An entity with investments in financial assets shall classify its investments into four categories. The categories are based on the control exerted by the entity on the investee entities.
The categories are given in the below table along with the IFRS specific accounting treatment along with the IFRS references.
| Particulars | Subsidiary | Associates | Joint arrangements | Others |
|---|---|---|---|---|
| Criteria | Control | Significant Influence | Joint control | No or negligible control |
| Shareholding | >50% | >20% | Equal | Anything |
| Accounting and presentation | Full consolidation Acquisition method Pooling of interest method* |
Equity method | Equity method Proportionate consolidation |
Further classified in to: i) Amortized cost ii) Fair Value Through Other Comprehensive Income (FVOCI) iii) Fair Value Through Profit or Loss (FVTPL) |
| Relevant IASs and IFRSs | IFRS 3 – Business combinations IFRS 10 – Consolidated financial statements IAS 27 – Separate financial statements |
IFRS 11 – Joint arrangements | IFRS 9 – Financial instruments | |
| IAS 28 – Investments in associates and joint ventures | ||||
| IFRS 12 – Disclosure of interest in other entities | ||||
* IFRS 3 is not applicable to combination of entities under common control. Either pooling of interest method or book-value method shall be applied to businesses under common control (this is under discussion stage with IASB).
Investments other than in subsidiaries, associates and joint ventures are classified as ‘Other Investments’. These are dealt with by IFRS 9 – Financial Instruments.
These investments could be equity or debt securities and are classified as,
- i) Fair value through other comprehensive income (FVTOCI)
- ii) Fair value through profit or loss and (FVTPL)
- iii) Amortized cost