of (carrying amount × proportion of the reduction, case convention)
Calculation
Carrying amount of the investment at the date of the partial disposal ; Proportion of the reduction in the interest (%)
Gain on the partial disposal before reclassification (price − carrying amount disposed of)
Calculation
0
Price received for the portion sold (significant influence retained) ; − Carrying amount disposed of (carrying amount × proportion of the reduction, case convention)
Loss on the partial disposal before reclassification
Calculation
0
Price received for the portion sold (significant influence retained) ; − Carrying amount disposed of (carrying amount × proportion of the reduction, case convention)
Gain on loss of influence before reclassification of other comprehensive income (positive part)
Calculation
0
Fair value of the consideration received on the loss of influence ; Fair value of the retained interest on the loss of influence ; − Carrying amount of the investment at the date of loss of influence
Loss on loss of influence before reclassification of other comprehensive income (negative part)
Calculation
0
Fair value of the consideration received on the loss of influence ; Fair value of the retained interest on the loss of influence ; − Carrying amount of the investment at the date of loss of influence
Total gain on loss of influence, reclassified other comprehensive income included
Calculation
0
Fair value of the consideration received on the loss of influence ; Fair value of the retained interest on the loss of influence ; − Carrying amount of the investment at the date of loss of influence ; Other comprehensive income reclassified (accumulated amount × proportion of the reduction)

Illustrative entries

Entries

Entry: share of losses charged to the investment
Entry
Account Debit Credit
Share of losses of the associate 600,000
Investment in associate (reduced to zero) 600,000
Entry: excess loss charged to the long-term interests
Entry
Account Debit Credit
Share of losses of the associate 250,000
Long-term interests in the associate 250,000
Entry: impairment loss on the net investment
Entry
Debit Impairment loss on the investment ← Impairment loss on the net investment (entire carrying amount − recoverable amount, if positive) ; Credit Investment in associate (decrease) ← Impairment loss on the net investment (entire carrying amount − recoverable amount, if positive)
Entry: reclassification of other comprehensive income to profit or loss
Entry
Debit Other comprehensive income reserve of the associate (released) ← Other comprehensive income reclassified (accumulated amount × proportion of the reduction) ; Credit Gain reclassified to profit or loss ← Other comprehensive income reclassified (accumulated amount × proportion of the reduction)
Partial disposal entry (significant influence retained)
Entry
Debit Cash received ← Price received for the portion sold (significant influence retained) ; Debit Loss on the partial disposal ← Loss on the partial disposal before reclassification ; Credit Equity-accounted investment (carrying amount disposed of) ← Carrying amount disposed of (carrying amount × proportion of the reduction, case convention) ; Credit Gain on the partial disposal ← Gain on the partial disposal before reclassification (price − carrying amount disposed of)
Entry: derecognition of the investment on loss of influence
Entry
Debit Cash received ← Fair value of the consideration received on the loss of influence ; Debit Retained interest at fair value ← Fair value of the retained interest on the loss of influence ; Debit Loss on loss of influence (if the carrying amount exceeds the fair values) ← Loss on loss of influence before reclassification of other comprehensive income (negative part) ; Credit Investment in associate (derecognised) ← Carrying amount of the investment at the date of loss of influence ; Credit Gain on loss of influence ← Gain on loss of influence before reclassification of other comprehensive income (positive part)

Account	Debit	Credit
Share of losses of the associate	600,000
Investment in associate (reduced to zero)		600,000

Account	Debit	Credit
Share of losses of the associate	250,000
Long-term interests in the associate		250,000

Judgments: long-term interests, impairment indicator and loss of influence

Judgment

IAS 28 §38IAS 28 §40IAS 28 §41AIAS 28 §22

Classification of the long-term interests
JudgmentRequired
Forms part of the net investment: included in the interest used to cap losses
Forms part of the net investment: included in the interest used to cap losses / Does not form part of the net investment: IFRS 9 alone / Not applicable
Professional judgment: the classification is supported by the substance of the loan, not by its label.
Rationale: in substance, settlement neither planned nor likely, no trade receivable
Text
IN_SUBSTANCE_PART_OF_THE_NET_INVESTMENT
Objective evidence of impairment
JudgmentRequired
Not applicable
Objective evidence established: test of the net investment required / No objective evidence: no test / Not applicable
Rationale: events after initial recognition and effect on estimated future cash flows
Text
THE_ISSUE_IS_THE_CAP_ON_LOSSES
Loss of significant influence
JudgmentRequired
Not applicable
Influence lost: equity method stopped / Influence retained: equity method continues / Not applicable
Professional judgment: loss of influence is supported by the facts; the 20 % presumption is only a rebuttable starting point.
Rationale: remaining percentage, board representation, participation in policy decisions
Text

Effect on the financial statements

FS impact

Effect derived from the entries
Table

Items to document for the losses and impairment

Disclosure

IAS 28 §38IAS 28 §39IAS 28 §40

Information to prepare for the note
Checklist
- Unrecognised losses of the period and cumulative, and absence of an obligation justifying a liability
- Objective evidence retained, recoverable amount and impairment loss recognised

Conclusion

Losses recognised and unrecognised, any impairment loss and treatment of the exit from the equity method, recoverable amounts and fair values being case data
ConclusionRequired

Normative references

References

Normative references cited in this workpaper
References

Checks and financial statement impact

Associate and losses describedPass
Loss entry balancedPass
Long-term interest entry balancedPass
Impairment entry balancedNot evaluated
Reclassification entry balancedNot evaluated
Loss of influence entry balancedNot evaluated
Losses recognised = loss charged to the investment + loss charged to the long-term interestsPass
Partial disposal entry balancedNot evaluated

Assets: -850,000
Liabilities: 0
Profit or loss: -850,000
OCI: 0
Equity: -850,000

File and entity

Losses beyond the interest, long-term interests, possible liability, impairment indicators and test of the net investment as a single asset

Case tasks documented here

Rovane: is the loan of 250,000 part of the net investment? Compute Hexor’s interest used to cap the losses.
Rovane: compute the share of losses to recognise.
Rovane: compute the unrecognised losses.
Rovane: in which order are the losses charged to the components of the interest, and must Hexor recognise a liability for the unrecognised losses?
Sendral: is there objective evidence of impairment of the net investment? Is the test required?
Sendral: determine the recoverable amount.
Sendral: compute the impairment loss on the net investment.
Rovane: record the loss charged to the investment.
Rovane: record the loss charged to the long-term interests.
Sendral: record the impairment loss.

Facts and data

Inputs

Associate: result of the period, investor’s interest, legal or constructive obligations, payments on its behalf
TextRequired
THIRTY_FIVE_PERCENT_ASSOCIATE_WITH_OBJECTIVE_EVIDENCE_OF_IMPAIRMENT
Carrying amount of the investment under the equity method
Number
Long-term interests forming part of the net investment (excluding trade receivables)
Number
Investor’s share of the losses of the period
Number
Loss charged to the investment (first)
Number
Excess loss charged to the long-term interests (reverse order of seniority)
Number
Value in use of the net investment
Number
1,000,000
Fair value of the investment less costs of disposal
Number
950,000
Entire carrying amount of the investment tested, goodwill included
Number
1,200,000
Accumulated other comprehensive income relating to the associate
Number
Proportion of the reduction in the interest (%)
Number
Carrying amount of the investment at the date of the partial disposal
Number
Price received for the portion sold (significant influence retained)
Number
Fair value of the consideration received on the loss of influence
Number
Fair value of the retained interest on the loss of influence
Number
Carrying amount of the investment at the date of loss of influence
Number
Nature of the long-term interests: settlement neither planned nor likely in the foreseeable future, instruments subject to IFRS 9
Text
Objective evidence of impairment: financial difficulty of the associate, adverse market, legal or technological changes
Text
LOSS_OF_MAIN_CUSTOMER_ADVERSE_REGULATION_AND_FINANCIAL_DIFFICULTY
Facts on influence after the disposal: percentage, board, policy decisions, nature of the retained interest
Text

Supporting documents

Evidence

Documents obtained and referenced (associate’s statements, loan agreements, impairment tests, sale agreements, valuation of the retained interest)
EvidenceRequired

Analysis of losses, impairment and discontinuance

Analysis

IAS 28 §38IAS 28 §39IAS 28 §40IAS 28 §41AIAS 28 §42IAS 28 §41CIAS 28 §22IAS 28 §25IAS 28IAS 28IAS 28IAS 28IAS 28IAS 28

Points reviewed: losses, impairment and discontinuance
ChecklistRequired
- Share of losses stopped when it equals or exceeds the investor’s interest
- Interest = carrying amount of the investment + long-term interests forming part of the net investment
- Excess losses charged to the other components in reverse order of seniority; IFRS 9 applied to long-term interests
- Additional liability only for a legal or constructive obligation or payments on the associate’s behalf; unrecognised losses tracked off the books
- Objective evidence of impairment from events after initial recognition
- Entire carrying amount tested as a single asset, goodwill not tested separately, recoverable amount = higher of value in use and fair value less costs of disposal
- Loss of influence: equity method stopped, retained interest at fair value, gain or loss in profit or loss
- Partial disposal with influence retained: proportionate reclassification of other comprehensive income
- Associate becoming a subsidiary: equity method ends, consolidation (detail not described here)
- Interest retained after loss of control: its fair value is the cost of the associate
- Proposals of 2024 (unrecognised losses, presentation) and of 2026 (impairment indicators): not applied

