IASB Issued Narrow-scope Amendments to IFRS 10 & IAS 28

Previously, on 13 December 2012, IASB published for public comment ED/2012/6 Sale or Contribution of Assets Between an Investor and its Associate or Joint Venture (Proposed Amendments to IFRS 10 and IAS 28) (click here for the document). This Exposure Draft proposed narrow-scope amendments to IFRS 10 Consolidated Financial Statements and IAS 28 Investments in Associates and Joint Ventures (2011) to address an acknowledged inconsistency between the requirements in IFRS 10 and those in IAS 28 (2011), in dealing with the sale or contribution of a subsidiary. The main consequence of the proposed amendments is that a full gain or loss would be recognized on the loss of control of a business (whether it is housed in a subsidiary or not), including cases in which the investors retains joint control of, or significant influence over, the investee.

Within the ED, it said that the IASB proposed to amend IAS 28 (2011) so that :

1. the current requirements for the partial gain or loss recognition for transactions between an investor and its associate or joint venture only apply to the gain or loss resulting from the sale or contribution of assets that do not constitute a business, as defined in IFRS 3 Business Combinations; and
2. the gain or loss resulting from the sale or contribution of assets that constitute a business, as defined in IFRS 3, between an investor and its associate or joint venture is recognized in full.

The IASB also proposed to amend IFRS 10 so that the gain or loss resulting from the sale or contribution of a subsidiary that does not constitute a business, as defined in IFRS 3, between an investor and its associate or joint venture is recognized only to the extent of the unrelated investors’ interests in the associate or joint venture. The consequence is that a full gain or loss would be recognized on the loss of control of a subsidiary that constitutes a business, including cased in which the investor retains joint control of, or significant influence over, the investee.

Later, on 11 September 2014, IASB issued narrow-scope amendments to IFRS 10 Consolidated Financial Statements and IAS 28 Investments in Associates and Joint Ventures (2011).

The amendments will be effective from annual periods commencing on or after 1 January 2016.

Subscribers to eIFRS can download the document of Sale or Contribution of Assets between an investor and its Associate or Joint Venture (Amendments to IFRS 10 and IAS 28) from eIFRS