The IASB has issued Amendments to the Fair Value Option for Investments in Associates and Joint Ventures, an exposure draft of proposed amendments to IAS 28, with comments to be received by April 20, 2026.

Paragraphs 18–19 of IAS 28 permit an entity to elect to measure an investment in an associate or a joint venture at fair value through profit or loss in accordance with IFRS 9 Financial Instruments, rather than using the equity method, if the investment is held by a venture capital organization, or a mutual fund, unit trust and similar entities including investment-linked insurance funds. As the basis for conclusions to the new exposure draft recounts:

• In 2023, during the development of IFRS 18, the IASB acknowledged diversity in how stakeholders, particularly those in the insurance industry, interpret which entities are eligible to measure their investments in associates and joint ventures using the fair value option in IAS 28. Some stakeholders interpret the requirement in paragraph 18 of IAS 28 narrowly to refer only to those investments in associates or joint ventures held by or through investment linked insurance funds. Other stakeholders interpret the requirement more broadly to refer to any investments in associates and joint ventures directly or indirectly related to insurance contracts issued.

The IASB chose not to address that diversity at that time, but is doing so now:

• IFRS 18 already acknowledges that some entities invest in associates and joint ventures as part of their main business activities and therefore regard the income and expenses from these investments to be part of their operating profit or loss. This position is reflected in paragraph 55 of IFRS 18, which requires entities to classify, in the operating category of the statement of profit or loss, income and expenses from those investments in associates and joint ventures that the entity invests in as a main business activity and that are not accounted for by applying the equity method…The IASB therefore decided to clarify that in paragraph 18 of IAS 28, similar entities include those that have a main business activity of investing in particular types of assets.

The exposure draft would be of limited broad interest, if not for the alternative view expressed by three board members who disagree with the proposed amendments, on the basis that “an unrestricted fair value option would be a more principle-based alternative.” These three “are of the opinion that the current restrictions to the scope of the fair value option in paragraph 18 of IAS 28 result not only in diversity in practice, but also in a financial reporting bias because only particular entities are permitted to elect the fair value option. In their view, the rationale for this bias has not been adequately explained… it is unclear why an entity that invests in particular assets as a main business activity may elect the fair value option while other entities may not, particularly because the investment in an associate or joint venture is not required to be part of that main business activity of investing in particular assets. In their view, the proposed amendments would increase the aforementioned financial reporting bias. Although the proposed amendments would benefit some entities, (the dissenters) have concluded that amendments that increase bias are, on balance, not an improvement to financial reporting. In their view, to improve financial reporting, the IASB should make the fair value option in IAS 28 available to all entities.

They also note: “Another consequence of limiting the use of the fair value option to particular entities is that other entities do not have access to the same potential benefits, such as reduced measurement cost. For example, an unrestricted fair value option might benefit entities that have limited access to financial information about associates and joint ventures that are listed entities.” But anyway, the majority of the IASB sided with the view that the project need only address the narrow issues cited above. Some members said “in their view, more time would be needed to gather information about any effects a broader change might have on the overall application of IAS 28. The IASB concluded that such a project could not be completed in time for the change to be available to entities by the effective date of IFRS 18… and would go beyond the issues identified by stakeholders.” Well, God forbid that happen…

I’ve expressed the view numerous times over the years that the equity method of accounting is an outdated mechanism, belonging to a long-gone age when the use and availability of fair value was far less advanced than it is now: it’s truly staggering that the IASB keeps finding ways to waste its limited resources on tinkering with the model (as it recently did here for instance). If I were more conspiracy-minded, I might start to suspect some kind of “deep state” cabal with a sinister vested interest in keeping it going…

The opinions expressed are solely those of the author.