BDO submits comment letter on IASB ED Equity Method of Accounting

BDO has submitted its comment letter to the IASB on Exposure Draft 2024/7: Equity Method of Accounting - IAS 28 Investments in Associates and Joint Ventures (Revised 202x).
BDO supports the objective of the IASB to provide clarifications on application questions related to the equity method.
However, BDO has expressed some concerns about the proposed requirements, which include the following:
  • Accounting for partial disposals, while retaining significant influence:
BDO believes greater clarity is required for the accounting for partial disposals, while retaining significant influence. BDO suggests that the IASB consider including an example to illustrate the requirement.
  • Proposed paragraph 34(a):
BDO believes that the proposed paragraph 34(a) requires further clarification and suggests the IASB to consider including an example to illustrate the requirement.
  • Accounting when an entity purchases or disposes of an interest with other changes occurring at the same time:
The proposed requirements currently do not address scenarios where purchases or disposals of investments occur while significant influence is retained occurring simultaneously with other changes in ownership interest. BDO believes that further explanatory guidance or illustrative examples would help provide greater clarity.
  • Proposed requirement to recognise in full gains and losses resulting from ‘upstream’ and ‘downstream’ transactions with associates and joint ventures:
BDO disagrees with the proposed requirement to recognise in full gains and losses resulting from ‘upstream’ and ‘downstream’ transactions with associates and joint ventures. BDO agrees with the concerns raised by Mr. Tadeu Cendon in his alternative view regarding the implications of this proposed amendment on separate financial statements of an entity that applies the equity method to measure its investment in subsidiaries. BDO suggests the IASB does not proceed with this aspect of the proposals.

The comment letter may be accessed here.