Calculations

IAS 28 §38IAS 28 §42IAS 28 §22IAS 28 §25

Investor’s interest (carrying amount + long-term interests forming part of the net investment)
Calculation
0
Carrying amount of the investment under the equity method ; Long-term interests forming part of the net investment (excluding trade receivables)
Share of losses recognised (the lower of the share of losses and the interest)
Calculation
Investor’s share of the losses of the period ; Investor’s interest (carrying amount + long-term interests forming part of the net investment)
Unrecognised losses (share of losses − losses recognised)
Calculation
0
Investor’s share of the losses of the period ; − Share of losses recognised (the lower of the share of losses and the interest)
Recoverable amount (the higher of value in use and fair value less costs of disposal)
Calculation
1,000,000
Value in use of the net investment ; Fair value of the investment less costs of disposal
Impairment loss on the net investment (entire carrying amount − recoverable amount, if positive)
Calculation
200,000
Entire carrying amount of the investment tested, goodwill included ; − Recoverable amount (the higher of value in use and fair value less costs of disposal)
Other comprehensive income reclassified (accumulated amount × proportion of the reduction)
Calculation
Accumulated other comprehensive income relating to the associate ; Proportion of the reduction in the interest (%)
Carrying amount disposed of (carrying amount × proportion of the reduction, case convention)
Calculation
Carrying amount of the investment at the date of the partial disposal ; Proportion of the reduction in the interest (%)
Gain on the partial disposal before reclassification (price − carrying amount disposed of)
Calculation
0
Price received for the portion sold (significant influence retained) ; − Carrying amount disposed of (carrying amount × proportion of the reduction, case convention)
Loss on the partial disposal before reclassification
Calculation
0
Price received for the portion sold (significant influence retained) ; − Carrying amount disposed of (carrying amount × proportion of the reduction, case convention)
Gain on loss of influence before reclassification of other comprehensive income (positive part)
Calculation
0
Fair value of the consideration received on the loss of influence ; Fair value of the retained interest on the loss of influence ; − Carrying amount of the investment at the date of loss of influence
Loss on loss of influence before reclassification of other comprehensive income (negative part)
Calculation
0
Fair value of the consideration received on the loss of influence ; Fair value of the retained interest on the loss of influence ; − Carrying amount of the investment at the date of loss of influence
Total gain on loss of influence, reclassified other comprehensive income included
Calculation
0
Fair value of the consideration received on the loss of influence ; Fair value of the retained interest on the loss of influence ; − Carrying amount of the investment at the date of loss of influence ; Other comprehensive income reclassified (accumulated amount × proportion of the reduction)

Illustrative entries

Entries

Entry: share of losses charged to the investment
Entry
Debit Share of losses of the associate ← Loss charged to the investment (first) ; Credit Investment in associate (reduced to zero) ← Loss charged to the investment (first)
Entry: excess loss charged to the long-term interests
Entry
Debit Share of losses of the associate ← Excess loss charged to the long-term interests (reverse order of seniority) ; Credit Long-term interests in the associate ← Excess loss charged to the long-term interests (reverse order of seniority)
Entry: impairment loss on the net investment
Entry
Account Debit Credit
Impairment loss on the investment 200,000
Investment in associate (decrease) 200,000
Entry: reclassification of other comprehensive income to profit or loss
Entry
Debit Other comprehensive income reserve of the associate (released) ← Other comprehensive income reclassified (accumulated amount × proportion of the reduction) ; Credit Gain reclassified to profit or loss ← Other comprehensive income reclassified (accumulated amount × proportion of the reduction)
Partial disposal entry (significant influence retained)
Entry
Debit Cash received ← Price received for the portion sold (significant influence retained) ; Debit Loss on the partial disposal ← Loss on the partial disposal before reclassification ; Credit Equity-accounted investment (carrying amount disposed of) ← Carrying amount disposed of (carrying amount × proportion of the reduction, case convention) ; Credit Gain on the partial disposal ← Gain on the partial disposal before reclassification (price − carrying amount disposed of)
Entry: derecognition of the investment on loss of influence
Entry
Debit Cash received ← Fair value of the consideration received on the loss of influence ; Debit Retained interest at fair value ← Fair value of the retained interest on the loss of influence ; Debit Loss on loss of influence (if the carrying amount exceeds the fair values) ← Loss on loss of influence before reclassification of other comprehensive income (negative part) ; Credit Investment in associate (derecognised) ← Carrying amount of the investment at the date of loss of influence ; Credit Gain on loss of influence ← Gain on loss of influence before reclassification of other comprehensive income (positive part)

Account	Debit	Credit
Impairment loss on the investment	200,000
Investment in associate (decrease)		200,000

Judgments: long-term interests, impairment indicator and loss of influence

Judgment

IAS 28 §38IAS 28 §40IAS 28 §41AIAS 28 §22

Classification of the long-term interests
JudgmentRequired
Not applicable
Forms part of the net investment: included in the interest used to cap losses / Does not form part of the net investment: IFRS 9 alone / Not applicable
Professional judgment: the classification is supported by the substance of the loan, not by its label.
Rationale: in substance, settlement neither planned nor likely, no trade receivable
Text
Objective evidence of impairment
JudgmentRequired
Objective evidence established: test of the net investment required
Objective evidence established: test of the net investment required / No objective evidence: no test / Not applicable
Rationale: events after initial recognition and effect on estimated future cash flows
Text
EVENTS_AFTER_INITIAL_RECOGNITION_AFFECT_FUTURE_CASH_FLOWS
Loss of significant influence
JudgmentRequired
Not applicable
Influence lost: equity method stopped / Influence retained: equity method continues / Not applicable
Professional judgment: loss of influence is supported by the facts; the 20 % presumption is only a rebuttable starting point.
Rationale: remaining percentage, board representation, participation in policy decisions
Text

Effect on the financial statements

FS impact

Effect derived from the entries
Table

Items to document for the losses and impairment

Disclosure

IAS 28 §38IAS 28 §39IAS 28 §40

Information to prepare for the note
Checklist
- Unrecognised losses of the period and cumulative, and absence of an obligation justifying a liability
- Objective evidence retained, recoverable amount and impairment loss recognised

Conclusion

Losses recognised and unrecognised, any impairment loss and treatment of the exit from the equity method, recoverable amounts and fair values being case data
ConclusionRequired

Normative references

References

Normative references cited in this workpaper
References

Checks and financial statement impact

Associate and losses describedPass
Loss entry balancedNot evaluated
Long-term interest entry balancedNot evaluated
Impairment entry balancedPass
Reclassification entry balancedNot evaluated
Loss of influence entry balancedNot evaluated
Losses recognised = loss charged to the investment + loss charged to the long-term interestsNot evaluated
Partial disposal entry balancedNot evaluated

Assets: -200,000
Liabilities: 0
Profit or loss: -200,000
OCI: 0
Equity: -200,000

File and entity

Loss of control with a retained associate (IFRS 10 + IAS 28 interaction): cost at fair value, equity method, partial disposal, loss of influence, associate becoming a subsidiary and proposals

Case tasks documented here

Partial disposal of 1 March 20X7: compute the other comprehensive income to reclassify to profit or loss.
Partial disposal: does significant influence remain? Compute the carrying amount disposed of and the gain on disposal.
Record the proportionate reclassification of other comprehensive income.
1 September 20X7: does Valtenis lose significant influence? Determine the carrying amount at that date and the remaining other comprehensive income.
Loss of influence: compute the gain before and after reclassification of other comprehensive income.
Record the derecognition of the investment and the retained 10 % interest at fair value.
Record the reclassification of the remaining other comprehensive income.

Facts and data

Inputs

Associate: result of the period, investor’s interest, legal or constructive obligations, payments on its behalf
TextRequired
TEN_POINTS_SOLD_OUT_OF_FORTY_INFLUENCE_RETAINED
Carrying amount of the investment under the equity method
Number
Long-term interests forming part of the net investment (excluding trade receivables)
Number
Investor’s share of the losses of the period
Number
Loss charged to the investment (first)
Number
Excess loss charged to the long-term interests (reverse order of seniority)
Number
Value in use of the net investment
Number
Fair value of the investment less costs of disposal
Number
Entire carrying amount of the investment tested, goodwill included
Number
Accumulated other comprehensive income relating to the associate
Number
20,000
Proportion of the reduction in the interest (%)
Number
25 %
Carrying amount of the investment at the date of the partial disposal
Number
680,000
Price received for the portion sold (significant influence retained)
Number
190,000
Fair value of the consideration received on the loss of influence
Number
Fair value of the retained interest on the loss of influence
Number
Carrying amount of the investment at the date of loss of influence
Number
Nature of the long-term interests: settlement neither planned nor likely in the foreseeable future, instruments subject to IFRS 9
Text
Objective evidence of impairment: financial difficulty of the associate, adverse market, legal or technological changes
Text
Facts on influence after the disposal: percentage, board, policy decisions, nature of the retained interest
Text
THIRTY_PERCENT_BOARD_SEATS_AND_POLICY_PARTICIPATION_RETAINED

Supporting documents

Evidence

Documents obtained and referenced (associate’s statements, loan agreements, impairment tests, sale agreements, valuation of the retained interest)
EvidenceRequired

Analysis of losses, impairment and discontinuance

Analysis

IAS 28 §38IAS 28 §39IAS 28 §40IAS 28 §41AIAS 28 §42IAS 28 §41CIAS 28 §22IAS 28 §25IAS 28IAS 28IAS 28IAS 28IAS 28IAS 28

Points reviewed: losses, impairment and discontinuance
ChecklistRequired
- Share of losses stopped when it equals or exceeds the investor’s interest
- Interest = carrying amount of the investment + long-term interests forming part of the net investment
- Excess losses charged to the other components in reverse order of seniority; IFRS 9 applied to long-term interests
- Additional liability only for a legal or constructive obligation or payments on the associate’s behalf; unrecognised losses tracked off the books
- Objective evidence of impairment from events after initial recognition
- Entire carrying amount tested as a single asset, goodwill not tested separately, recoverable amount = higher of value in use and fair value less costs of disposal
- Loss of influence: equity method stopped, retained interest at fair value, gain or loss in profit or loss
- Partial disposal with influence retained: proportionate reclassification of other comprehensive income
- Associate becoming a subsidiary: equity method ends, consolidation (detail not described here)
- Interest retained after loss of control: its fair value is the cost of the associate
- Proposals of 2024 (unrecognised losses, presentation) and of 2026 (impairment indicators): not applied

