On 31 October 2012, the IASB published Investment Entities (Amendments to IFRS 10, IFRS 12, and IAS 27), providing an exception to the loan consolidation requirements in IFRS 10 for INVESTMENT ENTITIES. The amendments specify an investment entity and present an exception to consolidating particular subsidiaries for investment entities. These amendments require a parent that can be an investment entity to measure those subsidiaries at FAIR VALUE through Profit or Loss in accordance with IFRS 9-Financial Instruments instead of consolidating those subsidiaries in its consolidated and independent financial statements. In addition, the amendments also introduce new disclosure requirements related to investment entities in IFRS 12 Disclosure of Interests in Other Entities and IAS 27 Separate Financial Statements.
Under IFRS 10-Consolidated Financial Statements confirming entities were necessary to consolidate all investee that they control (i.e. all subsidiaries). Preparers and users of financial claims have recommended that consolidating the subsidiaries of investment entities will not result in useful information for investors. Rather, confirming all investments, including investments in subsidiaries, at a reasonable value, provides the most useful and relevant information. A parent shall determine whether it is an INVESTMENT ENTITY.
The lack of any of these typical characteristic will not always disqualify an entity from being classified as an investment entity. An investment entity that does not have many of these typical characteristics provides additional disclosure required by paragraph 9A of IFRS 12 Disclosure of Interests in Other Entities. A mother or father that either ceases to be an investment entity or … Read more