This document is amended on the basis of the order of the Ministry of Finance of Russia dated June 4, 2018 N 125n from January 1, 2021.

international standard financial reporting(IAS) 28 Investments in Associates and Joint Ventures

Document as amended by:
( );
(Order of the Ministry of Finance of Russia dated June 27, 2016 N 98n) (Official website of the Ministry of Finance Russian Federation www.minfin.ru, 07/28/2016) (for the procedure for entry into force, see paragraph 2 of the order of the Ministry of Finance of Russia dated June 27, 2016 N 98n);
(Order of the Ministry of Finance of Russia dated June 27, 2016 N 98n) (Official website of the Ministry of Finance of the Russian Federation www.minfin.ru, 07/28/2016) ;
(Order of the Ministry of Finance of Russia dated July 20, 2017 N 117n) (Official website of the Ministry of Finance of the Russian Federation www.minfin.ru, 18.08.2017) ;
(order of the Ministry of Finance of the Russian Federation of March 27, 2018 N 56n) (Official Internet portal legal information www.pravo.gov.ru, 04/17/2018, N 0001201804170023) (for the procedure for entry into force, see paragraph 2 by order of the Ministry of Finance of Russia dated March 27, 2018 N 56n).
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Target

1. The purpose of this Standard is to define the accounting for investments in associates and the requirements for applying the equity participation when accounting for investments in associates and joint ventures.

Scope of application

2. This Standard shall be applied by all entities that are investors that have joint control or significant influence over an investee.

Definitions

3. In this standard, the following terms are used in specified values:

Associated organization An organization over which the investor has significant influence.

Consolidated Financial Statements - group financial statements in which the assets, liabilities, equity, income, expenses and cash flows of the parent and its subsidiaries are presented as belonging to a single economic entity.

Equity method - an accounting method in which investments are initially recognized at cost, and then their cost is adjusted to take into account changes in the investor's share in net assets investee after acquisition. The investor's profit or loss includes the investor's share of the investee's profit or loss, and the investor's other comprehensive income includes the investor's share of the investee's other comprehensive income.

Joint Venture - entrepreneurial activity which is jointly controlled by two or more parties.

Joint control - stipulated by the agreement separation of control over an activity, which occurs only when decisions regarding the relevant activity require the unanimous consent of the parties sharing control.

Joint venture - a joint arrangement that involves the parties that have joint control of the arrangement having rights to the net assets of the arrangement.

Joint Venture Member - a party to a joint venture that has joint control of that joint venture.

Significant influence - the power to participate in the financial and operating policy decisions of the investee, but not to control or jointly control those policies.

4. The following terms are defined in paragraph 4 of IAS 27 Separate Financial Statements and in Appendix A of IFRS 10 Consolidated Financial Statements and are used in this Standard with the meanings given in the IFRSs in which they are defined:

- control over the investment object;

- Group;

- parent organization

- separate financial statements;

- subsidiary organization.

Significant impact

5. If an entity directly or indirectly (eg through subsidiaries) owns 20 percent or more of the voting rights of an investee, the entity is considered to have significant influence unless there is compelling evidence to the contrary. However, if an entity directly or indirectly (for example, through subsidiaries) owns less than 20 percent of the voting rights of an investee, then the entity is not considered to have significant influence unless there is compelling evidence to the contrary. The presence of a major or controlling interest in another investor does not necessarily preclude the entity from having significant influence.

6. An entity's significant influence is usually evidenced by one or more of the following:

(a) representation on the board of directors or similar governing body of the investee;

(b) participation in the policy-making process, including participation in decisions on the payment of dividends or other distribution of profits;

(c) there are significant transactions between the entity and its investee;

(d) exchange of management personnel; or

(e) providing important technical information.

7. An entity may hold share warrants, share call options, debt or equity instruments that are convertible into ordinary shares, or other similar instruments that, if exercised or converted, could provide an entity with additional voting rights or reduce the other party's voting rights over the financial and operating policies of another entity (i.e., potential voting rights). The existence and effect of potential voting rights that are currently exercisable or convertible, including the potential voting rights of other entities, are factors that should be considered in assessing whether an entity has significant influence. Potential voting rights are not currently exercisable or convertible if, for example, they are not exercisable or convertible until a certain date in the future or before the occurrence of a certain event.

8. In assessing whether potential voting rights give rise to significant influence, an entity shall consider all facts and circumstances (including the terms and conditions for exercising potential voting rights and other agreements, whether considered individually or in the aggregate) that affect the potential rights. , except for the intentions of management and financial opportunity realize or convert these potential rights.

9. The entity loses significant influence over the activities of the investee when it loses the right to participate in the financial and operating policy decisions of the investee. The loss of significant influence may or may not be accompanied by a change in absolute or relative ownership interests. For example, this may occur if the associated entity becomes subject to control by a government, judicial, administrative or regulatory authority. It can also happen as a result of the conclusion of a contract.

Equity Method

10. Under the equity method, on initial recognition an investment in an associate or joint venture is recognized at cost and then book value increases or decreases by recognizing the investor's share of the profit or loss of the investee after the acquisition date. The investor's share of the profit or loss of the investee is recognized in the investor's profit or loss. Funds received from the investee as a result of the distribution of profits reduce the carrying amount of the investment. An adjustment to the carrying amount of an investment may also be necessary to reflect changes in the investor's proportionate interest in the investee that arise from changes in the investee's other comprehensive income. Such changes arise, in particular, in connection with the revaluation of property, plant and equipment and in connection with exchange rate differences from currency translation. The investor's share of these changes is recognized in the investor's other comprehensive income (see IAS 1 Presentation of Financial Statements) ).

11. Recognition of income based on a distribution of profits received may not be an adequate basis for measuring an investor's return on an investment in an associate or joint venture because the funds received from the distribution of profits may only slightly reflect the performance of the associate or joint venture. Because the investor has joint control or significant influence over the investee, the investor has an interest in the performance of the associate or joint venture and, therefore, in the return on its investment. An investor reflects its interest by including in the financial statements its share of the profit or loss of such an investee. The use of the equity method increases the information content of financial statements in terms of net assets and profit or loss of the investor.

12. If there are potential voting rights or other derivatives that contain potential voting rights, the entity's interest in an associate or joint venture is determined solely on the basis of existing ownership interests and does not reflect the possible exercise or conversion of potential voting rights and other derivatives, unless applicable point 13.

13. In some circumstances, an entity may, in substance, have effective ownership as a result of a transaction that currently gives it access to the income associated with an ownership interest. In such circumstances, the share allocated to the entity is determined by taking into account the possible exercise of potential voting rights and other derivatives that currently give the entity access to income.

14. IFRS 9 Financial Instruments does not apply to interests in associates and joint ventures that are accounted for using the equity method. If instruments containing current potential voting rights in substance give access to income associated with an ownership interest in an associate or joint venture, then those instruments are not subject to IFRS 9. In all other cases, instruments with potential voting rights in an associate or joint venture are accounted for in accordance with IFRS 9.

14A. An entity applies IFRS 9 also to other financial instruments in an associate or joint venture to which the equity method is not applied. These include long-term investments that, in substance, form part of the entity's net investment in an associate or joint venture (see paragraph 38). An entity applies IFRS 9 to such long-term investments before it applies paragraphs 38 and paragraphs 40–43 of this Standard. In applying IFRS 9, an entity does not take into account adjustments to the carrying amount of long-term investments that arise from the application of this Standard.
IFRS Long-Term Investments in Associates and Joint Ventures (Amendments to IAS 28) dated March 27, 2018)

15. If an investment or any interest in an investment in an associate or joint venture is not classified as held for sale in accordance with IFRS 5 Non-Current Assets Held for Sale and Discontinued Operations , then the investment or any remaining interest in the investment that is not classified as held for sale shall be classified as a non-current asset.