Calculations

IAS 28 §38IAS 28 §42IAS 28 §22IAS 28 §25

Investor’s interest (carrying amount + long-term interests forming part of the net investment)
Calculation
0
Carrying amount of the investment under the equity method ; Long-term interests forming part of the net investment (excluding trade receivables)
Share of losses recognised (the lower of the share of losses and the interest)
Calculation
Investor’s share of the losses of the period ; Investor’s interest (carrying amount + long-term interests forming part of the net investment)
Unrecognised losses (share of losses − losses recognised)
Calculation
0
Investor’s share of the losses of the period ; − Share of losses recognised (the lower of the share of losses and the interest)
Recoverable amount (the higher of value in use and fair value less costs of disposal)
Calculation
Value in use of the net investment ; Fair value of the investment less costs of disposal
Impairment loss on the net investment (entire carrying amount − recoverable amount, if positive)
Calculation
0
Entire carrying amount of the investment tested, goodwill included ; − Recoverable amount (the higher of value in use and fair value less costs of disposal)
Other comprehensive income reclassified (accumulated amount × proportion of the reduction)
Calculation
5,000
Accumulated other comprehensive income relating to the associate ; Proportion of the reduction in the interest (%)
Carrying amount disposed of (carrying amount × proportion of the reduction, case convention)
Calculation
170,000
Carrying amount of the investment at the date of the partial disposal ; Proportion of the reduction in the interest (%)
Gain on the partial disposal before reclassification (price − carrying amount disposed of)
Calculation
20,000
Price received for the portion sold (significant influence retained) ; − Carrying amount disposed of (carrying amount × proportion of the reduction, case convention)
Loss on the partial disposal before reclassification
Calculation
0
Price received for the portion sold (significant influence retained) ; − Carrying amount disposed of (carrying amount × proportion of the reduction, case convention)
Gain on loss of influence before reclassification of other comprehensive income (positive part)
Calculation
0
Fair value of the consideration received on the loss of influence ; Fair value of the retained interest on the loss of influence ; − Carrying amount of the investment at the date of loss of influence
Loss on loss of influence before reclassification of other comprehensive income (negative part)
Calculation
0
Fair value of the consideration received on the loss of influence ; Fair value of the retained interest on the loss of influence ; − Carrying amount of the investment at the date of loss of influence
Total gain on loss of influence, reclassified other comprehensive income included
Calculation
5,000
Fair value of the consideration received on the loss of influence ; Fair value of the retained interest on the loss of influence ; − Carrying amount of the investment at the date of loss of influence ; Other comprehensive income reclassified (accumulated amount × proportion of the reduction)

Illustrative entries

Entries

Entry: share of losses charged to the investment
Entry
Debit Share of losses of the associate ← Loss charged to the investment (first) ; Credit Investment in associate (reduced to zero) ← Loss charged to the investment (first)
Entry: excess loss charged to the long-term interests
Entry
Debit Share of losses of the associate ← Excess loss charged to the long-term interests (reverse order of seniority) ; Credit Long-term interests in the associate ← Excess loss charged to the long-term interests (reverse order of seniority)
Entry: impairment loss on the net investment
Entry
Debit Impairment loss on the investment ← Impairment loss on the net investment (entire carrying amount − recoverable amount, if positive) ; Credit Investment in associate (decrease) ← Impairment loss on the net investment (entire carrying amount − recoverable amount, if positive)
Entry: reclassification of other comprehensive income to profit or loss
Entry
Account Debit Credit
Other comprehensive income reserve of the associate (released) 5,000
Gain reclassified to profit or loss 5,000
Partial disposal entry (significant influence retained)
Entry
Account Debit Credit
Cash received 190,000
Equity-accounted investment (carrying amount disposed of) 170,000
Gain on the partial disposal 20,000
Entry: derecognition of the investment on loss of influence
Entry
Debit Cash received ← Fair value of the consideration received on the loss of influence ; Debit Retained interest at fair value ← Fair value of the retained interest on the loss of influence ; Debit Loss on loss of influence (if the carrying amount exceeds the fair values) ← Loss on loss of influence before reclassification of other comprehensive income (negative part) ; Credit Investment in associate (derecognised) ← Carrying amount of the investment at the date of loss of influence ; Credit Gain on loss of influence ← Gain on loss of influence before reclassification of other comprehensive income (positive part)

Account	Debit	Credit
Other comprehensive income reserve of the associate (released)	5,000
Gain reclassified to profit or loss		5,000

Account	Debit	Credit
Cash received	190,000
Equity-accounted investment (carrying amount disposed of)		170,000
Gain on the partial disposal		20,000

Judgments: long-term interests, impairment indicator and loss of influence

Judgment

IAS 28 §38IAS 28 §40IAS 28 §41AIAS 28 §22

Classification of the long-term interests
JudgmentRequired
Not applicable
Forms part of the net investment: included in the interest used to cap losses / Does not form part of the net investment: IFRS 9 alone / Not applicable
Professional judgment: the classification is supported by the substance of the loan, not by its label.
Rationale: in substance, settlement neither planned nor likely, no trade receivable
Text
Objective evidence of impairment
JudgmentRequired
Not applicable
Objective evidence established: test of the net investment required / No objective evidence: no test / Not applicable
Rationale: events after initial recognition and effect on estimated future cash flows
Text
Loss of significant influence
JudgmentRequired
Influence retained: equity method continues
Influence lost: equity method stopped / Influence retained: equity method continues / Not applicable
Professional judgment: loss of influence is supported by the facts; the 20 % presumption is only a rebuttable starting point.
Rationale: remaining percentage, board representation, participation in policy decisions
Text
THIRTY_PERCENT_AND_BOARD_PRESENCE_REMAIN

Effect on the financial statements

FS impact

Effect derived from the entries
Table

Items to document for the losses and impairment

Disclosure

IAS 28 §38IAS 28 §39IAS 28 §40

Information to prepare for the note
Checklist
- Unrecognised losses of the period and cumulative, and absence of an obligation justifying a liability
- Objective evidence retained, recoverable amount and impairment loss recognised

Conclusion

Losses recognised and unrecognised, any impairment loss and treatment of the exit from the equity method, recoverable amounts and fair values being case data
ConclusionRequired

Normative references

References

Normative references cited in this workpaper
References

Checks and financial statement impact

Associate and losses describedPass
Loss entry balancedNot evaluated
Long-term interest entry balancedNot evaluated
Impairment entry balancedNot evaluated
Reclassification entry balancedPass
Loss of influence entry balancedNot evaluated
Losses recognised = loss charged to the investment + loss charged to the long-term interestsNot evaluated
Partial disposal entry balancedPass

Assets: 20,000
Liabilities: 0
Profit or loss: 25,000
OCI: -5,000
Equity: 20,000

File and entity

Loss of control with a retained associate (IFRS 10 + IAS 28 interaction): cost at fair value, equity method, partial disposal, loss of influence, associate becoming a subsidiary and proposals

Case tasks documented here

Partial disposal of 1 March 20X7: compute the other comprehensive income to reclassify to profit or loss.
Partial disposal: does significant influence remain? Compute the carrying amount disposed of and the gain on disposal.
Record the proportionate reclassification of other comprehensive income.
1 September 20X7: does Valtenis lose significant influence? Determine the carrying amount at that date and the remaining other comprehensive income.
Loss of influence: compute the gain before and after reclassification of other comprehensive income.
Record the derecognition of the investment and the retained 10 % interest at fair value.
Record the reclassification of the remaining other comprehensive income.

Facts and data

Inputs

Associate: result of the period, investor’s interest, legal or constructive obligations, payments on its behalf
TextRequired
TWENTY_POINTS_SOLD_OUT_OF_THIRTY_BOARD_SEATS_GIVEN_UP
Carrying amount of the investment under the equity method
Number
Long-term interests forming part of the net investment (excluding trade receivables)
Number
Investor’s share of the losses of the period
Number
Loss charged to the investment (first)
Number
Excess loss charged to the long-term interests (reverse order of seniority)
Number
Value in use of the net investment
Number
Fair value of the investment less costs of disposal
Number
Entire carrying amount of the investment tested, goodwill included
Number
Accumulated other comprehensive income relating to the associate
Number
15,000
Proportion of the reduction in the interest (%)
Number
100 %
Carrying amount of the investment at the date of the partial disposal
Number
Price received for the portion sold (significant influence retained)
Number
Fair value of the consideration received on the loss of influence
Number
380,000
Fair value of the retained interest on the loss of influence
Number
190,000
Carrying amount of the investment at the date of loss of influence
Number
540,000
Nature of the long-term interests: settlement neither planned nor likely in the foreseeable future, instruments subject to IFRS 9
Text
Objective evidence of impairment: financial difficulty of the associate, adverse market, legal or technological changes
Text
Facts on influence after the disposal: percentage, board, policy decisions, nature of the retained interest
Text
TEN_PERCENT_RETAINED_NO_BOARD_SEAT_NO_POLICY_PARTICIPATION

Supporting documents

Evidence

Documents obtained and referenced (associate’s statements, loan agreements, impairment tests, sale agreements, valuation of the retained interest)
EvidenceRequired

