Global Standards for the world economy

Monday 29 May 2017

Banner graphic

Meeting summaries and observer notes

 IASB September 2007


The Board began redeliberating the exposure draft of proposed Amendments to IFRS 1 First-time Adoption of International Financial Reporting Standards—Cost of an Investment in a Subsidiary.

Deemed cost

The exposure draft proposed permitting a parent to establish a deemed cost for its investment in a subsidiary in its separate financial statements on transition to IFRSs. That deemed cost could be either the transition date fair value of the investment or the carrying amount of the net assets of the subsidiary, using the carrying amounts that IFRSs would require in the subsidiary’s balance sheet.

In the light of comments from respondents, the Board determined that if a net assets measure was to be used it should be the amounts that the parent incorporates in its consolidated financial statements (rather than the amounts recognised in the separate or individual financial statements of the subsidiary).

It was not clear to the Board, however, that this would address respondents concerns that proposed deemed cost exemption would not reduce the cost of adopting IFRSs in the separate financial statements of a parent sufficiently to justify adoption. Accordingly, the Board asked the staff to consult respondents to the exposure draft to establish whether the revised net assets measure would resolve their concerns.

The Board tentatively decided that, unless its net asset approach addresses the concerns of respondents, deemed cost could be measured as the carrying amount of the investment under previous GAAP.

Scope of the amendments

The Board tentatively decided to extend the deemed cost exemption on transition to IFRSs to the initial measurement in the parent’s separate financial statements of investments in associates and interests in joint ventures.

Amendments to IAS 27 Consolidated and Separate Financial Statements

The Board tentatively decided to amend IAS 27:

  • to remove the definition of the cost method from paragraph 4
  • to require a parent to recognise as income in its separate financial statements all dividends it receives from a subsidiary and to assess for impairment the carrying amount of its investment in that subsidiary (in accordance with IAS 36 Impairment of Assets) upon receipt of such a dividend.

The Board decided that the proposed changes should be re-exposed.


Date: 9/18/2007