EFRAG Publishes Final Comment Letter on the IASB Equity Method of Accounting Exposure Draft
The IASB published its Exposure Draft, Equity Method of Accounting Investments in Associates and Joint Ventures (revised 202x) (ED) on 19 September 2024. The ED was open for comments until 20 January 2025. The ED addresses long-standing IAS 28 application questions and improves the disclosure requirements in IFRS 12 Disclosures of Interests in Other Entities and IAS 27 Separate Financial Statements.
In its final comment letter, EFRAG supports the ED's proposals related to the measurement of cost of an associate or joint venture (investee), transactions between an investor and its investees, disclosures, and impairment indicators.
At the same time, EFRAG has several concerns and, among its recommendations, has called for:
(a) further simplification of the proposed layered approach applied for step acquisitions of an investee;
(b) the development of a holistic, principle-based solution for non-exchange changes in ownership interests in an investee;
(c) exempting transactions with equity-accounted subsidiaries from the ED's proposals for separate financial statements, and
(d) the modification and clarification of the proposed transition requirements.
EFRAG also suggests the IASB includes a fundamental review of the equity method in its forthcoming agenda consultation.