The International Accounting Standards Board has published an exposure draft to amend International Accounting Standard 28 regarding the application of the equity method.
The amendment included requirements related to changes in ownership interest in associates. SOCPA, represented by its Accounting Standards Council, expressed its view on the amendment, indicating agreement with the amendment's approach regarding how to measure the cost of investment in an associate when the investing entity obtains significant influence leading to the application of the equity method, where the proposed amendment stipulates remeasuring the previously held interest at fair value before obtaining significant influence.
However, SOCPA expressed reservations about not measuring the held interest that gives the entity significant influence when the entity increases its investment in the associate, as the proposed amendment is inconsistent with the principles established in IFRS 3 regarding step acquisition accounting. Similarly, SOCPA considered it appropriate to reconsider the proposed amendment requiring the investing entity to recognize the full gain or loss from transactions with the associate, and the amendment's lack of reference to transactions that may lack commercial substance.
The details of SOCPA's view can be accessed by clicking
here.