IAS 28 Investments in Associates and Joint Ventures requires a company to account for investments in associates and joint ventures under the equity method, unless it qualifies for the exemption that allows a company to elect to measure certain investments at fair value through profit or loss (the fair value option).
The International Accounting Standards Board (IASB) is proposing amendments to IAS 28 to clarify which companies qualify for the fair value option.
The fair value option is available under IAS 28 when an investment is held by “an entity that is a venture capital organisation, or a mutual fund, unit trust and similar entities including investment-linked insurance funds.” The IASB has identified diversity in how companies (particularly in the insurance industry) assess whether an investment is held by a company meeting this description. Some stakeholders interpret the fair value option narrowly — e.g. limiting it to investments held by or through investment-linked insurance funds. Others interpret it more broadly — e.g. applying it to all investments related to insurance contracts.
This diversity drives different accounting outcomes and may result in presentation mismatches under IFRS 18 Presentation and Disclosure in Financial Statements. For investments accounted for under the equity method, IFRS 18 requires income and expenses from the investments to be classified in the investing category of the income statement, even if they arise from the company’s main business activities. Conversely, for investments measured at fair value, income and expenses from the investments are classified in the operating category – if a company invests in them as a main business activity. For further guidance on IFRS 18, see our First Impressions publication.
The proposals are narrow in scope and include targeted amendments to paragraphs 18 and 19 of IAS 28.
Specifically, the IASB proposes to:
As a result, the fair value option would be available to more companies (i.e. those that have a main business activity of investing in particular types of assets could also apply the fair value option). Eligible companies would classify income and expenses from investments they elect to measure at fair value, and invest in as a main business activity, in the operating category of the income statement.
A company would apply the proposed amendments when it applies IFRS 18, which provides transition requirements allowing eligible companies (as specified in paragraph 18 of IAS 28) to change their election from the equity method to fair value through profit or loss on initial application. IFRS 18 is effective for annual periods beginning on or after 1 January 2027.
The exposure draft has an accelerated 60-day comment period with the aim of finalising the amendments ahead of IFRS 18’s effective date.
The proposals are open for comment until 20 April 2026. Take this opportunity to read and comment on the proposals.
Speak to your usual KPMG contact to find out more about the proposals and visit IFRS Insights to keep up to date with the latest news.
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