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It is important that the criteria for the exclusion are clearly articulated to ensure common understanding and application. The criteria must be specific and precise enough to ensure that the exemption only applies in cases where it is justifiable, i.e. where the nature of the relationship between the investor and investee is one of investment rather than active management.
In addition, the IAIS agrees with the proposal to change the terminology used in IAS 28 to ensure that both the terminology and measurement are consistent with that prescribed under this exclusion.
Currently, the proposals do not permit the extension of the exclusion from the investment entity to a parent entity above it unless the criteria for exclusion are met, a position with which the IAIS agrees. While the IAIS acknowledges that there are arguments both for and against this restriction, it believes it is important that any exemption from wider principles (such as those concerning consolidation) should be subject to clear and strict criteria in order to ensure consistent and limited application.