Analysis of losses, impairment and discontinuance

Analysis

IAS 28 §38IAS 28 §39IAS 28 §40IAS 28 §41AIAS 28 §42IAS 28 §41CIAS 28 §22IAS 28 §25IAS 28IAS 28IAS 28IAS 28IAS 28IAS 28

Points reviewed: losses, impairment and discontinuance
ChecklistRequired
- Share of losses stopped when it equals or exceeds the investor’s interest
- Interest = carrying amount of the investment + long-term interests forming part of the net investment
- Excess losses charged to the other components in reverse order of seniority; IFRS 9 applied to long-term interests
- Additional liability only for a legal or constructive obligation or payments on the associate’s behalf; unrecognised losses tracked off the books
- Objective evidence of impairment from events after initial recognition
- Entire carrying amount tested as a single asset, goodwill not tested separately, recoverable amount = higher of value in use and fair value less costs of disposal
- Loss of influence: equity method stopped, retained interest at fair value, gain or loss in profit or loss
- Partial disposal with influence retained: proportionate reclassification of other comprehensive income
- Associate becoming a subsidiary: equity method ends, consolidation (detail not described here)
- Interest retained after loss of control: its fair value is the cost of the associate
- Proposals of 2024 (unrecognised losses, presentation) and of 2026 (impairment indicators): not applied

Calculations

IAS 28 §38IAS 28 §42IAS 28 §22IAS 28 §25

Investor’s interest (carrying amount + long-term interests forming part of the net investment)
Calculation
0
Carrying amount of the investment under the equity method ; Long-term interests forming part of the net investment (excluding trade receivables)
Share of losses recognised (the lower of the share of losses and the interest)
Calculation
Investor’s share of the losses of the period ; Investor’s interest (carrying amount + long-term interests forming part of the net investment)
Unrecognised losses (share of losses − losses recognised)
Calculation
0
Investor’s share of the losses of the period ; − Share of losses recognised (the lower of the share of losses and the interest)
Recoverable amount (the higher of value in use and fair value less costs of disposal)
Calculation
Value in use of the net investment ; Fair value of the investment less costs of disposal
Impairment loss on the net investment (entire carrying amount − recoverable amount, if positive)
Calculation
0
Entire carrying amount of the investment tested, goodwill included ; − Recoverable amount (the higher of value in use and fair value less costs of disposal)
Other comprehensive income reclassified (accumulated amount × proportion of the reduction)
Calculation
15,000
Accumulated other comprehensive income relating to the associate ; Proportion of the reduction in the interest (%)
Carrying amount disposed of (carrying amount × proportion of the reduction, case convention)
Calculation
Carrying amount of the investment at the date of the partial disposal ; Proportion of the reduction in the interest (%)
Gain on the partial disposal before reclassification (price − carrying amount disposed of)
Calculation
0
Price received for the portion sold (significant influence retained) ; − Carrying amount disposed of (carrying amount × proportion of the reduction, case convention)
Loss on the partial disposal before reclassification
Calculation
0
Price received for the portion sold (significant influence retained) ; − Carrying amount disposed of (carrying amount × proportion of the reduction, case convention)
Gain on loss of influence before reclassification of other comprehensive income (positive part)
Calculation
30,000
Fair value of the consideration received on the loss of influence ; Fair value of the retained interest on the loss of influence ; − Carrying amount of the investment at the date of loss of influence
Loss on loss of influence before reclassification of other comprehensive income (negative part)
Calculation
0
Fair value of the consideration received on the loss of influence ; Fair value of the retained interest on the loss of influence ; − Carrying amount of the investment at the date of loss of influence
Total gain on loss of influence, reclassified other comprehensive income included
Calculation
45,000
Fair value of the consideration received on the loss of influence ; Fair value of the retained interest on the loss of influence ; − Carrying amount of the investment at the date of loss of influence ; Other comprehensive income reclassified (accumulated amount × proportion of the reduction)

Illustrative entries

Entries

Entry: share of losses charged to the investment
Entry
Debit Share of losses of the associate ← Loss charged to the investment (first) ; Credit Investment in associate (reduced to zero) ← Loss charged to the investment (first)
Entry: excess loss charged to the long-term interests
Entry
Debit Share of losses of the associate ← Excess loss charged to the long-term interests (reverse order of seniority) ; Credit Long-term interests in the associate ← Excess loss charged to the long-term interests (reverse order of seniority)
Entry: impairment loss on the net investment
Entry
Debit Impairment loss on the investment ← Impairment loss on the net investment (entire carrying amount − recoverable amount, if positive) ; Credit Investment in associate (decrease) ← Impairment loss on the net investment (entire carrying amount − recoverable amount, if positive)
Entry: reclassification of other comprehensive income to profit or loss
Entry
Account Debit Credit
Other comprehensive income reserve of the associate (released) 15,000
Gain reclassified to profit or loss 15,000
Partial disposal entry (significant influence retained)
Entry
Debit Cash received ← Price received for the portion sold (significant influence retained) ; Debit Loss on the partial disposal ← Loss on the partial disposal before reclassification ; Credit Equity-accounted investment (carrying amount disposed of) ← Carrying amount disposed of (carrying amount × proportion of the reduction, case convention) ; Credit Gain on the partial disposal ← Gain on the partial disposal before reclassification (price − carrying amount disposed of)
Entry: derecognition of the investment on loss of influence
Entry
Account Debit Credit
Cash received 380,000
Retained interest at fair value 190,000
Investment in associate (derecognised) 540,000
Gain on loss of influence 30,000

Account	Debit	Credit
Other comprehensive income reserve of the associate (released)	15,000
Gain reclassified to profit or loss		15,000

Account	Debit	Credit
Cash received	380,000
Retained interest at fair value	190,000
Investment in associate (derecognised)		540,000
Gain on loss of influence		30,000

Judgments: long-term interests, impairment indicator and loss of influence

Judgment

IAS 28 §38IAS 28 §40IAS 28 §41AIAS 28 §22

Classification of the long-term interests
JudgmentRequired
Not applicable
Forms part of the net investment: included in the interest used to cap losses / Does not form part of the net investment: IFRS 9 alone / Not applicable
Professional judgment: the classification is supported by the substance of the loan, not by its label.
Rationale: in substance, settlement neither planned nor likely, no trade receivable
Text
Objective evidence of impairment
JudgmentRequired
Not applicable
Objective evidence established: test of the net investment required / No objective evidence: no test / Not applicable
Rationale: events after initial recognition and effect on estimated future cash flows
Text
Loss of significant influence
JudgmentRequired
Influence lost: equity method stopped
Influence lost: equity method stopped / Influence retained: equity method continues / Not applicable
Professional judgment: loss of influence is supported by the facts; the 20 % presumption is only a rebuttable starting point.
Rationale: remaining percentage, board representation, participation in policy decisions
Text
TEN_PERCENT_NO_BOARD_PRESENCE_AND_NO_POLICY_PARTICIPATION

Effect on the financial statements

FS impact

Effect derived from the entries
Table

Items to document for the losses and impairment

Disclosure

IAS 28 §38IAS 28 §39IAS 28 §40

Information to prepare for the note
Checklist
- Unrecognised losses of the period and cumulative, and absence of an obligation justifying a liability
- Objective evidence retained, recoverable amount and impairment loss recognised

Conclusion

Losses recognised and unrecognised, any impairment loss and treatment of the exit from the equity method, recoverable amounts and fair values being case data
ConclusionRequired

Normative references

References

Normative references cited in this workpaper
References

Checks and financial statement impact

Associate and losses describedPass
Loss entry balancedNot evaluated
Long-term interest entry balancedNot evaluated
Impairment entry balancedNot evaluated
Reclassification entry balancedPass
Loss of influence entry balancedPass
Losses recognised = loss charged to the investment + loss charged to the long-term interestsNot evaluated
Partial disposal entry balancedNot evaluated

Assets: 30,000
Liabilities: 0
Profit or loss: 45,000
OCI: -15,000
Equity: 30,000

File and entity

Group file: significant influence, equity method, eliminations, losses and impairment, cessation of influence (IAS 28)

Case tasks documented here

Rimel: are the long-term interests part of the net investment? Compute Halvern’s interest used to cap the losses.
Rimel: compute the share of losses to recognise.
Rimel: compute the unrecognised losses.
Rimel: in which order are the losses charged to the components of the interest, and must Halvern recognise a liability for the unrecognised losses?
Tarvik: determine the recoverable amount of the net investment.
Tarvik: compute the impairment loss on the net investment.
Orvel: does Halvern lose significant influence? Determine the other comprehensive income to reclassify.
Orvel: compute the gain on loss of influence before and after reclassification.
Rimel: record the loss charged to the investment.
Rimel: record the loss charged to the long-term interests.
Tarvik: record the impairment loss.
Orvel: record the derecognition of the investment and the retained 10 % interest at fair value.
Orvel: record the reclassification of other comprehensive income.