Application of the equity method

16 An entity with joint control or significant influence over an investee shall account for its investment in an associate or joint venture using the equity method, unless the entity is exempted from accounting for such investments using the equity method in accordance with paragraphs 17–19. .

Exemptions from application of the equity method

(Name as amended from 18 August 2017 IFRS Annual Improvements to IFRSs 2014-2016 Period dated 20 July 2017 .

17 An entity need not apply the equity method to account for its investment in an associate or joint venture if the entity is a parent that is exempt from preparing consolidated financial statements under the exception specified in the scope of paragraph 4(a) of IFRS 10 , or if all of the following are true:

(a) The entity is a wholly or partly owned subsidiary of another entity and its other owners, including those who would not otherwise have voting rights, have been informed that the entity does not apply the equity participation and do not object to it.

(b) The entity's debt or equity instruments are not traded open market(on domestic or foreign stock exchange or in the over-the-counter market, including local and regional markets).

(c) The entity has not filed its financial statements and is not in the process of filing its financial statements with the securities or other regulatory body for the purpose of listing any type of instrument on the open market.

(d) The entity's ultimate or intermediate parent prepares publicly available consolidated financial statements in accordance with the requirements of International Financial Reporting Standards, in which subsidiaries are consolidated or measured at fair value through profit or loss in accordance with IFRS 10 .
(Subparagraph (d) as amended effective 28 July 2016 of IFRS Investment Entities: Application of the Consolidation Exception (Amendments to IFRS 10, IFRS 12 and IAS 28) dated June 27, 2016 .

18. If an investment in an associate or joint venture is owned directly by an entity that specializes in venture capital investments or is a mutual fund, mutual fund or similar entity, including insurance funds investment type, or held through such an entity, in which case the entity may elect to measure those investments at fair value through profit or loss in accordance with IFRS 9. An entity must make this determination on a case-by-case basis for each associate or joint venture upon initial recognition of that associate or joint venture.
(Clause as amended from 18 August 2017 in IFRS Annual Improvements to IFRSs 2014-2016 Period dated 20 July 2017 .

19. If an entity has an investment in an associate in which a portion of the interest is held through a venture investment entity, mutual fund, a mutual fund or a similar entity, including investment-type insurance funds, an entity may choose to measure that interest of an investment in an associate at fair value through profit or loss in accordance with IFRS 9, regardless of whether such entities (an entity that specializes in venture capital investment, mutual fund, mutual fund or similar entity, including investment-type insurance funds) significant influence on that share of the investment. If an entity chooses to do so, it must apply the equity method to any portion of the remaining interest of its investment in an associate that it does not hold through a venture capitalist, mutual fund, mutual fund, or similar entity, including investment-type insurance funds. .

Investments classified as held for sale

20 An entity shall apply IFRS 5 to an investment, or a share of an investment in an associate or joint venture, that meets the classification criterion of “held for sale”. Any remaining interest in an investment in an associate or joint venture that has not been classified as held for sale must be accounted for using the equity method until the interest classified as held for sale is disposed of. Upon disposal, an entity shall account for its retained interest in an associate or joint venture in accordance with IFRS 9, unless the retained interest continues to be recognized as an associate or joint venture, in which case the entity shall use the equity method.

21. If an investment or an interest in an investment in an associate or joint venture previously classified as held for sale ceases to qualify for such classification, it shall be accounted for using the equity method retrospectively from the date it was classified as held for sale. The financial statements for all periods since the investment was classified as held for sale should be adjusted accordingly.

Termination of the equity method

22. An entity shall cease using the equity method from the date on which its investment ceases to be an associate or joint venture:

(a) If the investment becomes a subsidiary, the entity shall account for its investment in accordance with IFRS 3 Business Combinations and IFRS 10 .

(b) If the remaining interest in the former associate or joint venture is a financial asset, the entity shall measure the remaining interest at fair value. The fair value of the remaining interest should be measured as its fair value on initial recognition as a financial asset in accordance with IFRS 9 . An entity shall recognize in profit or loss any difference between:

(i) the fair value of the retained interest and proceeds from the disposal of a portion of the investment in the associate or joint venture; and

(ii) the carrying amount of the investment at the date the equity method is discontinued.

(c) If an entity ceases to use the equity method, the entity shall account for any amounts previously recognized in other comprehensive income in respect of those investments in the same manner as if the related assets and liabilities were disposed of directly with the investee.

23 Therefore, if a gain or loss previously recognized in other comprehensive income by an investee is reclassified to gain or loss on disposal of the related assets or liabilities, an entity reclassifies the gain or loss out of equity to profit or loss (reclassification adjustment) when the equity method ceases to be used. For example, if an associate or joint venture has accumulated exchange differences relating to foreign operations and the entity ceases to use the equity method, the entity shall reclassify to profit or loss the gain or loss previously recognized in other comprehensive income for those foreign operations.

24. If an investment in an associate becomes an investment in a joint venture or an investment in a joint venture becomes an investment in an associate, the entity continues to use the equity method and does not remeasure the remaining interest.

Ownership Changes

25. If an entity's ownership interest in an associate or joint venture is reduced but the investment continues to be classified as either an associate or a joint venture, respectively, the entity shall reclassify to profit or loss a portion of the income or loss previously recognized in other comprehensive the income associated with that decrease in ownership if that gain or loss were required to be reclassified to profit or loss on disposal of the related assets or liabilities.
IFRS Equity Method for Separate Financial Statements (Amendments to IAS 27) dated June 27, 2016 .

Procedures applied under the equity method

26. Many of the procedures for applying the equity method are similar to the consolidation procedures described in IFRS 10. In addition, the concepts underlying the procedures used in accounting for the acquisition of a subsidiary are also used in accounting for the acquisition of an investment in an associate or joint venture.

27. A group's interest in an associate or joint venture is the combined interest of the parent and its subsidiaries in that associate or joint venture. Interests held by other associates or joint ventures of the group are not taken into account for these purposes. If an associate or joint venture has subsidiaries, associates or joint ventures, profit or loss, other comprehensive income and net assets used in applying the equity method, is profit or loss, other comprehensive income and net assets recognized in the financial statement. statements of an associate or joint venture (including the associate's or joint venture's share of profit or loss, other comprehensive income and net assets of its own associates and joint ventures) after adjustments necessary to comply with the unified accounting policy(See paragraphs 35 and 36A).
(Paragraph as amended from 28 July 2016 to IFRS Investment Entities: Application of the Consolidation Exception (Amendments to IFRS 10, IFRS 12 and IAS 28) dated 27 June 2016 of the year .

28. Gains and losses arising from bottom-up and top-down transactions between an entity (including its consolidated subsidiaries) and its associate or joint venture are recognized in the entity's financial statements to the extent that they are not attributable to to the investor's interest in that associate or joint venture. Bottom-up transactions, for example, involve the sale of assets to an investor by an associate or joint venture. An example of top-down transactions would be the sale or contribution of assets to an associate or joint venture by an investor. The investor's share of the associate's or joint venture's profit or loss from these transactions shall be excluded.

29. If top-down transactions indicate a decrease in the net realizable value of the assets to be sold or invested, or an impairment loss on those assets, then those losses should be recognized in full by the investor. If bottom-up transactions indicate a decrease in the net realizable price of the assets to be purchased, or an impairment loss on those assets, then the investor should recognize its share of those losses.

