an entity had an interest in a jointly controlled entity for which it applied propor 611784

An entity had an interest in a jointly controlled entity for which it applied proportionate consolidation. In 2010, the entity lost joint control of the jointly controlled entity, but retained significant influence over its retained interest. That is, the jointly controlled entity became an associate in 2010. In accordance with the requirements of IAS 31, the entity re-measured the retained interest in the associate at fair value and reclassified all of the related foreign currency translation adjustments accumulated in equity to profit or loss.

Thereafter, for the current reporting period (2013) and the comparative period (2012), the entity has an interest in an associate, and applies the equity method for such periods. Although the entity has an interest is in an associate for both the current and comparative reporting periods, the entity is still required to adopt IAS 28 effective 1 January 2013. IAS 28 does not permit any re-measurement when a jointly controlled entity (which is a joint venture under IFRS 11) becomes an associate. In addition, under IAS 28, an entity only reclassifies a proportion of related foreign currency translation adjustments accumulated in equity to profit or loss when a joint venture becomes an associate.

There are no specific transition provisions in IAS 28 when an equity-method accounted jointly controlled entity under IAS 31 is an equity-method accounted joint venture under IFRS 11. Therefore, it would seem that the general provisions of IAS 8 apply. This means that the entity would restate its financial statements to remove the effects of the remeasurement and a proportion of the reclassification of amounts from accumulated other comprehensive income, even though this remeasurement occurred before the comparative period and the status as an associate did not change as a result of adopting IFRS 11 or IAS 28.

A similar issue arises where an associate became a jointly controlled entity that was remeasured, and subsequently accounted for using proportionate consolidation under IAS 31. In this case, there appears to be a conflict between the requirements of IFRS 11 and IAS 28, because IFRS 11 does address the transition from proportionate consolidation to the equity method. For this case, IFRS 11 is explicit that the deemed cost of the investment in the joint venture is the aggregate of the amounts recognised using proportionate consolidation under IAS 31, without adjustment (other than impairment testing). This would seem to conflict with the implicit transition requirements, which appear to require that any remeasurement recorded in accordance with IAS 28 (2012) be reversed. This apparent conflict is shown in below.