Facts and data

Inputs

Associate: result of the period, investor’s interest, legal or constructive obligations, payments on its behalf
TextRequired
FORTY_PERCENT_ASSOCIATE_LOSS_ABOVE_THE_INTEREST_NO_OBLIGATION_NO_PAYMENT_ON_ITS_BEHALF
Carrying amount of the investment under the equity method
Number
500,000
Long-term interests forming part of the net investment (excluding trade receivables)
Number
200,000
Investor’s share of the losses of the period
Number
900,000
Loss charged to the investment (first)
Number
500,000
Excess loss charged to the long-term interests (reverse order of seniority)
Number
200,000
Value in use of the net investment
Number
Fair value of the investment less costs of disposal
Number
Entire carrying amount of the investment tested, goodwill included
Number
Accumulated other comprehensive income relating to the associate
Number
Proportion of the reduction in the interest (%)
Number
Carrying amount of the investment at the date of the partial disposal
Number
Price received for the portion sold (significant influence retained)
Number
Fair value of the consideration received on the loss of influence
Number
Fair value of the retained interest on the loss of influence
Number
Carrying amount of the investment at the date of loss of influence
Number
Nature of the long-term interests: settlement neither planned nor likely in the foreseeable future, instruments subject to IFRS 9
Text
LOAN_NEITHER_PLANNED_NOR_LIKELY_TO_BE_REPAID_NOT_A_TRADE_RECEIVABLE
Objective evidence of impairment: financial difficulty of the associate, adverse market, legal or technological changes
Text
Facts on influence after the disposal: percentage, board, policy decisions, nature of the retained interest
Text

Supporting documents

Evidence

Documents obtained and referenced (associate’s statements, loan agreements, impairment tests, sale agreements, valuation of the retained interest)
EvidenceRequired

Analysis of losses, impairment and discontinuance

Analysis

IAS 28 §38IAS 28 §39IAS 28 §40IAS 28 §41AIAS 28 §42IAS 28 §41CIAS 28 §22IAS 28 §25IAS 28IAS 28IAS 28IAS 28IAS 28IAS 28

Points reviewed: losses, impairment and discontinuance
ChecklistRequired
- Share of losses stopped when it equals or exceeds the investor’s interest
- Interest = carrying amount of the investment + long-term interests forming part of the net investment
- Excess losses charged to the other components in reverse order of seniority; IFRS 9 applied to long-term interests
- Additional liability only for a legal or constructive obligation or payments on the associate’s behalf; unrecognised losses tracked off the books
- Objective evidence of impairment from events after initial recognition
- Entire carrying amount tested as a single asset, goodwill not tested separately, recoverable amount = higher of value in use and fair value less costs of disposal
- Loss of influence: equity method stopped, retained interest at fair value, gain or loss in profit or loss
- Partial disposal with influence retained: proportionate reclassification of other comprehensive income
- Associate becoming a subsidiary: equity method ends, consolidation (detail not described here)
- Interest retained after loss of control: its fair value is the cost of the associate
- Proposals of 2024 (unrecognised losses, presentation) and of 2026 (impairment indicators): not applied

Calculations

IAS 28 §38IAS 28 §42IAS 28 §22IAS 28 §25

Investor’s interest (carrying amount + long-term interests forming part of the net investment)
Calculation
700,000
Carrying amount of the investment under the equity method ; Long-term interests forming part of the net investment (excluding trade receivables)
Share of losses recognised (the lower of the share of losses and the interest)
Calculation
700,000
Investor’s share of the losses of the period ; Investor’s interest (carrying amount + long-term interests forming part of the net investment)
Unrecognised losses (share of losses − losses recognised)
Calculation
200,000
Investor’s share of the losses of the period ; − Share of losses recognised (the lower of the share of losses and the interest)
Recoverable amount (the higher of value in use and fair value less costs of disposal)
Calculation
Value in use of the net investment ; Fair value of the investment less costs of disposal
Impairment loss on the net investment (entire carrying amount − recoverable amount, if positive)
Calculation
0
Entire carrying amount of the investment tested, goodwill included ; − Recoverable amount (the higher of value in use and fair value less costs of disposal)
Other comprehensive income reclassified (accumulated amount × proportion of the reduction)
Calculation
Accumulated other comprehensive income relating to the associate ; Proportion of the reduction in the interest (%)
Carrying amount disposed of (carrying amount × proportion of the reduction, case convention)
Calculation
Carrying amount of the investment at the date of the partial disposal ; Proportion of the reduction in the interest (%)
Gain on the partial disposal before reclassification (price − carrying amount disposed of)
Calculation
0
Price received for the portion sold (significant influence retained) ; − Carrying amount disposed of (carrying amount × proportion of the reduction, case convention)
Loss on the partial disposal before reclassification
Calculation
0
Price received for the portion sold (significant influence retained) ; − Carrying amount disposed of (carrying amount × proportion of the reduction, case convention)
Gain on loss of influence before reclassification of other comprehensive income (positive part)
Calculation
0
Fair value of the consideration received on the loss of influence ; Fair value of the retained interest on the loss of influence ; − Carrying amount of the investment at the date of loss of influence
Loss on loss of influence before reclassification of other comprehensive income (negative part)
Calculation
0
Fair value of the consideration received on the loss of influence ; Fair value of the retained interest on the loss of influence ; − Carrying amount of the investment at the date of loss of influence
Total gain on loss of influence, reclassified other comprehensive income included
Calculation
0
Fair value of the consideration received on the loss of influence ; Fair value of the retained interest on the loss of influence ; − Carrying amount of the investment at the date of loss of influence ; Other comprehensive income reclassified (accumulated amount × proportion of the reduction)

Illustrative entries

Entries

Entry: share of losses charged to the investment
Entry
Account Debit Credit
Share of losses of the associate 500,000
Investment in associate (reduced to zero) 500,000
Entry: excess loss charged to the long-term interests
Entry
Account Debit Credit
Share of losses of the associate 200,000
Long-term interests in the associate 200,000
Entry: impairment loss on the net investment
Entry
Debit Impairment loss on the investment ← Impairment loss on the net investment (entire carrying amount − recoverable amount, if positive) ; Credit Investment in associate (decrease) ← Impairment loss on the net investment (entire carrying amount − recoverable amount, if positive)
Entry: reclassification of other comprehensive income to profit or loss
Entry
Debit Other comprehensive income reserve of the associate (released) ← Other comprehensive income reclassified (accumulated amount × proportion of the reduction) ; Credit Gain reclassified to profit or loss ← Other comprehensive income reclassified (accumulated amount × proportion of the reduction)
Partial disposal entry (significant influence retained)
Entry
Debit Cash received ← Price received for the portion sold (significant influence retained) ; Debit Loss on the partial disposal ← Loss on the partial disposal before reclassification ; Credit Equity-accounted investment (carrying amount disposed of) ← Carrying amount disposed of (carrying amount × proportion of the reduction, case convention) ; Credit Gain on the partial disposal ← Gain on the partial disposal before reclassification (price − carrying amount disposed of)
Entry: derecognition of the investment on loss of influence
Entry
Debit Cash received ← Fair value of the consideration received on the loss of influence ; Debit Retained interest at fair value ← Fair value of the retained interest on the loss of influence ; Debit Loss on loss of influence (if the carrying amount exceeds the fair values) ← Loss on loss of influence before reclassification of other comprehensive income (negative part) ; Credit Investment in associate (derecognised) ← Carrying amount of the investment at the date of loss of influence ; Credit Gain on loss of influence ← Gain on loss of influence before reclassification of other comprehensive income (positive part)

Account	Debit	Credit
Share of losses of the associate	500,000
Investment in associate (reduced to zero)		500,000

Account	Debit	Credit
Share of losses of the associate	200,000
Long-term interests in the associate		200,000

Judgments: long-term interests, impairment indicator and loss of influence

Judgment

IAS 28 §38IAS 28 §40IAS 28 §41AIAS 28 §22

Classification of the long-term interests
JudgmentRequired
Forms part of the net investment: included in the interest used to cap losses
Forms part of the net investment: included in the interest used to cap losses / Does not form part of the net investment: IFRS 9 alone / Not applicable
Professional judgment: the classification is supported by the substance of the loan, not by its label.
Rationale: in substance, settlement neither planned nor likely, no trade receivable
Text
IN_SUBSTANCE_PART_OF_THE_NET_INVESTMENT
Objective evidence of impairment
JudgmentRequired
Not applicable
Objective evidence established: test of the net investment required / No objective evidence: no test / Not applicable
Rationale: events after initial recognition and effect on estimated future cash flows
Text
THE_ISSUE_IS_THE_CAP_ON_LOSSES
Loss of significant influence
JudgmentRequired
Not applicable
Influence lost: equity method stopped / Influence retained: equity method continues / Not applicable
Professional judgment: loss of influence is supported by the facts; the 20 % presumption is only a rebuttable starting point.
Rationale: remaining percentage, board representation, participation in policy decisions
Text

Effect on the financial statements

FS impact

Effect derived from the entries
Table

Items to document for the losses and impairment

Disclosure

IAS 28 §38IAS 28 §39IAS 28 §40

Information to prepare for the note
Checklist
- Unrecognised losses of the period and cumulative, and absence of an obligation justifying a liability
- Objective evidence retained, recoverable amount and impairment loss recognised

Conclusion

Losses recognised and unrecognised, any impairment loss and treatment of the exit from the equity method, recoverable amounts and fair values being case data
ConclusionRequired

Normative references

References

Normative references cited in this workpaper
References

Checks and financial statement impact

Associate and losses describedPass
Loss entry balancedPass
Long-term interest entry balancedPass
Impairment entry balancedNot evaluated
Reclassification entry balancedNot evaluated
Loss of influence entry balancedNot evaluated
Losses recognised = loss charged to the investment + loss charged to the long-term interestsPass
Partial disposal entry balancedNot evaluated

Assets: -700,000
Liabilities: 0
Profit or loss: -700,000
OCI: 0
Equity: -700,000

File and entity

Group file: significant influence, equity method, eliminations, losses and impairment, cessation of influence (IAS 28)

Case tasks documented here

Rimel: are the long-term interests part of the net investment? Compute Halvern’s interest used to cap the losses.
Rimel: compute the share of losses to recognise.
Rimel: compute the unrecognised losses.
Rimel: in which order are the losses charged to the components of the interest, and must Halvern recognise a liability for the unrecognised losses?
Tarvik: determine the recoverable amount of the net investment.
Tarvik: compute the impairment loss on the net investment.
Orvel: does Halvern lose significant influence? Determine the other comprehensive income to reclassify.
Orvel: compute the gain on loss of influence before and after reclassification.
Rimel: record the loss charged to the investment.
Rimel: record the loss charged to the long-term interests.
Tarvik: record the impairment loss.
Orvel: record the derecognition of the investment and the retained 10 % interest at fair value.
Orvel: record the reclassification of other comprehensive income.