30. A contribution of a non-monetary asset to an associate or joint venture in exchange for an equity interest in the associate or joint venture shall be accounted for in accordance with paragraph 28, unless such contribution is devoid of commercial content as defined in IAS 16 Property, Plant and Equipment . If such a contribution is devoid of commercial substance, the gain or loss is treated as unrealized and is not recognized unless paragraph 31 also applies. Such unrealized gain or loss must be eliminated against investments accounted for using the equity method and should not be presented as deferred profit or loss in the consolidated statement of financial position entity or in the statement of financial position in which the investment is accounted for using the equity method.

31. If, in addition to receiving an equity interest in an associate or joint venture, an entity also receives monetary or non-monetary assets, the entity fully recognizes in profit or loss the share of the gain or loss on the non-monetary contribution associated with the monetary or non-monetary assets received.

31A.

31B. [This paragraph concerns amendments not yet in force and is therefore not included in this edition.]

32. Investments are accounted for using the equity method from the date the entity becomes an associate or joint venture. On the acquisition of an investment, any difference between the cost of the investment and the entity's share of the net fair value of the identifiable assets and liabilities of the investee is accounted for as follows:

(a) Goodwill relating to an associate or joint venture is included in the carrying amount of investments. Amortization of this goodwill is not permitted.

(b) The excess of the entity's share of the net fair value of the associate's identifiable assets and liabilities over the cost of the investment is recognized as income in determining the investor's share of the profit or loss of the associate or joint venture in the period in which the investment is acquired.

In addition, necessary adjustments are made to the investor's share of the associate's or joint venture's post-acquisition profit or loss to reflect, for example, depreciation of depreciable assets based on their fair value at the acquisition date. Similarly, appropriate adjustments are made to the investor's share of the associate's or joint venture's post-acquisition profit or loss to account for impairment losses, such as impairment of goodwill or property, plant and equipment.

33. When applying the equity method, an entity uses the most recent financial statements of the associate or joint venture. If the reporting period end dates of the entity and the associate or joint venture are different, the associate or joint venture prepares financial statements for the entity as at the same reporting period end date as the entity's own financial statements, unless this is impracticable.

34. If in accordance with paragraph 33, the financial statements of an associate or joint venture used in applying the equity method are prepared at a different reporting date from the entity's financial statements, adjustments must be made to reflect the effect of significant transactions or events that occur between that date and the reporting date. organization date. In any event, the difference between the end of the reporting period of the associate or joint venture and the end of the reporting period of the entity shall not exceed three months. The duration of the reporting periods and the difference in the dates of the end of the reporting periods should be the same from period to period.

35. An entity's financial statements should be prepared using uniform accounting policies for similar transactions and events occurring in similar circumstances.

36. Except as described in paragraph 36A, if an associate or joint venture applies an accounting policy that is different from the entity's accounting policy for similar transactions and events occurring in similar circumstances, an adjustment shall be made to bring the accounting policy of the associate or joint venture in accordance with accounting policy entity if the financial statements of an associate or joint venture are used by an entity applying the equity method.
(Paragraph as amended from 28 July 2016 to IFRS Investment Entities: Application of the Consolidation Exception (Amendments to IFRS 10, IFRS 12 and IAS 28) dated 27 June 2016 of the year .

36A. Notwithstanding the requirement in paragraph 36, if an entity that is not itself an investment entity has an interest in an associate or joint venture that is an investment entity, that entity may elect to retain the fair value measurement applied by its associate when applying the equity method. or joint venture that are investment entities to their own interests in subsidiaries. Such determination shall be made separately for each associate or joint venture that is an investment entity on the later of the following dates: (a) the date on which the associate or joint venture that is an investment entity is initially recognized; (b) the date on which the associate or joint venture becomes an investment entity; and (c) the date on which an associate or joint venture that is an investment entity first becomes parent organizations.
IFRS Investment Entities: Applying the Consolidation Exception (Amendments to IFRS 10, IFRS 12 and IAS 28) dated 27 June 2016; as amended effective 18 August 2017 IFRS Annual Improvements to IFRSs 2014-2016 Period. dated July 20, 2017 .

37. If an associate or joint venture has cumulative preference shares owned by parties other than the entity and classified as equity, the entity calculates its share of profit or loss after adjusting for the amount of dividends on such shares, whether or not those dividends are declared payable.

38 When an entity's share of the losses of an associate or joint venture equals or exceeds its share of the associate or joint venture, the entity derecognises its share of the further losses. The interest in an associate or joint venture corresponds to the carrying amount of the investment in the associate or joint venture accounted for using the equity method, together with long-term investments that, in substance, form part of net investment organization into an associate or joint venture. For example, an item that is not expected or probable to be settled in the foreseeable future is, in substance, an additional investment by the entity in an associate or joint venture. Such items may include preferred shares and long-term accounts receivable or long-term borrowings, but does not include trade receivables, trade payables or long-term receivables for which adequate collateral has been provided, such as secured loans. Losses recognized under the equity method in excess of the entity's investment in ordinary shares are attributed to the other components of the entity's interest in the associate or joint venture in reverse order of precedence (ie priority in liquidation).

39. After an entity's ownership interest is reduced to zero, additional losses and liabilities are recognized only to the extent that the entity has assumed legal or constructive obligations or made payments on behalf of the associate or joint venture. If an associate or joint venture subsequently recognizes a profit, the entity only resumes recognizing its share of that profit when its share of the profit equals the unrecognized share of the loss.

Impairment losses

40 After applying the equity method, including recognizing losses of an associate or joint venture in accordance with paragraph 38, an entity applies paragraphs 41A–41C to determine objective evidence that the net investment in the associate or joint venture is impaired.
IFRS (IFRS) dated June 27, 2016 N 9.

41. Item deleted as of 26 April 2018 - IFRS Long-Term Investments in Associates and Joint Ventures (Amendments to IAS 28) dated 27 March 2018..

41A. A net investment in an associate or joint venture is impaired and an impairment loss occurs if and only if there is objective evidence of impairment as a result of one or more events that have occurred since the net investment was initially recognized (“loss event”), and such loss event(s) has an impact on the estimated future cash flows of the net investment that can be estimated reliably. It may not be possible to identify one specific event that gives rise to the impairment. Impairment can be caused by a combination of events. Losses that are expected to result from future events are not recognized, whether or not they are probable. Objective evidence that the net investment is impaired includes observable evidence of the following loss events that become known to the entity:

(a) significant financial difficulty for an associate or joint venture;

(b) a breach of contract, such as a default or evasion by an associate or joint venture;

(c) the granting by an entity of an assignment to its associate or joint venture, for economic or legal reasons relating to their financial difficulties, that would not otherwise have been granted;

(d) bankruptcy or other financial reorganization of the associate or joint venture becomes probable; or

(e) the disappearance of an active market for the net investment as a result of an associate's or joint venture's financial difficulties.

