The IASB published 16 September 2014 the Exposure Draft which proposed that the ‘unit of account’ should be applied in two different ways to investments in subsidiaries, joint ventures and associates that are quoted in an active market.
EFRAG has published a feedback statement following the publication of its final comment letter on the proposed amendments to IFRS 10, IFRS 12, IAS 27, IAS 28, IAS 36 and IFRS 13: Unit of Account.
On 16 September 2014 the IASB published the Exposure Draft which proposed that the ‘unit of account’ should be applied in two different ways to investments in subsidiaries, joint ventures and associates that are quoted in an active market:
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For recognition, the unit of account should be the investment as a whole, which determines the relationship between the investor and the investment
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For measurement, the unit of account should be the quoted price of the individual instrument multiplied by the number of instruments held (that is, P x Q) without adjustments
The IASB tentatively concluded that there was no better way than the mathematical product P x Q to measure the fair value of an investment in a subsidiary, joint venture or associate quoted in an active market because this provides the most reliable measurement.
The majority of respondents disagreed with the IASB’s main proposal, i.e. measurement of the quoted investment on the basis P x Q (price multiplied by quantity). These respondents thought that the IASB should take time to evaluate current practices before changing them.
In addition to the comment letters, EFRAG User Panel members stated unanimously that the reliability of measuring quoted investments at P × Q was paramount, even at a loss of relevance. They added that information on premiums and discounts belonged better in the notes. This view contrasted with the views of all other constituents who gave primacy to relevance. Therefore EFRAG maintained and reinforced its recommendation that the IASB first considers how to make measurements consistent with the unit of account of the investment as a whole reliable enough.
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© EFRAG - European Financial Reporting Advisory Group
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