Facts and data

Inputs

Associate: result of the period, investor’s interest, legal or constructive obligations, payments on its behalf
TextRequired
THIRTY_FIVE_PERCENT_ASSOCIATE_WITH_OBJECTIVE_EVIDENCE_OF_IMPAIRMENT
Carrying amount of the investment under the equity method
Number
Long-term interests forming part of the net investment (excluding trade receivables)
Number
Investor’s share of the losses of the period
Number
Loss charged to the investment (first)
Number
Excess loss charged to the long-term interests (reverse order of seniority)
Number
Value in use of the net investment
Number
780,000
Fair value of the investment less costs of disposal
Number
740,000
Entire carrying amount of the investment tested, goodwill included
Number
900,000
Accumulated other comprehensive income relating to the associate
Number
Proportion of the reduction in the interest (%)
Number
Carrying amount of the investment at the date of the partial disposal
Number
Price received for the portion sold (significant influence retained)
Number
Fair value of the consideration received on the loss of influence
Number
Fair value of the retained interest on the loss of influence
Number
Carrying amount of the investment at the date of loss of influence
Number
Nature of the long-term interests: settlement neither planned nor likely in the foreseeable future, instruments subject to IFRS 9
Text
Objective evidence of impairment: financial difficulty of the associate, adverse market, legal or technological changes
Text
LOSS_OF_MAIN_CUSTOMER_ADVERSE_REGULATION_AND_FINANCIAL_DIFFICULTY
Facts on influence after the disposal: percentage, board, policy decisions, nature of the retained interest
Text

Supporting documents

Evidence

Documents obtained and referenced (associate’s statements, loan agreements, impairment tests, sale agreements, valuation of the retained interest)
EvidenceRequired

Analysis of losses, impairment and discontinuance

Analysis

IAS 28 §38IAS 28 §39IAS 28 §40IAS 28 §41AIAS 28 §42IAS 28 §41CIAS 28 §22IAS 28 §25IAS 28IAS 28IAS 28IAS 28IAS 28IAS 28

Points reviewed: losses, impairment and discontinuance
ChecklistRequired
- Share of losses stopped when it equals or exceeds the investor’s interest
- Interest = carrying amount of the investment + long-term interests forming part of the net investment
- Excess losses charged to the other components in reverse order of seniority; IFRS 9 applied to long-term interests
- Additional liability only for a legal or constructive obligation or payments on the associate’s behalf; unrecognised losses tracked off the books
- Objective evidence of impairment from events after initial recognition
- Entire carrying amount tested as a single asset, goodwill not tested separately, recoverable amount = higher of value in use and fair value less costs of disposal
- Loss of influence: equity method stopped, retained interest at fair value, gain or loss in profit or loss
- Partial disposal with influence retained: proportionate reclassification of other comprehensive income
- Associate becoming a subsidiary: equity method ends, consolidation (detail not described here)
- Interest retained after loss of control: its fair value is the cost of the associate
- Proposals of 2024 (unrecognised losses, presentation) and of 2026 (impairment indicators): not applied

Calculations

IAS 28 §38IAS 28 §42IAS 28 §22IAS 28 §25

Investor’s interest (carrying amount + long-term interests forming part of the net investment)
Calculation
0
Carrying amount of the investment under the equity method ; Long-term interests forming part of the net investment (excluding trade receivables)
Share of losses recognised (the lower of the share of losses and the interest)
Calculation
Investor’s share of the losses of the period ; Investor’s interest (carrying amount + long-term interests forming part of the net investment)
Unrecognised losses (share of losses − losses recognised)
Calculation
0
Investor’s share of the losses of the period ; − Share of losses recognised (the lower of the share of losses and the interest)
Recoverable amount (the higher of value in use and fair value less costs of disposal)
Calculation
780,000
Value in use of the net investment ; Fair value of the investment less costs of disposal
Impairment loss on the net investment (entire carrying amount − recoverable amount, if positive)
Calculation
120,000
Entire carrying amount of the investment tested, goodwill included ; − Recoverable amount (the higher of value in use and fair value less costs of disposal)
Other comprehensive income reclassified (accumulated amount × proportion of the reduction)
Calculation
Accumulated other comprehensive income relating to the associate ; Proportion of the reduction in the interest (%)
Carrying amount disposed of (carrying amount × proportion of the reduction, case convention)
Calculation
Carrying amount of the investment at the date of the partial disposal ; Proportion of the reduction in the interest (%)
Gain on the partial disposal before reclassification (price − carrying amount disposed of)
Calculation
0
Price received for the portion sold (significant influence retained) ; − Carrying amount disposed of (carrying amount × proportion of the reduction, case convention)
Loss on the partial disposal before reclassification
Calculation
0
Price received for the portion sold (significant influence retained) ; − Carrying amount disposed of (carrying amount × proportion of the reduction, case convention)
Gain on loss of influence before reclassification of other comprehensive income (positive part)
Calculation
0
Fair value of the consideration received on the loss of influence ; Fair value of the retained interest on the loss of influence ; − Carrying amount of the investment at the date of loss of influence
Loss on loss of influence before reclassification of other comprehensive income (negative part)
Calculation
0
Fair value of the consideration received on the loss of influence ; Fair value of the retained interest on the loss of influence ; − Carrying amount of the investment at the date of loss of influence
Total gain on loss of influence, reclassified other comprehensive income included
Calculation
0
Fair value of the consideration received on the loss of influence ; Fair value of the retained interest on the loss of influence ; − Carrying amount of the investment at the date of loss of influence ; Other comprehensive income reclassified (accumulated amount × proportion of the reduction)

Illustrative entries

Entries

Entry: share of losses charged to the investment
Entry
Debit Share of losses of the associate ← Loss charged to the investment (first) ; Credit Investment in associate (reduced to zero) ← Loss charged to the investment (first)
Entry: excess loss charged to the long-term interests
Entry
Debit Share of losses of the associate ← Excess loss charged to the long-term interests (reverse order of seniority) ; Credit Long-term interests in the associate ← Excess loss charged to the long-term interests (reverse order of seniority)
Entry: impairment loss on the net investment
Entry
Account Debit Credit
Impairment loss on the investment 120,000
Investment in associate (decrease) 120,000
Entry: reclassification of other comprehensive income to profit or loss
Entry
Debit Other comprehensive income reserve of the associate (released) ← Other comprehensive income reclassified (accumulated amount × proportion of the reduction) ; Credit Gain reclassified to profit or loss ← Other comprehensive income reclassified (accumulated amount × proportion of the reduction)
Partial disposal entry (significant influence retained)
Entry
Debit Cash received ← Price received for the portion sold (significant influence retained) ; Debit Loss on the partial disposal ← Loss on the partial disposal before reclassification ; Credit Equity-accounted investment (carrying amount disposed of) ← Carrying amount disposed of (carrying amount × proportion of the reduction, case convention) ; Credit Gain on the partial disposal ← Gain on the partial disposal before reclassification (price − carrying amount disposed of)
Entry: derecognition of the investment on loss of influence
Entry
Debit Cash received ← Fair value of the consideration received on the loss of influence ; Debit Retained interest at fair value ← Fair value of the retained interest on the loss of influence ; Debit Loss on loss of influence (if the carrying amount exceeds the fair values) ← Loss on loss of influence before reclassification of other comprehensive income (negative part) ; Credit Investment in associate (derecognised) ← Carrying amount of the investment at the date of loss of influence ; Credit Gain on loss of influence ← Gain on loss of influence before reclassification of other comprehensive income (positive part)

Account	Debit	Credit
Impairment loss on the investment	120,000
Investment in associate (decrease)		120,000

Judgments: long-term interests, impairment indicator and loss of influence

Judgment

IAS 28 §38IAS 28 §40IAS 28 §41AIAS 28 §22

Classification of the long-term interests
JudgmentRequired
Not applicable
Forms part of the net investment: included in the interest used to cap losses / Does not form part of the net investment: IFRS 9 alone / Not applicable
Professional judgment: the classification is supported by the substance of the loan, not by its label.
Rationale: in substance, settlement neither planned nor likely, no trade receivable
Text
Objective evidence of impairment
JudgmentRequired
Objective evidence established: test of the net investment required
Objective evidence established: test of the net investment required / No objective evidence: no test / Not applicable
Rationale: events after initial recognition and effect on estimated future cash flows
Text
EVENTS_AFTER_INITIAL_RECOGNITION_AFFECT_FUTURE_CASH_FLOWS
Loss of significant influence
JudgmentRequired
Not applicable
Influence lost: equity method stopped / Influence retained: equity method continues / Not applicable
Professional judgment: loss of influence is supported by the facts; the 20 % presumption is only a rebuttable starting point.
Rationale: remaining percentage, board representation, participation in policy decisions
Text

Effect on the financial statements

FS impact

Effect derived from the entries
Table

Items to document for the losses and impairment

Disclosure

IAS 28 §38IAS 28 §39IAS 28 §40

Information to prepare for the note
Checklist
- Unrecognised losses of the period and cumulative, and absence of an obligation justifying a liability
- Objective evidence retained, recoverable amount and impairment loss recognised

Conclusion

Losses recognised and unrecognised, any impairment loss and treatment of the exit from the equity method, recoverable amounts and fair values being case data
ConclusionRequired

Normative references

References

Normative references cited in this workpaper
References

Checks and financial statement impact

Associate and losses describedPass
Loss entry balancedNot evaluated
Long-term interest entry balancedNot evaluated
Impairment entry balancedPass
Reclassification entry balancedNot evaluated
Loss of influence entry balancedNot evaluated
Losses recognised = loss charged to the investment + loss charged to the long-term interestsNot evaluated
Partial disposal entry balancedNot evaluated

Assets: -120,000
Liabilities: 0
Profit or loss: -120,000
OCI: 0
Equity: -120,000

File and entity

Group file: significant influence, equity method, eliminations, losses and impairment, cessation of influence (IAS 28)

Case tasks documented here

Rimel: are the long-term interests part of the net investment? Compute Halvern’s interest used to cap the losses.
Rimel: compute the share of losses to recognise.
Rimel: compute the unrecognised losses.
Rimel: in which order are the losses charged to the components of the interest, and must Halvern recognise a liability for the unrecognised losses?
Tarvik: determine the recoverable amount of the net investment.
Tarvik: compute the impairment loss on the net investment.
Orvel: does Halvern lose significant influence? Determine the other comprehensive income to reclassify.
Orvel: compute the gain on loss of influence before and after reclassification.
Rimel: record the loss charged to the investment.
Rimel: record the loss charged to the long-term interests.
Tarvik: record the impairment loss.
Orvel: record the derecognition of the investment and the retained 10 % interest at fair value.
Orvel: record the reclassification of other comprehensive income.