41b. The disappearance of an active market as a result of the cessation of open trading in equity or financial instruments of an associate or joint venture is not evidence of impairment. decline credit rating associate or joint venture or a decrease in the fair value of an associate or joint venture is not in itself evidence of impairment, although it may be indicative of impairment when taken together with other available information.
(The paragraph is additionally included from January 1, 2018 IFRS (IFRS) dated June 27, 2016 N 9)

41C. In addition to the types of events described in paragraph 41A, objective evidence of an impairment of the net investment in equity instruments of an associate or joint venture includes information about significant changes with an adverse effect that have occurred in the technological, market, economic or legal environment in which the associate or the joint venture engages in activities that indicate that the cost of the investment in the equity instrument may not be recovered. A significant or prolonged decline in the fair value of an investment in an equity instrument below its cost is also objective evidence of impairment.
(The paragraph is additionally included from January 1, 2018 IFRS (IFRS) dated June 27, 2016 N 9)

42 Because goodwill that is part of the carrying amount of an investment in an associate or joint venture is not recognized separately, it is not subject to separate impairment testing using the requirements for the goodwill impairment test in IAS 36 Impairment of Assets. Instead, the entire carrying amount of investments is tested for impairment under IAS 36 as a single asset by comparing their recoverable amount (which is the greater of value in use or fair value less costs to sell) with their carrying amount where when the application of the requirements in paragraphs 41A–41C indicates that the investment may have been impaired. An impairment loss recognized in such circumstances is not allocated to any asset, including goodwill, that is part of the carrying amount of the investment in the associate or joint venture. Therefore, any reversal of that impairment loss is recognized in accordance with IAS 36 if the recoverable amount of the net investment subsequently increases. In determining the value in use of a net investment, an entity evaluates:

(a) its share of the present value of estimated future cash flows expected to be generated by the associate or joint venture, including cash flows from the operations of the associate or joint venture and proceeds from the ultimate disposal of investments; or

(b) the present value of the estimated future dividend cash flows expected to be received from the investment and from the ultimate disposal of the investment.

Under the right assumptions, both methods give the same result.
(Clause as amended by IFRS dated June 27, 2016 N 9, effective from January 1, 2018.

43. The recoverable amount of an investment in an associate or joint venture is estimated on a case by case basis, unless the associate or joint venture generates cash inflows from continuing operations that would be substantially independent of cash inflows from other assets of the organization.

Separate financial statements

44 An investment in an associate or joint venture shall be accounted for in the entity's separate financial statements in accordance with paragraph 10 of IAS 27 (as amended in 2011).

Effective date and transitional provisions

45 An entity shall apply this Standard for annual periods beginning on or after 1 January 2013. Early application is allowed. If an entity applies this Standard for an earlier period, it shall disclose that fact and apply the Standard at the same time as IFRS 10, IFRS 11 "joint venture" IFRS 12 "Disclosure of information about participation in other organizations" and IAS 27 (as amended in 2011).

45A. IFRS 9, issued in July 2014, amended paragraphs 40–42 and added paragraphs 41A–41C. An entity shall apply those amendments at the same time as it applies IFRS 9.
(The paragraph is additionally included from January 1, 2018 IFRS (IFRS) dated June 27, 2016 N 9)

45b. The Equity Method for Separate Financial Statements (Amendments to International Financial Reporting Standard (IAS) 27) issued in August 2014 amended paragraph 25. An entity shall apply the amendment for annual periods beginning January 1, 2016 or after that date, retrospectively in accordance with IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors. Early application is allowed. If an entity applies the amendments for an earlier period, it shall disclose that fact.
(Item was additionally included from July 28, 2016 in IFRS Equity Method in Separate Financial Statements (Amendments to IAS 27) dated June 27, 2016)

45A-45C. [These paragraphs relate to amendments not yet in force and are therefore not included in this edition.]

45D. Investment Entities: Applying the Consolidation Exception (Amendments to International Financial Reporting Standards (IFRS) 10, International Financial Reporting Standards (IFRS) 12 and International Financial Reporting Standards (IAS) 28), issued in December 2014, amended changes to paragraphs 17, 27 and 36 and added paragraph 36A. An entity shall apply these amendments for annual periods beginning on or after January 1, 2016. Early application is allowed. If an entity applies the amendments for an earlier period, it shall disclose that fact.
(The paragraph was additionally included from 28 July 2016 IFRS Investment Entities: Applying the Consolidation Exception (Amendments to IFRS 10, IFRS 12 and IAS 28) dated 27 June 2016)

45E. Document "Annual Improvements to International Financial Reporting Standards, period 2014-2016." , issued in December 2016, amended paragraphs 18 and 36A. An entity shall apply these amendments retrospectively in accordance with IAS 8 for annual periods beginning on or after 1 January 2018. Early application is allowed. If an entity applies the amendments for an earlier period, it shall disclose that fact.
(Item was additionally included from 18 August 2017 in IFRS Annual Improvements to IFRSs 2014-2016 period dated 20 July 2017)

45g. Document " Long-term investments to associates and joint ventures issued in October 2017, added paragraph 14A and deleted paragraph 41. An entity shall apply the amendments retrospectively in accordance with IAS 8 for annual periods beginning on or after 1 January 2019, unless specified in paragraphs 45H–45K Early application is permitted If an entity applies the amendments early, it must disclose that fact.
(The paragraph was additionally included from April 26, 2018 in IFRS Long-term Investments in Associates and Joint Ventures (Amendments to IAS 28) dated March 27, 2018)

45H. An entity that first applies the amendments in paragraph 45G at the same time as it initially applies IFRS 9 to the long-term investments described in paragraph 14A.
(The paragraph was additionally included from April 26, 2018 in IFRS Long-term Investments in Associates and Joint Ventures (Amendments to IAS 28) dated March 27, 2018)

45i. An entity that first applies the amendments in paragraph 45G after initially applying IFRS 9 shall apply the transitional provisions in IFRS 9 necessary to apply the requirements in paragraph 14A to long-term investments. For these purposes, references to the date of initial application of IFRS 9 should be treated as references to the start date of the annual reporting period in which an entity first applies the amendments (date of initial application of the amendments). An entity is not required to restate historical information to reflect the application of these amendments. An entity may restate historical information only if such restatement is possible without the use of more recent information.
(The paragraph was additionally included from April 26, 2018 in IFRS Long-term Investments in Associates and Joint Ventures (Amendments to IAS 28) dated March 27, 2018)

45J. On first application of the amendments in paragraph 45G, an entity that applies the temporary exemption from IFRS 9 in accordance with IFRS 4 Insurance Contracts need not restate historical information to reflect the application of those amendments. An entity may restate historical information only if such restatement is possible without the use of more recent information.
(The paragraph was additionally included from April 26, 2018 in IFRS Long-term Investments in Associates and Joint Ventures (Amendments to IAS 28) dated March 27, 2018)

45K. If an entity does not restate historical information in accordance with paragraph 45I or paragraph 45J, at the date of initial application of those amendments, it shall recognize in the opening balance of retained earnings (or other component of equity, as applicable) the difference between:

(a) the previous carrying amount of the long-term investments specified in paragraph 14A at that date; and

(b) the carrying amount of those long-term investments at that date.
(The paragraph was additionally included from April 26, 2018 in IFRS Long-term Investments in Associates and Joint Ventures (Amendments to IAS 28) dated March 27, 2018)

References to IFRS 9

46 If an entity applies this Standard but is not yet applying IFRS 9, any reference to IFRS 9 shall be read as a reference to IAS 39.

Termination of IAS 28 (revised 2003)

47 This Standard replaces IAS 28 "Investments in associates"(revised in 2003).

Revision of the document, taking into account
changes and additions prepared
JSC "Kodeks"

International Financial Reporting Standard (IAS) 28 Investments in Associates and Joint Ventures (as amended March 27, 2018)

Consider the standard IAS (IAS) 28 and the features of accounting for investments in associated companies and joint ventures, and what constitutes significant influence and the equity method.

Another very common type of investment is an associate over which the investor has significant influence.

The accounting rules for such investments are determined IAS 28 Investments in Associates and Joint Ventures. Consider the main provisions of this standard.

What is the purpose of IAS 28?

The objective of IAS 28 Investments in Associates and Joint Ventures is to define:

• accounting rules for investments in associates;
• requirements for applying the equity method when accounting for investments in associates and joint ventures.

