In August 2011 the IASB issued the Exposure Draft Investment Entities (‘the ED’). The ED provides criteria and guidance to determine whether an entity is an investment entity. In accordance with the ED, investment entities are required to measure their investments in controlled entities at fair value through profit or loss in accordance with IFRS 9 Financial Instruments.
EFRAG agrees with the IASB’s proposal for an exception to the consolidation principle, because measuring an investment entity’s controlled investments at fair value produces more decision-useful information that meets users’ needs as it better reflects the entity’s business model.
EFRAG believes that a non-investment entity parent should be required to consolidate its investment entity subsidiaries, but that it should retain the fair value measurement of the controlled entities that are held through those investment entity subsidiaries (i.e. the parent would ‘roll-up’ the accounting of its investment entity subsidiary).
Click here for a short presentation of EFRAG's position on the comment letter.