Facts and data

Inputs

Associate: result of the period, investor’s interest, legal or constructive obligations, payments on its behalf
TextRequired
TWENTY_POINTS_SOLD_OUT_OF_THIRTY_BOARD_SEATS_GIVEN_UP
Carrying amount of the investment under the equity method
Number
Long-term interests forming part of the net investment (excluding trade receivables)
Number
Investor’s share of the losses of the period
Number
Loss charged to the investment (first)
Number
Excess loss charged to the long-term interests (reverse order of seniority)
Number
Value in use of the net investment
Number
Fair value of the investment less costs of disposal
Number
Entire carrying amount of the investment tested, goodwill included
Number
Accumulated other comprehensive income relating to the associate
Number
18,000
Proportion of the reduction in the interest (%)
Number
100 %
Carrying amount of the investment at the date of the partial disposal
Number
Price received for the portion sold (significant influence retained)
Number
Fair value of the consideration received on the loss of influence
Number
300,000
Fair value of the retained interest on the loss of influence
Number
150,000
Carrying amount of the investment at the date of loss of influence
Number
410,000
Nature of the long-term interests: settlement neither planned nor likely in the foreseeable future, instruments subject to IFRS 9
Text
Objective evidence of impairment: financial difficulty of the associate, adverse market, legal or technological changes
Text
Facts on influence after the disposal: percentage, board, policy decisions, nature of the retained interest
Text
TEN_PERCENT_RETAINED_NO_BOARD_SEAT_NO_POLICY_PARTICIPATION

Supporting documents

Evidence

Documents obtained and referenced (associate’s statements, loan agreements, impairment tests, sale agreements, valuation of the retained interest)
EvidenceRequired

Analysis of losses, impairment and discontinuance

Analysis

IAS 28 §38IAS 28 §39IAS 28 §40IAS 28 §41AIAS 28 §42IAS 28 §41CIAS 28 §22IAS 28 §25IAS 28IAS 28IAS 28IAS 28IAS 28IAS 28

Points reviewed: losses, impairment and discontinuance
ChecklistRequired
- Share of losses stopped when it equals or exceeds the investor’s interest
- Interest = carrying amount of the investment + long-term interests forming part of the net investment
- Excess losses charged to the other components in reverse order of seniority; IFRS 9 applied to long-term interests
- Additional liability only for a legal or constructive obligation or payments on the associate’s behalf; unrecognised losses tracked off the books
- Objective evidence of impairment from events after initial recognition
- Entire carrying amount tested as a single asset, goodwill not tested separately, recoverable amount = higher of value in use and fair value less costs of disposal
- Loss of influence: equity method stopped, retained interest at fair value, gain or loss in profit or loss
- Partial disposal with influence retained: proportionate reclassification of other comprehensive income
- Associate becoming a subsidiary: equity method ends, consolidation (detail not described here)
- Interest retained after loss of control: its fair value is the cost of the associate
- Proposals of 2024 (unrecognised losses, presentation) and of 2026 (impairment indicators): not applied

Calculations

IAS 28 §38IAS 28 §42IAS 28 §22IAS 28 §25

Investor’s interest (carrying amount + long-term interests forming part of the net investment)
Calculation
0
Carrying amount of the investment under the equity method ; Long-term interests forming part of the net investment (excluding trade receivables)
Share of losses recognised (the lower of the share of losses and the interest)
Calculation
Investor’s share of the losses of the period ; Investor’s interest (carrying amount + long-term interests forming part of the net investment)
Unrecognised losses (share of losses − losses recognised)
Calculation
0
Investor’s share of the losses of the period ; − Share of losses recognised (the lower of the share of losses and the interest)
Recoverable amount (the higher of value in use and fair value less costs of disposal)
Calculation
Value in use of the net investment ; Fair value of the investment less costs of disposal
Impairment loss on the net investment (entire carrying amount − recoverable amount, if positive)
Calculation
0
Entire carrying amount of the investment tested, goodwill included ; − Recoverable amount (the higher of value in use and fair value less costs of disposal)
Other comprehensive income reclassified (accumulated amount × proportion of the reduction)
Calculation
18,000
Accumulated other comprehensive income relating to the associate ; Proportion of the reduction in the interest (%)
Carrying amount disposed of (carrying amount × proportion of the reduction, case convention)
Calculation
Carrying amount of the investment at the date of the partial disposal ; Proportion of the reduction in the interest (%)
Gain on the partial disposal before reclassification (price − carrying amount disposed of)
Calculation
0
Price received for the portion sold (significant influence retained) ; − Carrying amount disposed of (carrying amount × proportion of the reduction, case convention)
Loss on the partial disposal before reclassification
Calculation
0
Price received for the portion sold (significant influence retained) ; − Carrying amount disposed of (carrying amount × proportion of the reduction, case convention)
Gain on loss of influence before reclassification of other comprehensive income (positive part)
Calculation
40,000
Fair value of the consideration received on the loss of influence ; Fair value of the retained interest on the loss of influence ; − Carrying amount of the investment at the date of loss of influence
Loss on loss of influence before reclassification of other comprehensive income (negative part)
Calculation
0
Fair value of the consideration received on the loss of influence ; Fair value of the retained interest on the loss of influence ; − Carrying amount of the investment at the date of loss of influence
Total gain on loss of influence, reclassified other comprehensive income included
Calculation
58,000
Fair value of the consideration received on the loss of influence ; Fair value of the retained interest on the loss of influence ; − Carrying amount of the investment at the date of loss of influence ; Other comprehensive income reclassified (accumulated amount × proportion of the reduction)

Illustrative entries

Entries

Entry: share of losses charged to the investment
Entry
Debit Share of losses of the associate ← Loss charged to the investment (first) ; Credit Investment in associate (reduced to zero) ← Loss charged to the investment (first)
Entry: excess loss charged to the long-term interests
Entry
Debit Share of losses of the associate ← Excess loss charged to the long-term interests (reverse order of seniority) ; Credit Long-term interests in the associate ← Excess loss charged to the long-term interests (reverse order of seniority)
Entry: impairment loss on the net investment
Entry
Debit Impairment loss on the investment ← Impairment loss on the net investment (entire carrying amount − recoverable amount, if positive) ; Credit Investment in associate (decrease) ← Impairment loss on the net investment (entire carrying amount − recoverable amount, if positive)
Entry: reclassification of other comprehensive income to profit or loss
Entry
Account Debit Credit
Other comprehensive income reserve of the associate (released) 18,000
Gain reclassified to profit or loss 18,000
Partial disposal entry (significant influence retained)
Entry
Debit Cash received ← Price received for the portion sold (significant influence retained) ; Debit Loss on the partial disposal ← Loss on the partial disposal before reclassification ; Credit Equity-accounted investment (carrying amount disposed of) ← Carrying amount disposed of (carrying amount × proportion of the reduction, case convention) ; Credit Gain on the partial disposal ← Gain on the partial disposal before reclassification (price − carrying amount disposed of)
Entry: derecognition of the investment on loss of influence
Entry
Account Debit Credit
Cash received 300,000
Retained interest at fair value 150,000
Investment in associate (derecognised) 410,000
Gain on loss of influence 40,000

Account	Debit	Credit
Other comprehensive income reserve of the associate (released)	18,000
Gain reclassified to profit or loss		18,000

Account	Debit	Credit
Cash received	300,000
Retained interest at fair value	150,000
Investment in associate (derecognised)		410,000
Gain on loss of influence		40,000

Judgments: long-term interests, impairment indicator and loss of influence

Judgment

IAS 28 §38IAS 28 §40IAS 28 §41AIAS 28 §22

Classification of the long-term interests
JudgmentRequired
Not applicable
Forms part of the net investment: included in the interest used to cap losses / Does not form part of the net investment: IFRS 9 alone / Not applicable
Professional judgment: the classification is supported by the substance of the loan, not by its label.
Rationale: in substance, settlement neither planned nor likely, no trade receivable
Text
Objective evidence of impairment
JudgmentRequired
Not applicable
Objective evidence established: test of the net investment required / No objective evidence: no test / Not applicable
Rationale: events after initial recognition and effect on estimated future cash flows
Text
Loss of significant influence
JudgmentRequired
Influence lost: equity method stopped
Influence lost: equity method stopped / Influence retained: equity method continues / Not applicable
Professional judgment: loss of influence is supported by the facts; the 20 % presumption is only a rebuttable starting point.
Rationale: remaining percentage, board representation, participation in policy decisions
Text
TEN_PERCENT_NO_BOARD_PRESENCE_AND_NO_POLICY_PARTICIPATION

