Equity method

In particular, the IASB considered whether to address application questions that respondents to the Exposure draft had suggested should be added to the project scope. 

Concerning the scope of the project, the IASB has tentatively decided: 

• to add the application question ‘How does an investor recognise acquisition-related costs when applying the equity method?’; 
• not to add an application question on obtaining significant influence over an associate that does not constitute a business; 
• not to add an application question on qualifying criteria for using the fair value through profit or loss option (IAS 28 paragraphs 18–19), offered to an investor in an associate or joint venture that is a venture capital organisation, mutual fund, unit trust or a similar entity including investment-linked insurance funds, but to consider whether the wording could be clarified; 
• to explore the possibility of providing relief in respect of the accounting treatment when purchasing an additional interest in an associate. At this stage, the exposure draft proposes that an investor should: 
  • measure the additional interest at the fair value of the consideration transferred; 
  • determine, at the acquisition date, the fair value of the associate’s identifiable assets and liabilities, and recognise its additional share of the remeasured net assets, and 
  • thus calculate the goodwill (as the difference between the two).