📖 Overview
IAS 28 prescribes the accounting for investments in associates (entities over which the investor has significant influence) using the equity method. Significant influence is presumed at 20% or more of voting power.
🎯 Scope
Applies to all investments in associates where the investor has significant influence but not control or joint control. Does not apply to investments held by venture capital organizations or mutual funds (measured at fair value).
⚙️ Key Principles
1. Significant Influence: Power to participate in financial and operating policy decisions (board representation, participation in policy-making, material transactions, interchange of personnel).
2. Equity Method: Investment initially at cost, then adjusted for post-acquisition share of profit/loss and other comprehensive income.
3. Dividends: Reduce the carrying amount of the investment (not recognized as revenue).
4. Impairment: Tested when indicators exist; loss is carrying amount minus recoverable amount.
📏 Measurement
Initial measurement: Cost (purchase price plus transaction costs). Subsequent measurement: Carrying amount = Cost + share of post-acquisition profit/loss - dividends received - impairment losses. Share of OCI recognized in OCI.
✅ Recognition
Recognized when investor obtains significant influence. Share of associate's profit/loss recognized in income statement. Share of associate's OCI recognized in OCI. Impairment loss recognized when carrying amount exceeds recoverable amount.
📊 Presentation
Presented as a non-current asset on the balance sheet, separate from other investments. Share of profit/loss presented in the income statement (usually as a separate line before tax).
📝 Disclosure Requirements
Disclose: Name and nature of associates, ownership percentage, carrying amount, fair value (if available), share of profit/loss and OCI, summarized financial information of associates, any restrictions or commitments.
🔗 Related Standards
IFRS 10 (Consolidation), IFRS 11 (Joint Arrangements), IFRS 12 (Disclosure of Interests), IAS 36 (Impairment)