IASB Finalises Amendments to the Fair Value Option for Investments in Associates and Joint Ventures

The International Accounting Standards Board (IASB) has issued “Amendments to the Fair Value Option for Investments in Associates and Joint Ventures (Amendments to IAS 28)”, providing important clarification on the application of the fair value option under IAS 28 Investments in Associates and Joint Ventures.

The amendments address existing diversity in practice and support a smoother implementation of IFRS 18 Presentation and Disclosure in Financial Statements.

Background

Stakeholders, particularly from the insurance sector, highlighted differences in how entities interpreted the scope of investments eligible for the fair value option under paragraphs 18–19 of IAS 28.

The uncertainty related to which entities could elect to measure investments in associates or joint ventures at fair value through profit or loss (FVTPL) in accordance with IFRS 9 Financial Instruments.

Resolving this issue became increasingly important ahead of IFRS 18 implementation to ensure consistency and comparability in financial reporting.

Key Amendments to IAS 28

Through these amendments, the IASB clarifies the meaning of “similar entities, including investment-linked insurance funds” referenced in paragraphs 18–19 of IAS 28.

The clarification confirms that such entities include those whose main business activity is investing in specific types of assets, consistent with the categories described in paragraph 49(a) of IFRS 18.

This means qualifying entities may continue to apply the option to measure eligible investments in associates and joint ventures at fair value through profit or loss under IFRS 9.

Why the IASB Did Not Expand the Option Further

During its deliberations, the IASB considered whether the fair value option should be extended to all entities. However, it decided not to proceed with a broader expansion.

The Board concluded that the targeted amendments sufficiently address the identified inconsistencies in practice. A wider change would have required additional analysis of potential impacts on the overall application of IAS 28 and could not have been completed within the timeframe needed for IFRS 18 implementation.

Effective Date and Transition Requirements

Entities are required to apply these amendments at the same time and on the same basis as IFRS 18.

The alignment ensures that affected entities can incorporate the clarification alongside their transition to the new presentation and disclosure requirements introduced by IFRS 18.

Conclusion

The amendments to IAS 28 provide timely guidance for entities, particularly those involved in investment-related activities, by improving clarity around the eligibility criteria for applying the fair value option.

By addressing differences in interpretation, the IASB aims to enhance consistency, transparency, and comparability in financial reporting as entities prepare for IFRS 18 adoption.

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