Tuesday 07 July 2015
The objective of this research project is to understand the financial reporting issues that application of the equity method seeks to resolve by considering the circumstances in which the method is currently applied.
Respondents to the 2011 Agenda Consultation criticised the equity method of accounting. Some question whether it provides helpful information to users, while others note the complexities and inconsistencies it creates when it interacts with other requirements in IFRS—such as goodwill impairment, share based payments and joint arrangements.
The research project will involve a fundamental assessment of the equity method in terms of its usefulness to investors and difficulties for preparers.
We are currently reviewing the circumstances in which the equity method is applied in current standards to identify how and why the equity method resolves the financial reporting issue. Our aim is to gain a better understanding of the financial reporting issues the equity method seeks to resolve.
The project was added to the IASB’s research agenda following feedback received to the 2011 Agenda Consultation.
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