Fair Value Measurement: Unit of Account (Amend IFRS 10, IFRS 12, IAS 27, IAS 28 and IAS 36)

BACKGROUND

The Accounting Standards Board (AcSB) is participating in the International Accounting Standards Board’s (IASB) project to amend International Financial Reporting Standard (IFRS) 10 Consolidated Financial Statements, IFRS 12 Disclosure of Interests in Other Entities, International Accounting Standard (IAS) 27 Separate Financial Statements, IAS 28 Investments in Associates and Joint Ventures and IAS 36 Impairment of Assets.

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The objective of this project is to clarify:

  • the unit of account for investments in subsidiaries, joint ventures and associates that are measured at fair value when those investments are quoted in an active market; and  
  • the measurement of the recoverable amount of cash-generating units that correspond to entities that are quoted in an active market.

The AcSB’s due process includes ensuring that Canadian entities’ financial reporting needs are considered by the IASB and issuing the AcSB’s own exposure draft on each IASB proposal.  Subject to the responses to the AcSB’s exposure draft on whether the IASB’s proposals are appropriate for application in Canada, the AcSB expects that the amendments will be incorporated into Canadian GAAP in accordance with the AcSB’s strategy of adopting IFRSs for publicly accountable enterprises.

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PROJECT NEWS

AcSB Response – Measuring Quoted Investments in Subsidiaries, Joint Ventures and Associates at Fair Value (Proposed amendments to IFRS 10, IFRS 12, IAS 27, IAS 28 and IAS 36 and Illustrative Examples for IFRS 13)
On January 16, 2015, the AcSB submitted a comment letter responding to the IASB’s Exposure Draft issued in September 2014. The letter supports the clarification that the unit of account for investments within the scope of IFRS 10, IAS 27 and IAS 28 is the investment as a whole. However, the letter disagrees that the product of the quoted price of the share multiplied by the quantity of financial instruments held, or PxQ, without adjustments, should always determine the fair value of quoted investments in subsidiaries, joint ventures and associates. The letter also disagrees that PxQ, without adjustments, should always determine the fair value of the recoverable amount of a cash generating unit that corresponds to a quoted entity measured on the basis of fair value less costs of disposal. The letter observes that mandating the use of unadjusted Level 1 inputs in order to result in measurements that are objective and verifiable comes at the expense of not reflecting marketplace realities accurately. Read the AcSB letter posted by the IASB.

AcSB Decision Summary – January 14, 2015
The AcSB discussed the feedback obtained from the outreach activities with Canadian stakeholders on the IASB Exposure Draft, Measuring Quoted Investments in Subsidiaries, Joint Ventures and Associates at Fair Value (Proposed amendments to IFRS 10, IFRS 12, IAS 27, IAS 28 and IAS 36 and Illustrative Examples for IFRS 13).”  The AcSB approved its response letter to the IASB’s Exposure Draft, subject to drafting changes to incorporate the Board’s comments.

AcSB Exposure Draft – Measuring Quoted Investments in Subsidiaries, Joint Ventures and Associates at Fair Value (Proposed amendments to IFRS 10, IFRS 12, IAS 27, IAS 28 and IAS 36)
November 4, 2014. The AcSB has issued an Exposure Draft that corresponds to the IASB’s Exposure Draft on this topic. Canadian stakeholders are encouraged to submit their comments, on the form provided, by January 16, 2015.

IASB Exposure Draft – Measuring Quoted Investments in Subsidiaries, Joint Ventures and Associates at Fair Value (Proposed amendments to IFRS 10, IFRS 12, IAS 27, IAS 28 and IAS 36 and Illustrative Examples for IFRS 13)
September 24, 2014.The IASB has issued an Exposure Draft proposing amendments regarding the measurement of investments in subsidiaries, joint ventures and associates at fair value when those investments are quoted in an active market. Canadian stakeholders are encouraged to submit their comments to the IASB by January 16, 2015.

 

Disclaimer: This project summary has been prepared for information purposes only. Decisions reported are tentative and reflect only the current status of discussions on this project, which may change after further Board deliberations. Decisions to publish Handbook material are final only after a formal ballot process.