Equity Method - IASB Research Project
- Active
- Research phase
- Didrik Thrane-Nielsen, Hocine Kebli
Description
Project History
In 2014, the IASB started a research project on the Equity Method of accounting. The objective of this research project is to understand the financial reporting issues that application of the equity method seeks to resolve by considering the circumstances in which the method is currently applied. The research project will involve a reassessment of the equity method in terms of its usefulness to investors and difficulties for preparers.
In 2016, the IASB deferred the works on the Equity Method until the feedback from Post-implementation Reviews of IFRS 10 Consolidated Financial Statements, IFRS 11 Joint Arrangements and IFRS 12 Disclosure of Interests in Other Entities is considered.
Assess whether application questions with the equity method, as set out in IAS 28, can be addressed in consolidated and individual financial statements by identifying and explaining principles in IAS 28.
Previous EFRAG Work
In January 2014, EFRAG published The Equity Method: A One-line Consolidation or a Measurement Basis? which discussed various views on the conceptual underpinnings of the equity method. This EFRAG Discussion Paper is available here. The details of the feedback received from EFRAG constituents is available here.
The responses to the Discussion Paper indicated that there is no common understanding of the purpose or use of the equity method. However there was a limited consensus on whether clarifying the Equity Method was possible without a wholesale reassessment of its underlying role. Nevertheless, some respondents called for a fundamental rethink and other respondents thought that more clarity on the underlying principles was needed.