22 March 2013

Deloitte commented on equity method

Deloitte's IFRS Global Office published a comment letter responding to the IASB's ED 'Equity Method: Share of Other Net Asset Changes'. While Deloitte welcomes the initiative taken by the IASB dealing with the application of the equity method, it does not agree with the proposed solution.

Deloitte recommends that any solution should be based off the current practice which is consistent with the approach tentatively agreed upon by the IFRS Interpretations Committee. The comment letter states:

The proposed approach would result in a distortion of the investor’s equity and that current practice is, to a large extent, consistent with the approach tentatively agreed upon by the IFRS Interpretations Committee. The approach tentatively agreed upon by the IFRS Interpretations Committee reflects that indirect increases in ownership interest are substantially different from indirect decreases in ownership interest and that both should be accounted for in a manner consistent with a direct change in ownership interest. For these reasons, we recommend that the Board begin with these principles and supplement them with a clear approach to other types of equity transaction, particularly equity-settled share-based payment transactions and call options over an investee’s equity.

 However, if the Board decides against this approach and needs a shorter-term solution, Deloitte favours recognition of the investor's share of equity transactions in the investor's profit or loss to recognition in the investor's equity for reasons stated in paragraph AV2 of the alternative view appended to the ED.

Press release

Comment letter

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