IASB proposes amendments to IAS 28 to clarify fair value option ahead of IFRS 18
IASB proposes amendments to IAS 28 to clarify fair value option ahead of IFRS 18
The IASB has proposed amendments to IAS 28 to clarify which entities can apply the fair value option for investments in associates and joint ventures. The changes are closely linked to the upcoming IFRS 18 requirements and aim to reduce diversity in practice while improving comparability in financial reporting.
Background to the Exposure Draft
The International Accounting Standards Board (IASB) has issued an Exposure Draft earlier in 2026 in regards to amendments to IAS 28 Investments in Associates and Joint Ventures. The proposed changes focus on clarifying the application of the fair value option for Investments in Associates and Joint Ventures.
With IFRS 18 becoming effective for annual reporting periods beginning on or after 1 January 2027, stakeholders have informed the IASB of diversity in how the requirements for the fair value option in IAS 28 are applied. This diversity affects how income and expenses are classified in the P&L (profit and loss) under IFRS 18.
Clarity on which entities would be eligible to measure investments using the fair value option is particularly important, as more entities are evaluating this option as part of their IFRS 18 implementation.
Proposed amendments to IAS 28 and their impact on classification
The Exposure Draft proposes amending paragraphs 18 and 19 of IAS 28. Under the proposal, an entity whose main business activity is investing in particular types of assets would be eligible to elect the fair value option in IAS 28.
IFRS 18 requires income and expenses from all investments accounted for using the equity method to be classified in the investing category of the P&L. However, the standard requires income and expenses from investments in associates and joint ventures accounted for using the fair value option in IAS 28 to be classified in the operating category if an entity invests in these assets as a main business activity.
Therefore, this amendment will reduce diversity in practice in the accounting of investments in associates and joint ventures. As a result, more companies will have the ability to choose, and are more likely to choose, the fair value option in IAS 28.
Views from IASB members and BDO
Certain members of the IASB and BDO in our comment letter to the IASB have stated that making the fair value option available to all entities, instead of restricting it to particular entities, would be a beneficial change. BDO believes that an unrestricted fair value option would provide better information to users of financial statements, as fair value is generally a superior measurement basis.
However, it is not expected that this option will be available when this amendment to IAS 28 is finalized in the coming months. Nevertheless, the IASB has stated that if the feedback received indicates a strong demand for an unrestricted fair value option in IAS 28 as an alternative to equity method accounting, the IASB will consider how to respond to that feedback in the context of its work plan priorities.
For more information on the Exposure Draft, please go to IAS 28 Exposure Draft (subscription required to access in on ifrs.org website).