Recall what these terms mean:

Associated organization ("associate") is a company over which the investor has significant influence.

joint venture is a joint arrangement in which the parties have joint control of an entity and have rights to the net assets of the entity.

What is significant influence and how to identify it?

IAS 28 defines significant influence as the right to participate in decision-making related to the financial and operating (economic) policy of the company, while NOT having full or joint control over the adoption of these decisions.

It can sometimes be difficult to determine whether we are dealing with control or significant influence - and at the same time, the accountant cannot be mistaken in this matter, since all further accounting and financial reporting depend on this classification.

How to confirm the existence of a significant impact?

The main indicator of significant influence is (directly or indirectly) the ownership of more than 20% of the voting shares of the investee.

This is not a strict rule. and it often happens that in fact such a share does not correspond to significant influence.

Sometimes it happens that when an investor owns more than 20% of the votes (but less than 50), he gets control over the investee.

Let's say company ABC owns 40% of company XYZ. The remaining 60% is distributed among a large number of small investors, each of which holds a share of no more than 1%.

In this case, ABC does not hold a controlling majority of votes (more than 50%), and its share exceeds 20%, which may indicate significant influence.

But since the other investors own a maximum of 1% each, the likelihood of overriding ABC's vote in major decisions is very low, so ABC may actually have control over Company XYZ rather than significant influence. Of course, this situation should be studied in more detail.

Other ways to prove significant influence are as follows:

• The investor sits on the board of directors (or other equivalent governing body) of the company.
• The investor participates in the process of developing the company's policy (including decisions on the payment of dividends).
• There are significant transactions between the investor and the company.
• There is an exchange of management personnel between the investor and the company.
• The company provides the investor with the necessary technical and management information.

When assessing significant influence, you should always look at potential voting rights (in the form of stock options, convertible debt instruments, etc.).

How to apply the equity method?

Once an investor obtains significant influence or joint control of a joint venture, it must apply equity method.

The main principles of the equity method are:

On initial recognition:

1. Investments in an associate or joint venture are recognized at cost. Wiring:

• Debit.
• Credit. Cash (bank account, etc.).

2. If there is a difference between the cost of the investment and the investor's interest in the company (measured at the net fair value of identifiable assets and liabilities), then accounting depends on whether the difference is positive or negative:

• If the difference is positive (the cost is higher than the investor's share), then there is goodwill that is not recognized separately. It is included in the cost of the investment and is not depreciated.
• When the difference is negative (cost below the investor's share), it is recognized as income in profit or loss in the period in which the investment is acquired.

Subsequent accounting, after initial recognition:

1. The carrying amount of the investment is increased or decreased by the investor's share of net profit or loss on investment after the acquisition date. Wiring:

• Debit. Investments in the statement of financial position and
• Credit. Income of an associate in profit or loss.

Or, conversely, in the event of a loss of an associated company.

When an associate or joint venture incurs losses and those losses exceed the carrying amount of the investment, the investor cannot reduce the carrying amount of the investment below zero. The investor simply stops incurring further losses.

2. When a company distributes dividends to an investor, the distribution reduces the carrying value of the investment. Wiring:

• Debit. Cash (or whatever is applicable) and
• Credit. Investments in the statement of financial position.

Equity method procedures.

The equity method procedures are very similar to the consolidation procedures described in IFRS 10 Consolidated Financial Statements:

• Both the investor and the investee must apply uniform accounting policies for such transactions.
• The same reporting date is used unless this is impracticable.
• Investor's share of profit or loss from mutual operations "bottom-up" ("upstream") and "top-down" ("downstream") excluded. Thus, you do not eliminate account balances (receivable or accounts payable) at the end of the reporting period, but you exclude the investor's share of the profits.

When is the equity method not applicable?

An investor does not need to apply the equity method in the following circumstances:

1. The investor is a parent company that does not need to prepare consolidated financial statements in accordance with the exceptions provided in paragraph IFRS 10:4(a), which is as follows:

• The company is subsidiary wholly or partly controlled by another investor, and the owners of that other investor company are informed and do not object to the fact that the subsidiary does not apply the equity method;
• The entity's debt or equity instruments are not traded on the open market;
• The entity does not file its financial statements with the Securities Commission or other similar authority for the purpose of issuing financial instruments of any class on the open market;
• The ultimate or any intermediate parent of the investee prepares consolidated financial statements in accordance with IFRS that are available for public use.

2. When an investment in an associate or joint venture is held in an entity that is a venture capital, mutual or mutual fund or similar entity, then the investor may measure the investment at fair value through profit or loss in accordance with IFRS 9 (and thus, do not use the equity method). The same applies if an investor has invested in an associate part of which is owned by such entities.

It should be added here that if investments meet the criteria of IFRS 5 and are classified as held for sale, the investor should apply IFRS 5 to them, and not the equity method (if this applies only to part of the investment, then IFRS applies to that part (IFRS) 5).

When to stop using the equity method?

An investor ceases to apply the equity method when its investee ceases to be an associate or joint venture.

The method of termination depends on the specific circumstances. For example, if the investee becomes a subsidiary, then the investor stops using the equity method and starts using full consolidation in accordance with IFRS 10 / IFRS 3.

1. Introduction ‌

   IAS 28 Investments in Associates and Joint Ventures

   
   

   establishes the accounting principles for investments in associates;

   describes the equity accounting requirements for investments in associates and joint ventures.

   However, it does not apply to accounting for investments that belong to:

   
   

   venture funds; or

   joint, mutual funds and similar organizations, including insurance investment funds.

   
   

   Investments in associates and joint ventures by such companies may be carried at fair value through profit or loss in accordance with IFRS 9 Financial Instruments.

   
   

2. Definitions ‌

   Associated company (associate)is a company in which the investor has significant influence.

   
   

   Significant impact (significant influence)is the ability to participate in decision-making regarding the financial and operating policies of the company, but not to control or jointly control it.

   
   

   Equity Method (equity method)is an accounting method in which investments are initially recognized at cost of acquisition and then adjusted for post-acquisition changes in the investor's share of the investee's net assets. The financial result of the investor includes its share in the profits and losses of the company - the object of investment, and the other comprehensive income of the investor includes a share in the other comprehensive income of the company - the object of investment.

   
   

3. Significant influence ‌

   The presence of significant influence is usually characterized by the ownership of 20% to 50% of the voting shares of the investee.

   
   

   However, these limits of influence are not considered absolute. An investor may have significant influence without having such a stake. At the same time, the presence of a large block of shares does not always indicate the possibility of significantly influencing the activities of the invested company.

   
   

   The standard describes additional factors that indicate the existence of a material influence:

   representation in the board of directors or similar management body of the investment object;

   participation in the process of developing the policy of the investment object, including participation in decision-making regarding the payment of dividends;

   large transactions between the investor and the investee company;

   exchange of management personnel;

   providing important technical information.

   
   

   It is also necessary to take into account the existence of convertible financial instruments, which, if converted, can provide the investor with the possibility of significant influence.

   
   

   An entity loses significant influence when it loses the ability to participate in the financial and operating policy decisions of an investee, and the loss of significant influence is not necessarily accompanied by a change in voting share.

   
   

4. Equity Method ‌

   Investor reflects on a separate line in the statement of financial position, an investment in an associate or joint venture, and one line in the statement of profit or loss and other comprehensive income, a share of the profit or loss and other comprehensive income of an associate or joint venture.