Effect on the financial statements

FS impact

Effect derived from the entries
Table

Items to document for the losses and impairment

Disclosure

IAS 28 §38IAS 28 §39IAS 28 §40

Information to prepare for the note
Checklist
- Unrecognised losses of the period and cumulative, and absence of an obligation justifying a liability
- Objective evidence retained, recoverable amount and impairment loss recognised

Conclusion

Losses recognised and unrecognised, any impairment loss and treatment of the exit from the equity method, recoverable amounts and fair values being case data
ConclusionRequired

Normative references

References

Normative references cited in this workpaper
References

Checks and financial statement impact

Associate and losses describedPass
Loss entry balancedNot evaluated
Long-term interest entry balancedNot evaluated
Impairment entry balancedNot evaluated
Reclassification entry balancedPass
Loss of influence entry balancedPass
Losses recognised = loss charged to the investment + loss charged to the long-term interestsNot evaluated
Partial disposal entry balancedNot evaluated

Assets: 40,000
Liabilities: 0
Profit or loss: 58,000
OCI: -18,000
Equity: 40,000

Facts and data

Inputs

Associate: result of the period, investor’s interest, legal or constructive obligations, payments on its behalf
TextRequired
Carrying amount of the investment under the equity method
Number
Long-term interests forming part of the net investment (excluding trade receivables)
Number
Investor’s share of the losses of the period
Number
Loss charged to the investment (first)
Number
Excess loss charged to the long-term interests (reverse order of seniority)
Number
Value in use of the net investment
Number
Fair value of the investment less costs of disposal
Number
Entire carrying amount of the investment tested, goodwill included
Number
Accumulated other comprehensive income relating to the associate
Number
Proportion of the reduction in the interest (%)
Number
Carrying amount of the investment at the date of the partial disposal
Number
Price received for the portion sold (significant influence retained)
Number
Fair value of the consideration received on the loss of influence
Number
Fair value of the retained interest on the loss of influence
Number
Carrying amount of the investment at the date of loss of influence
Number
Nature of the long-term interests: settlement neither planned nor likely in the foreseeable future, instruments subject to IFRS 9
Text
Objective evidence of impairment: financial difficulty of the associate, adverse market, legal or technological changes
Text
Facts on influence after the disposal: percentage, board, policy decisions, nature of the retained interest
Text

Supporting documents

Evidence

Documents obtained and referenced (associate’s statements, loan agreements, impairment tests, sale agreements, valuation of the retained interest)
EvidenceRequired

Analysis of losses, impairment and discontinuance

Analysis

IAS 28 §38IAS 28 §39IAS 28 §40IAS 28 §41AIAS 28 §42IAS 28 §41CIAS 28 §22IAS 28 §25IAS 28IAS 28IAS 28IAS 28IAS 28IAS 28

Points reviewed: losses, impairment and discontinuance
ChecklistRequired
- Share of losses stopped when it equals or exceeds the investor’s interest
- Interest = carrying amount of the investment + long-term interests forming part of the net investment
- Excess losses charged to the other components in reverse order of seniority; IFRS 9 applied to long-term interests
- Additional liability only for a legal or constructive obligation or payments on the associate’s behalf; unrecognised losses tracked off the books
- Objective evidence of impairment from events after initial recognition
- Entire carrying amount tested as a single asset, goodwill not tested separately, recoverable amount = higher of value in use and fair value less costs of disposal
- Loss of influence: equity method stopped, retained interest at fair value, gain or loss in profit or loss
- Partial disposal with influence retained: proportionate reclassification of other comprehensive income
- Associate becoming a subsidiary: equity method ends, consolidation (detail not described here)
- Interest retained after loss of control: its fair value is the cost of the associate
- Proposals of 2024 (unrecognised losses, presentation) and of 2026 (impairment indicators): not applied

Calculations

IAS 28 §38IAS 28 §42IAS 28 §22IAS 28 §25

Investor’s interest (carrying amount + long-term interests forming part of the net investment)
Calculation
Carrying amount of the investment under the equity method ; Long-term interests forming part of the net investment (excluding trade receivables)
Share of losses recognised (the lower of the share of losses and the interest)
Calculation
Investor’s share of the losses of the period ; Investor’s interest (carrying amount + long-term interests forming part of the net investment)
Unrecognised losses (share of losses − losses recognised)
Calculation
Investor’s share of the losses of the period ; − Share of losses recognised (the lower of the share of losses and the interest)
Recoverable amount (the higher of value in use and fair value less costs of disposal)
Calculation
Value in use of the net investment ; Fair value of the investment less costs of disposal
Impairment loss on the net investment (entire carrying amount − recoverable amount, if positive)
Calculation
Entire carrying amount of the investment tested, goodwill included ; − Recoverable amount (the higher of value in use and fair value less costs of disposal)
Other comprehensive income reclassified (accumulated amount × proportion of the reduction)
Calculation
Accumulated other comprehensive income relating to the associate ; Proportion of the reduction in the interest (%)
Carrying amount disposed of (carrying amount × proportion of the reduction, case convention)
Calculation
Carrying amount of the investment at the date of the partial disposal ; Proportion of the reduction in the interest (%)
Gain on the partial disposal before reclassification (price − carrying amount disposed of)
Calculation
Price received for the portion sold (significant influence retained) ; − Carrying amount disposed of (carrying amount × proportion of the reduction, case convention)
Loss on the partial disposal before reclassification
Calculation
Price received for the portion sold (significant influence retained) ; − Carrying amount disposed of (carrying amount × proportion of the reduction, case convention)
Gain on loss of influence before reclassification of other comprehensive income (positive part)
Calculation
Fair value of the consideration received on the loss of influence ; Fair value of the retained interest on the loss of influence ; − Carrying amount of the investment at the date of loss of influence
Loss on loss of influence before reclassification of other comprehensive income (negative part)
Calculation
Fair value of the consideration received on the loss of influence ; Fair value of the retained interest on the loss of influence ; − Carrying amount of the investment at the date of loss of influence
Total gain on loss of influence, reclassified other comprehensive income included
Calculation
Fair value of the consideration received on the loss of influence ; Fair value of the retained interest on the loss of influence ; − Carrying amount of the investment at the date of loss of influence ; Other comprehensive income reclassified (accumulated amount × proportion of the reduction)

Illustrative entries

Entries

Entry: share of losses charged to the investment
Entry
Debit Share of losses of the associate ← Loss charged to the investment (first) ; Credit Investment in associate (reduced to zero) ← Loss charged to the investment (first)
Entry: excess loss charged to the long-term interests
Entry
Debit Share of losses of the associate ← Excess loss charged to the long-term interests (reverse order of seniority) ; Credit Long-term interests in the associate ← Excess loss charged to the long-term interests (reverse order of seniority)
Entry: impairment loss on the net investment
Entry
Debit Impairment loss on the investment ← Impairment loss on the net investment (entire carrying amount − recoverable amount, if positive) ; Credit Investment in associate (decrease) ← Impairment loss on the net investment (entire carrying amount − recoverable amount, if positive)
Entry: reclassification of other comprehensive income to profit or loss
Entry
Debit Other comprehensive income reserve of the associate (released) ← Other comprehensive income reclassified (accumulated amount × proportion of the reduction) ; Credit Gain reclassified to profit or loss ← Other comprehensive income reclassified (accumulated amount × proportion of the reduction)
Partial disposal entry (significant influence retained)
Entry
Debit Cash received ← Price received for the portion sold (significant influence retained) ; Debit Loss on the partial disposal ← Loss on the partial disposal before reclassification ; Credit Equity-accounted investment (carrying amount disposed of) ← Carrying amount disposed of (carrying amount × proportion of the reduction, case convention) ; Credit Gain on the partial disposal ← Gain on the partial disposal before reclassification (price − carrying amount disposed of)
Entry: derecognition of the investment on loss of influence
Entry
Debit Cash received ← Fair value of the consideration received on the loss of influence ; Debit Retained interest at fair value ← Fair value of the retained interest on the loss of influence ; Debit Loss on loss of influence (if the carrying amount exceeds the fair values) ← Loss on loss of influence before reclassification of other comprehensive income (negative part) ; Credit Investment in associate (derecognised) ← Carrying amount of the investment at the date of loss of influence ; Credit Gain on loss of influence ← Gain on loss of influence before reclassification of other comprehensive income (positive part)

Judgments: long-term interests, impairment indicator and loss of influence

Judgment

IAS 28 §38IAS 28 §40IAS 28 §41AIAS 28 §22

Classification of the long-term interests
JudgmentRequired
Forms part of the net investment: included in the interest used to cap losses / Does not form part of the net investment: IFRS 9 alone / Not applicable
Professional judgment: the classification is supported by the substance of the loan, not by its label.
Rationale: in substance, settlement neither planned nor likely, no trade receivable
Text
Objective evidence of impairment
JudgmentRequired
Objective evidence established: test of the net investment required / No objective evidence: no test / Not applicable
Rationale: events after initial recognition and effect on estimated future cash flows
Text
Loss of significant influence
JudgmentRequired
Influence lost: equity method stopped / Influence retained: equity method continues / Not applicable
Professional judgment: loss of influence is supported by the facts; the 20 % presumption is only a rebuttable starting point.
Rationale: remaining percentage, board representation, participation in policy decisions
Text

Effect on the financial statements

FS impact

Effect derived from the entries
Table

Items to document for the losses and impairment

Disclosure

IAS 28 §38IAS 28 §39IAS 28 §40

Information to prepare for the note
Checklist
- Unrecognised losses of the period and cumulative, and absence of an obligation justifying a liability
- Objective evidence retained, recoverable amount and impairment loss recognised

Conclusion

Losses recognised and unrecognised, any impairment loss and treatment of the exit from the equity method, recoverable amounts and fair values being case data
ConclusionRequired

Normative references

References

Normative references cited in this workpaper
References