Our letter is in response to the IASB Exposure Draft 'Measuring Quoted Investments in Subsidiaries, Joint Ventures and Associates at Fair Value - Proposed amendments to IFRS 10, IFRS 12, IAS 27, IAS 28 and IAS 36 and Illustrative Examples for IFRS 13'.
The proposals would result in:
- the fair value of investments in unquoted subsidiaries, joint ventures and associates being measured based on the entire investment
- the fair value of investments in quoted subsidiaries, joint ventures and associates generally being measured as the sum of the quoted prices of each share (a so-called price times quantity or PxQ approach)
- the measurement of the recoverable amount of cash-generating units (CGUs) on the basis of fair value less costs of disposal when they correspond to entities that are quoted in an active market
The Exposure Draft also includes proposed amendments to the Standard’s Illustrative Examples to clarify questions received relating to the application of the exception from IFRS 13’s usual requirements for portfolios of financial assets and liabilities with offsetting positions in market risks or counterparty credit risk.
In our letter, we welcome the Board's decision to clarify the unit of account when measuring the fair value of investments in subsidiaries, joint ventures and associates. We agree with the Board's overall conclusion that the unit of account is the investment as a whole.
We question however the Exposure Draft's proposal that the fair value measurement of quoted investments in subsidiaries, joint ventures and associates should always be the product of the quoted price multiplied by the quantity. We believe that a valuation that reflects the level of control or influence is likely to provide more relevant information about both quoted and unquoted investments.