The International Accounting Standards Board (IASB) has published for public comment an Exposure Draft detailing proposals concerning the measurement of investments in subsidiaries, joint ventures and associates at fair value when those investments are quoted in an active market.
The proposed amendments to IFRS 10 Consolidated Financial Statements, IFRS 12 Disclosure of Interests in Other Entities, IAS 27 Separate Financial Statements, IAS 28 Investments in Associates and Joint Ventures and IAS 36 Impairment of Assets aim to address two issues.
The first relates to the unit of account for investments in subsidiaries, joint ventures and associates and on the fair value measurement when those investments are quoted in an active market (quoted investments).
Secondly, it aims to address the question on the measurement of the recoverable amount of cash-generating units (CGUs) on the basis of fair value less costs of disposal when they correspond to entities that are quoted in an active market (quoted CGUs).
The proposed amendments clarify that an entity should measure the fair value of quoted investments and quoted CGUs as the product of the quoted price for the individual financial instruments that make up the investments held by the entity and the quantity of financial instruments.
The Exposure Draft also includes proposed amendments to the Illustrative Examples for IFRS 13 Fair Value Measurement to clarify questions received relating to the application of the exception in paragraph 48 of IFRS 13.
The example illustrates the fair value measurement of an entity’s net exposure to market risks arising from a group of financial assets and financial liabilities whose market risks are substantially the same and whose fair value measurement is categorised within Level 1 in the fair value hierarchy.