   
   

   According to the equity method:

   
   

   investments are initially recognized at cost;

   their carrying amount increases or decreases by the investor's recognized share of the profit or loss of the investee after the date of acquisition;

   the income received from the investee in the form of dividends reduces the carrying value of the investment;

   adjustments to the carrying amount may also be necessary to reflect changes in the investor's share of the investee's other comprehensive income (for example, income arising from the revaluation of property, plant and equipment). The investor's share of changes in other comprehensive income is presented as a single line item in the investor's other comprehensive income.

   
   

   If an investor's share of the losses of an associate or joint venture exceeds its share of the investment in it, then it derecognises further losses.

   
   

   If the associate or joint venture subsequently shows income, the investor only resumes recognizing its share of income when its share of income has been compared to the share of unrecognized losses.

   In the investor's separate accounts, investments in subsidiaries, associates and joint ventures controlled companies that were not classified as held for sale and were not part of the disposal groups are accounted for:

   
   

   or at cost

   or in accordance with IFRS 9 “ Financial instruments».

   1. 
      

      When the reporting dates of an investor and its associate or joint venture are different, the associate or joint venture must prepare financial statements on the same date as the investor's reporting date, if possible.

      
      

      If the reporting dates are not the same, an adjustment must be made for significant transactions or events between them.

      
      

      The difference between reporting dates should not exceed three months and should remain the same from period to period.

      
      

      
      

      If an associate or joint venture adopts accounting policies that differ from those of the investor, adjustments must be made to bring them closer together.

      
      

      
      

      The previous example of using the equity method did not contain the difficulties associated with the difference between the amount of the investor's actual costs of acquiring shares and the book value of the share of the net assets of the investee company. This difference must first be decomposed into two components:

      
      

   the difference between the carrying value and the fair value of a share of the net assets of the investee;

   the difference between the actual cost of the investment and the fair value of the respective share of net assets. It is this difference that is goodwill.

   
   

   The assets of the investee used to calculate goodwill must not include goodwill recognized in the separate financial statements of the associate or joint venture. An investor recognizes a separate intangible asset of an investee only if it meets the definition intangible assets in accordance with

   IAS 38 Intangible Assets.

   
   

   The standard requires that positive goodwill arising on the acquisition of an associate or joint venture be included in the carrying amount of the investment and tested for impairment.

   The excess of the investor's interest in the identifiable assets, liabilities and contingent liabilities of the associate or joint venture over the investment should be recognized as income in the period in which the associate or joint venture was acquired. Gain on acquisition is included in the same line item in the income statement that reflects the investor's share of the associate's or joint venture's post-acquisition net income.

   
   

   
   

   $10,000,000. Undestributed profits company D on that date was

   $2,000,000. Below is the fair value of entity D at the acquisition date.

   
   

   	Book value	fair value	Comments
   			Service life at date of purchase 4 years

   
   

   The fair value of Entity D's remaining net assets at the acquisition date approximated their carrying amounts.

   
   

   The goodwill impairment test performed on December 31, 2013 indicated that it needed to be impaired by $200,000.

   
   

   
   

   Investment in D
   Other net assets
   Share capital
   Undestributed profits

   
   

   
   

   
   

   
   

   Consolidated statement of financial position

   
   

   Investment in associate (P3)
   Other net assets
   Share capital
   Retained earnings (P4)
   P1. Net assets of JSC

   
   

   As of acquisition date As of reporting date

   
   

   Share capital 6,000
   Retained earnings 2,000
   Building cost adjustment 4,000
   Land value adjustment (500)
   P2. Goodwill
   Investment
   - Share in net assets at the date of purchase (40% x 11,500)
   Goodwill at the date of purchase
   Goodwill impairment loss
   Goodwill at the reporting date
   P3: Investment in associate
   Initial investment
   Goodwill impairment loss
   Investment in associate at the reporting date

   
   

   P4. Group retained earnings
   Retained earnings M
   M's share in the change in net assets (40% x (17,500 – 11,500))
   Goodwill impairment loss
   Group retained earnings

   
   

5. Accounting for transactions between an investor and an associate or an investor and a joint venture ‌

In some cases, transactions between an investor and an associate or joint venture will require certain adjustments to financial results when taking into account the share of the investor's profits in the income of the investee.

In accordance with the general concept of sales accounting, profit can only be recognized when it arises from transactions with unrelated parties on market conditions. In any event, the issue does not arise if the sale and purchase transactions between the investor and the associate or joint venture are at book value, without recognizing any financial results.

Where the transaction price differs from the book value, appropriate adjustments must be made. While full consolidation of the financial statements of the subsidiary and the investor excludes all internal transactions and, accordingly, profits and losses, when applying the equity method, only the profit component from the transaction between the investor and the associate or joint venture is excluded.

The exclusion of income and expenses on transactions is not required, since the equity method does not involve the inclusion of the turnover of the company - the object of investment in the investor's reporting.

However, it is necessary to exclude profits from such transactions in the proportion corresponding to the percentage of the investor's ownership in the capital of the associate or joint venture. This applies both to sales from an investor to an associate or joint venture and, conversely, to sales from an associate or joint venture to an investor.

The process of profit exclusion in transactions related to the transfer of fixed assets is similar to the example discussed above, however, the recognition of financial results for such transactions occurs simultaneously with the depreciation of the transferred fixed assets.

Exclusion of profit from operations related to fixed assets.

Assume that Ant, which owns a 25% stake in Ex, sells a building to Ex, with a residual life of beneficial use five years with a profit of $100,000. The sale was made at the end of 2010. Ex uses the straight-line depreciation method and plans to write off the cost of this building on a straight-line basis over 2011-2015.

1. Impairment losses ‌

   Goodwill is part present value an investment in an associate or a joint venture and is not recognized separately, so goodwill is not separately tested for impairment in accordance with the requirements of IAS 36 Impairment of Assets.

   
   

   Instead of testing for impairment of goodwill, an impairment test is carried out on the investment as a single asset by comparing the carrying amount and the recoverable amount (the higher of value in use and fair value less costs to sell).

   Impairment testing is carried out if, in accordance with IAS 36, there is an indication of impairment.

1. 35. Investments in associates - IAS 28

An associate is an entity in which the investor has significant influence, but which is neither a subsidiary nor a joint venture.

“Significant influence” means the ability to participate in the financial and operating policy decisions of the investee without the ability to control those policies. ©

It is assumed that such influence exists in cases where the investor owns at least 20% of the voting shares (interests) of the investee, and is absent in cases where it owns less than 20%. These assumptions are rebuttable if the contrary can be shown.

Associates are accounted for using the equity method unless they qualify under IFRS 5 for recognition as assets held for sale. Under the equity method, an investment in an associate is initially recognized at cost. In Consolidated and Individual Financial Statements 40 IFRS 2012 Summary thereafter, their carrying amount is increased or decreased by the investor's share of profit or loss and other changes in the associate's net assets in subsequent periods of acquisition. Investments in associates are treated as non-current assets and are presented as a single line item in the balance sheet (including goodwill arising on acquisition). The investment in each individual associate, as a single asset, is tested for possible impairment in accordance with IAS 36 Impairment of Assets if there is any indication of impairment provided in IAS 39. If the investor's share of the associate's loss exceeds the carrying amount the value of its investment, the carrying amount of the investment in the associate is reduced to zero. Additional losses are not recognized by the investor unless the investor has an obligation to finance the associate or has been provided with a security guarantee for the associate. In the individual (non-consolidated) financial statements of an investor, investments in associates may be recorded at cost or as financial assets under IAS 39. IAS 28 has been amended to include requirements for joint ventures, as well as associates, to be accounted for using the equity method.

1. 36 Ias 29:

primary goal

The main purpose of the Standard is to establish specific standards for entities reporting in the currency of hyperinflationary economies so that the financial information provided is comparable. The main reason for the adoption of this standard is the fact that a company's reporting in hyperinflationary conditions in local currency without recalculation has no value and misleads the user of reporting.

