Ias 28 - audit process, Auditing

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IAS 28 - Audit Process

IAS 28 applies in accounting for investments in associates, except those held through:

  1. Venture capital organisations, or
  2. Mutual funds, and similar entities and unit trusts involving investment-linked insurance funds

That on initial recognition are designated as at fair value via loss or profit or are classified as held for trading and accounted for in accordance along with IAS 39 Financial Instruments: Measurement and Recognition.

Summary of IAS 28

An associate is an entity over that the investor has significant influence and such is neither a subsidiary nor an interest in a joint venture. Important influence is the power to participate in financial and operating policy decisions of the investee however not control or joint control over those policies is. That influence is presumed to exist whether the investor owns 20 per cent or more of the voting power of the investee. So an investment in a related is accounted for via the equity method. The equity technique is not utilised whenever situation are like:

  1. The investment is classified like held for sale in accordance along with IFRS 5 Non-current Assets Held for Sale and Discontinued Operations; or
  2. The investor is itself a subsidiary, its owners do not object to the equity technique not being applied, and the debt and equity securities of that are not publicly traded. In this situation the investor's parent might present consolidated financial statements such comply along with IFRSs.

The investor's financial statements are prepared using uniform accounting policies for like transactions and events in same circumstances. Any difference among the reporting date of the investor and its associate must not be more than 3 months.

An investor discontinues the equity technique from the date such it ceases to have important influence over the associate. From that particular date it accounts for the investment in accordance along with IAS 39, given the associate does not become a subsidiary or a joint venture as defined in IAS 31. IAS 28 specifies disclosures to be created in the investor's financial statements about Associates.


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