IAS 28.35 states that the entity's financial statements shall be prepared using uniform accounting policies for like transactions and events in similar circumstances. I've always taken this to me as follows: if the associate or joint venture holds investment property at fair value, whilst the group accounts for investment property at cost - the option is to either (i) adjust the associate's/joint venture's investment property back to cost (in the consolidation workings), and then apply equity accounting in the restated figures in consolidated financial statements, or (ii) restate the group's investment property at fair value in the consolidated financial statements and equity account the associate's/JV's results without adjustment. (ii) was always just theoretical to me, but I've got a case at hand which might warrant it because the associate's investment property's fair value is VERY high and client does not want to lose this value from the balance sheet - of course at the cost of having to fair value all of the Group's investment properties.
Not really any question here, just wondering if anyone else ever went down this route? Just asking out of curiousity other than anything else.
Alignment of joint venture's accounting policies in equity accounting
Re: Alignment of joint venture's accounting policies in equity accounting
I think it all depends on what are you able to do as an investor, because sometimes, you just don't have the info, and it's too hard to do the adjustments (including for the prior years). I think you would need to agree with the auditors depending on the materiality of the investment.
For example, you've got an investment in an associate, that only do accounting in local GAAP, e.g., without IFRS 2, IFRS 16, IAS 32, etc... As you are only have significant influence, and have not necessarily access to the itty bitty information that allow you to do the accounting retreatments, I think it could be argued that you just take it as it is.
But as you described, if the information is available and the impact in the P&L is material, but the investee doesn't want, I think, you would need to do it yourself. Unless your auditors exempt you from doing it. The key point is, you are not changing the way the associate prepares their own FS, you are changing the way you report your share in your reporting.
For example, you've got an investment in an associate, that only do accounting in local GAAP, e.g., without IFRS 2, IFRS 16, IAS 32, etc... As you are only have significant influence, and have not necessarily access to the itty bitty information that allow you to do the accounting retreatments, I think it could be argued that you just take it as it is.
But as you described, if the information is available and the impact in the P&L is material, but the investee doesn't want, I think, you would need to do it yourself. Unless your auditors exempt you from doing it. The key point is, you are not changing the way the associate prepares their own FS, you are changing the way you report your share in your reporting.
Re: Alignment of joint venture's accounting policies in equity accounting
Yep exactly, and in this case I think we're going to have to adjust at a consolidated level, by way of a consolidation adjustment. Thanks for your input!
Re: Alignment of joint venture's accounting policies in equity accounting
The second option would constitute a change in group's accounting policy with all the IAS 8 implications like retrospective restatement.
Also, IAS 40.31 states that switching from the fair value model to the cost model will rarely lead to a more relevant financial statement presentation.
Also, IAS 40.31 states that switching from the fair value model to the cost model will rarely lead to a more relevant financial statement presentation.
Re: Alignment of joint venture's accounting policies in equity accounting
Right on all counts - in fact especially regarding your first point they'd have to open up the 3rd balance sheet.Marek Muc wrote: ↑25 Mar 2024, 18:47 The second option would constitute a change in group's accounting policy with all the IAS 8 implications like retrospective restatement.
Also, IAS 40.31 states that switching from the fair value model to the cost model will rarely lead to a more relevant financial statement presentation.