Definition of hyperinflation

Characteristics of the economic environment in a country that indicate the presence of hyperinflation include:

 the bulk of the population prefers to keep their wealth in non-monetary assets or in a relatively stable foreign currency;

 the bulk of the population considers money not from the position of the local currency, but from the position of a relatively stable foreign currency. Prices may be set in foreign currency;

 To buy or sell on credit, prices are used that compensate for the expected loss purchasing power for the credit period, even if it is short;Version 02

 interest rates, salaries and prices are linked to the price index;

 The cumulative inflation rate for 3 years approaches or reaches 100%.

Revision of financial statements The main principle of the standard is that the financial statements of a company reporting in the currency of a country with a hyperinflationary economy must be presented in units of measure in effect at the reporting date. Comparative data for prior periods should also be shown in units of measure in effect at the balance sheet date. Recalculation of reporting is done using a general price index.

Recalculation is made only for non-monetary assets and liabilities (advance payments to suppliers, shareholders' equity, inventories, property, plant and equipment, goodwill, reserves) that are carried at historical cost. An asset or liability is non-monetary if there is no right to receive a fixed or determinable amount of monetary units (advance payments to suppliers, equity capital, inventories, property, plant and equipment, goodwill, reserves). The restatement is made from the date of acquisition of the non-monetary asset or liability. Non-monetary assets and liabilities carried at fair value at the reporting date are not recalculated. Monetary items are not recalculated because, at the reporting date, these items already take into account changes in purchasing power. Profit or loss from the translation of non-monetary assets is taken to the income statement. When the economy recovers from a period of hyperinflation and an entity ceases to prepare and present financial statements in accordance with this Standard, it shall use amounts expressed in units of measure in effect at the end of the previous reporting period as the basis for balance values in future reporting.

Disclosures The main disclosures required by the standard are:

 Profit or loss on monetary items.

 An indication that the financial statements and related figures for prior periods have been restated to reflect changes in the overall purchasing power of the reporting currency.

 Whether the financial statements are based on cost or replacement cost.

 Name and level of the price index at the reporting date and changes in the index during the current and previous reporting periods. A sample disclosure under IAS 29 is given in Appendix No. 2.

Definitions

2 The following terms are used in this standard with the meanings specified:

Associate- an entity, including a non-equity entity such as a partnership, over which the investor has significant influence and which is neither a subsidiary nor an interest in a joint venture.

Consolidated financial statements- Group financial statements presented as those of a single economic entity.

Control is the power to govern the financial and operating policies of an entity so as to obtain benefits from its activities.

Equity method- an accounting method in which investments are initially recognized at cost and then their cost is adjusted to take into account the change in the investor's share in the net assets of the investee after the acquisition. The investor's profit or loss includes the investor's share of the profit or loss of the investee.

Joint control- Contractual distribution of control over economic activity; joint control exists only when the strategic financial and operating decisions require the unanimous approval of all parties that jointly control the economic activity(i.e. participants in a joint venture).

Separate financial statements- financial statements prepared by a parent, an investor in an associate or a member of a jointly controlled entity in which investments are accounted for on an equity basis rather than on the basis of the reported financial results and net assets of the investees.

Significant impact- the right to participate in the financial and operating policy decisions of the investee, which is not control or joint control over those policies.

Affiliated undertaking- an enterprise, including a non-stock enterprise, such as a partnership, which is controlled by another enterprise, called the parent enterprise.

3 Financial statements prepared using the equity method are not stand-alone financial statements, nor are financial statements of an entity that has no subsidiaries, associates, or interests in a joint venture.

4 Separate financial statements are those presented in addition to the consolidated financial statements, financial statements accounting for investments using the equity method and financial statements with proportionate consolidation of interests in joint arrangements. Separate financial statements may or may not be appendices to the said financial statements, accompany or not accompany the said financial statements.

5 Entities exempted from consolidation in accordance with paragraph 10 of IAS 27 Consolidated and Separate Financial Statements, from proportionate consolidation in accordance with paragraph 2 of IAS 31 Interests in Joint Ventures, or from application of the equity method in accordance with paragraph 13(b) of this Standard may present separate financial statements as their sole financial statements.

Significant impact

6 If an investor directly or indirectly (for example, through subsidiaries) owns 20 percent or more of the voting rights of an investee, the investor is considered to have significant influence unless there is compelling evidence to the contrary. Conversely, if an investor directly or indirectly (for example, through subsidiaries) owns less than 20 percent of the voting rights of the investee, then the investor is not considered to have significant influence unless there is compelling evidence to the contrary. The presence of a major or controlling interest in another investor does not necessarily preclude the investor from having significant influence.

7 An investor's significant influence is usually evidenced by one or more of the following:

(a) representation on the board of directors or similar governing body of the investee;

(b) participation in the policy-making process, including participation in decisions on the payment of dividends or other distribution of profits;

(c) there are significant transactions between the investor and the investee;

(d) exchange of management personnel;

(e) providing important technical information.

8 An entity may hold share warrants, share call options, debt or equity instruments that are convertible into ordinary shares, or other similar instruments that, if exercised or converted, could provide the entity with additional voting rights or reduce the voting rights of another party in in relation to the financial and operating policies of another entity (ie, potential voting rights). The existence and effect of potential voting rights that are currently exercisable or convertible, including potential voting rights of other entities, are factors that should be considered in assessing whether an entity has significant influence. Potential voting rights are not currently exercisable or convertible if, for example, they are not exercisable or convertible until a certain date in the future or before the occurrence of a certain event.

9 In assessing whether potential voting rights give rise to significant influence, an entity shall consider all the facts and circumstances (including the terms of exercise of potential voting rights and other contractual provisions, whether considered individually or in the aggregate) that affect the potential voting rights. other than the intention of management and the financial ability to exercise or convert those potential rights.

10 An entity loses significant influence over an investee when it no longer has the right to participate in the financial and operating policy decisions of the investee. The loss of significant influence may or may not be accompanied by a change in absolute or relative ownership interests. For example, this may occur if the associate becomes subject to control by a government, judicial, administrative or regulatory authority. It can also happen as a result of a contract.

Equity Method

11 Under the equity method, investments in an associate are initially recognized at cost and then their carrying amount is increased or decreased by recognizing the investor's share of the profit or loss of the investee after the acquisition date. The investor's share of the profit or loss of the investee is recognized in the investor's profit or loss. Funds received from the investee as a result of the distribution of profits reduce the carrying amount of the investment. The carrying amount of the investment is also adjusted to reflect changes in the investor's proportionate interest in the investee that arise from changes in the investee's other comprehensive income. Such changes arise, in particular, in connection with the revaluation of fixed assets and in connection with the difference from the translation of financial statements in another currency. The investor's share of these changes is recognized in the investor's other comprehensive income (see IAS 1 Presentation of Financial Statements (as revised in 2007)).

12 Where potential voting rights exist, the investor's share of the investee's profit or loss or changes in equity of the investee is based on current interests and does not reflect the potential exercise or conversion of potential voting rights.

