IASB discussions of the Equity Method project

Keywords: Mazars, Thailand, IASB, Equity Method 

15 May 2023

• purchase of an additional interest in an associate while retaining significant influence; 
• elimination of internal transactions with associates. 

Purchase of an additional interest in an associate 

The Board tentatively decided that an investor purchasing an additional interest in an associate while retaining significant influence would recognise any difference between the cost of the additional interest and its additional share in the net fair value of the associate’s identifiable assets and liabilities as goodwill (or as a gain from a bargain purchase). 

Elimination of internal transactions with associates 

During discussions on the perceived conflict between IFRS 10 – Consolidated Financial Statements and IAS 28, the IASB tentatively decided that an investor should recognise the full gain or loss on all transactions with the associate. 

The Board is therefore proposing to abandon the principle of eliminating internal transactions with associates. If this decision were to be confirmed, the application of the equity method would no longer require the monitoring of transactions between the group and an associate in order to eliminate the portion of income classified as internal. 

In the same vein, the IASB is also likely to propose improvements to the disclosure requirements when an investor recognises the full gain or loss on transactions with the associate. 

Next month, the Board will continue its discussions on the equity method and will decide on the direction of this project, which is currently only at the research stage.