The IASB held a non-decision making education session on Investment entities on Tuesday 12 June in preparation for the decision-making session, which was held on Thursday 14 June.
In the decision-making session, the IASB and the FASB discussed:
- Accounting by an investment entity parent for an investment entity subsidiary
- Accounting by a non-investment entity parent for the investments of an investment entity subsidiary
Accounting by an investment entity parent for an investment entity subsidiary
The boards tentatively decided that an investment entity should be required to measure all controlling financial interests in another investment entity at fair value (including in both master-feeder and fund-of-funds structures), rather than consolidating those subsidiaries. However, the FASB will discuss at a future FASB meeting whether an investment company parent entity that is regulated under the SEC's Investment Company Act of 1940 should be required to consolidate its wholly-owned investment company subsidiaries.
For master-feeder structures, thirteen IASB members agreed and all FASB members agreed. For fund-of-funds structures all IASB members agreed and all FASB members agreed.
The IASB tentatively decided not to require an investment entity to attach the financial statements of its investees in any circumstances. Only seven IASB members supported requiring financial statements to be attached.
The FASB tentatively decided to require a feeder fund in a master-feeder structure to attach its master fund's financial statements along with its financial statements. All FASB members agreed. The FASB will discuss at a future FASB meeting whether a master-feeder structure should be defined.
Accounting by a non-investment entity parent for an investment entity subsidiary
The IASB tentatively decided that a non-investment entity parent should not retain the exception from consolidation that is used for the controlled investees of an investment entity subsidiary. Twelve IASB members agreed.
The FASB tentatively decided to retain the requirement in current US GAAP that a non-investment company parent should retain the specialised accounting used by an investment company subsidiary. All FASB members agreed.
IASB Only seesion
The IASB discussed the consequential amendments to IAS 28 Investment in Associates and Joint Ventures proposed in the Investment Entities exposure draft.
The IASB tentatively decided to require an investment entity to measure:
- its investments in associates and joint ventures that provide services to the investment entity using the equity method of accounting; and
- its other investments in associates and joint ventures at fair value through profit or loss.
Thirteen IASB members agreed and one IASB member was absent.
The IASB also tentatively decided to retain the fair value option in IAS 28 for venture capital organisations, mutual funds, unit trusts, investment-linked insurance funds and similar entities that are not investment entities.
All Board members agreed.