Application of the equity method

13 An investment in an associate shall be accounted for using the equity method unless:

(a) investments are classified as held for sale in accordance with IFRS 5 Non-current Assets Held for Sale and Discontinued Operations;

(b) the exception in paragraph 10 of IAS 27 applies that a parent that also has an investment in an associate need not present consolidated financial statements;

(c) all of the following are true:

(i) the investor is a wholly owned subsidiary of another entity, or partially owned by another entity, and its other owners, including those who would not otherwise have voting rights, have been informed that that the investor does not apply the equity method and does not object to it;

(ii) the investor's debt or equity instruments are not publicly traded (on a domestic or foreign stock exchange or over the counter, including local and regional markets);

(iii) the investor has not filed its financial statements and is not in the process of filing its financial statements with the Securities Commission or other regulatory body for the purpose of placing any type of instrument on the open market;

(iv) the ultimate or intermediate parent of the investor prepares publicly available consolidated financial statements in accordance with the requirements of International Financial Reporting Standards.

15 If an investment in an associate previously classified as held for sale no longer meets the criteria for such classification, it shall be accounted for using the equity method from the date of classification as held for sale. The financial statements for all periods since the investment was classified as held for sale should be adjusted accordingly.

16 [Deleted]

17 Recognition of income in the amount of funds received from distributions of profits is not an adequate basis for measuring the return of an investor from an investment in an associate, because the funds received from distributions of profits may not reflect the results of the operations of an associate. Because the investor has significant influence over the associate, the investor has an interest in the associate's performance and hence the return on its investment. The investor reflects its interest by including in the financial statements its share of the profit or loss of such an associate. As a result, the application of the equity method ensures that the financial statements reflect more detailed information about the net assets and profit or loss of the investor.

18 An investor shall cease using the equity method from the date it ceases to have significant influence over the associate and, from that date, account for its investment in accordance with IAS 39, provided that the associate does not become a subsidiary or joint activities as defined in IAS 31. At the time of the loss of significant influence, the investor must measure at fair value any investment retained in the former associate. The investor must recognize in profit or loss any difference between:

(a) the fair value of any retained investment and any gains on disposal of a portion of an investment in an associate; and

(b) the carrying amount of the investment at the date when significant influence is lost.

19 When an entity ceases to be an associate and is accounted for in accordance with IAS 39, the fair value of the investment at that date shall be treated as its fair value at initial recognition as a financial asset in accordance with IAS 39.

19A If an investor loses significant influence in an associate, the investor shall account for any amounts recognized in other comprehensive income in respect of that associate on the same basis as if the associate had directly disposed of the related assets or liabilities. Therefore, if a gain or loss previously recognized in other comprehensive income by an associate is reclassified to profit or loss on disposal of the related assets or liabilities, the investor reclassifies the gain or loss from equity to profit or loss (as a reclassification adjustment) on the loss of significant influence in the associate. For example, if an associate has financial assets held for sale and the investor loses significant influence in the associate, the investor must reclassify to profit or loss the gain or loss previously recognized in other comprehensive income in respect of those assets. If an investor's ownership interest in an associate is reduced but the investee continues to be an associate, the investor shall reclassify to profit or loss only the related amount of the gain or loss previously recognized in other comprehensive income.

20 Many of the procedures for applying the equity method are similar to the consolidation procedures described in IAS 27. In addition, the concepts underlying the procedures used in accounting for the acquisition of a subsidiary are also used in accounting for the acquisition of an investment in an associate.

21 A group's interest in an associate is the combined interest of a parent and its subsidiaries in that associate. Investments by other associates or joint ventures of the group are not taken into account for these purposes. If an associate has subsidiaries, associates, or engages in joint ventures, the profit or loss and net assets used in applying the equity method are the profit or loss and net assets recognized in the associate’s financial statements (including the associate’s share of profits). or loss and net assets of own associates and joint ventures), after adjustments necessary to comply with uniform accounting policies (see paragraphs 26 and ).

22 Gains and losses arising from bottom-up and top-down transactions between an investor (including its consolidated subsidiaries) and an associate are recognized in the investor's financial statements only to the extent that they are not attributable to the investor's interest in this associate. Bottom-up transactions, for example, involve the sale of assets to an investor by an associate. An example of a top-down transaction would be the sale of assets to an associate by an investor. The investor's share of the associate's profit or loss from these transactions is subject to elimination.

23 An investment in an associate is accounted for using the equity method from the date that the associate becomes an associate. When acquiring an investment, the difference between the cost of the investment and the investor's share of the net fair value of the identifiable assets and liabilities of the associate is accounted for as follows:

(a) goodwill relating to an associate is included in the carrying amount of the investment. Amortization of this goodwill is not permitted.

(b) the excess of the investor's share of the net fair value of the associate's identifiable assets, liabilities and contingent liabilities over the cost of the investment is removed from the carrying amount of the investment and is instead recognized as income in determining the investor's share of the associate's profit or loss for that reporting period in which the investment was purchased.

In addition, necessary adjustments are made to the investor's share of the associate's post-acquisition profit or loss to reflect, for example, depreciation of assets based on their fair value at the acquisition date. Similarly, appropriate adjustments are made to the investor's share of the associate's post-acquisition profit or loss to account for impairment losses recognized by the associate, such as impairment adjustments for goodwill or property, plant and equipment.

24 When applying the equity method, the investor uses the most recent financial statements of the associate. If the investor's and the associate's reporting period end dates are different, the associate prepares financial statements for the investor at the same reporting period end date as the investor's own financial statements, unless this is impracticable.

(a) the fair value of investments in associates for which a quoted market price is available;

(b) aggregated financial information associates, including the aggregate amounts of assets, liabilities, revenue and profit or loss;

(c) reasons why the investor's assumption of lack of significant influence is violated in cases where the investor, directly or indirectly through subsidiaries, owns less than 20 percent of the voting rights or potential voting rights in respect of the investee, but believes that it has significant influence ;

(d) the reasons why the investor's presumption of significant influence is violated in cases where the investor, directly or indirectly through subsidiaries, owns 20 percent or more of the voting rights or potential voting rights in respect of the investee, but believes that it does not exercise significant influence;

(e) the end date of the reporting period of the financial statements of the associate, if those financial statements are used under the equity method and are prepared on a reporting date or for a reporting period that differs from the reporting date or reporting period of the investor, stating the reason for using a different reporting date, or another reporting period;

(f) the nature and extent of significant restrictions (eg, arising from loan agreements or regulatory requirements) on the ability of associates to transfer funds to an investor in the form of cash dividends or the repayment of loans or advances;

(g) the unrecognized share of the associate's loss, both for the reporting period and cumulatively, if the investor derecognises its share of the associate's loss;

(h) the fact that the associate is not accounted for under the equity method in accordance with paragraph 13;

(i) the aggregate financial information of associates, either individually or in groups that are not accounted for using the equity method, including the aggregate amounts of assets, liabilities, revenue and profit or loss.

38 Investments in associates accounted for using the equity method shall be classified as non-current (non-current) assets. The investor's share of the profit or loss of such associates and the carrying amount of such investments must be disclosed separately. The investor's interest in the discontinued operations of such associates must also be disclosed separately.

39 The investor's share of changes recognized in the other comprehensive income of an associate shall be recognized by the investor directly in other comprehensive income.

40 According to IAS 37 " Estimated reserves, contingent liabilities and contingent assets", the investor must disclose the following information:

(a) the investor's share of the associate's contingent liabilities assumed jointly with other investors;

(b) contingent liabilities arising from the investor's joint and several liability for all or any part of the associate's liabilities.

Effective Date and Transition Rules

41 An entity shall apply this Standard for annual periods beginning on or after 1 January 2005. Early application is welcome. If an entity applies this Standard for a period beginning before 1 January 2005, it shall disclose that fact.

41A IAS 1 (as revised in 2007) amended the terminology used in international standards financial reporting (IFRS). In addition, he amended paragraphs 11 41D [Deleted]

(c) SIC Clarification - 33 Consolidation and Equity Method Potential Voting Rights and Allocation of Interests.