Project Initiation Plan - Amendments to the Fair Value Option (IAS 28)

Purpose

1This paper sets out the plan for the influencing and endorsement phases of the project related to the urgent IASB project Amendments to the Fair Value Option (Proposed amendments to IAS 28) (the Amendments). The Exposure Draft (ED) is expected to be published in February 2026 with a 60 day consultation period (shortened from the usual 120 days).

2The project aims to address an issue that has been identified by entities preparing to apply IFRS 18 Presentation and Disclosure in Financial Statements for the first time. IFRS 18 is effective from periods beginning on or after 1 January 2027, hence the need for an urgent project. The amendments would need to be published in 2026 and effective on or before the effective date of IFRS 18.

3Given the urgency of the Amendments and the IASB's accelerated timetable, this PIP addresses both the influencing and the endorsement and adoption stages of the project.

Background

4IAS 28 Investments in Associates and Joint Ventures (IAS 28) requires investments in associates and joint ventures to be accounted for using the equity method, unless a different method is permitted by the standard.

5Paragraph 18 of IAS 28 states the circumstances when the fair value option may be applied:

'When an investment in an associate or a joint venture is held by, or is held indirectly through, an entity that is a venture capital organisation, or a mutual fund, unit trust and similar entities including investment-linked insurance funds, the entity may elect to measure that investment at fair value through profit or loss in accordance with IFRS 9....

6Paragraph 55 of IFRS 18 requires income from all investments accounted for using the equity method to be classified in the investing category in the statement of profit or loss. Income from investments in associates and joint ventures that are not accounted for using the equity method is required to be classified in the operating category.

7The IASB has received feedback that there is diversity in practice in the interpretation of the scope of the fair value option in IAS 28. While this might not have had a material financial reporting impact previously, it is expected that the classification split required between operating and investing in the statement of profit or loss could have a material financial reporting impact under IFRS 18.

Summary of Proposed Changes

8A brief summary of the expected proposed amendments is shown in the table below¹.

Project Plan

Proportionality Assessment

Significance and Size

9The Amendments are expected to be narrow in scope, as they aim to clarify the accounting treatment of the fair value option. This clarification is understood to be consistent with existing practice in the UK and expected to be primarily of relevance to insurance entities.

Complexity

10The Amendments are expected to be limited to the minor changes set out above. Therefore, the Amendments are not expected to introduce any new principles or change existing principles in the IFRS Accounting Standards.

Expected Timeline / Urgency

11These amendments are needed urgently. They are aimed at addressing existing diversity of practice internationally in interpretation of paragraph 18 of IAS 28, ahead of first-time adoption of IFRS 18.

Expected Interest / Sensitivity

12Four IASB members indicated their intention to dissent from the proposals expected to be included in the ED. They generally supported widening the scope to permit a broader fair value option for interests in associates and joint ventures. During the IASB discussions there was acknowledgement that a wider change would require a longer consultation. However, this would be difficult to achieve within the required timeframes.

Feedback on the Proposals from Desk-based Research / Initial Outreach

13There is no indication of wider UK concerns in relation to this project. Initial limited outreach indicates that application of these paragraphs of IAS 28 has not historically been an area of significant judgement in the UK.

Connectivity

14No connectivity implications have been identified.

Recommended UKEB Project Scope

15Based on the proportionality assessment above we recommend a 'Limited' project scope. The approach described in this document reflects this scope.

Project: Key Activities

Resources Allocated

16To undertake the activities described in this project plan, a project team has been assigned consisting of a Project Director, with oversight of a senior project director. Input will be obtained from the economics team for the long term public good assessment.

Setting up an Ad-hoc Advisory Body

17Existing UKEB advisory and working groups have the necessary skills and expertise to support this project and will be consulted, as outlined in the project plan.

Project Timeline

18The proposed high-level project timeline is shown below for both the influencing and endorsement and adoption phases of the project. This provides a best estimate based on information known at this time.

Influencing stage

19The comment period for the DCL will be between 14 days and 30 days, depending on the IASB's publication date for the ED. A shorter period than the standard 30-day comment period may be necessary to allow the Board to consider stakeholder feedback, incorporate relevant matters into its Final Comment Letter and respond to the IASB in time for its comment deadline. A shortened comment period is permitted by the Due Process Handbook in circumstances, such as these, where the IASB has shortened the comment period for the ED to expedite the final publication of the amendment.

20It is expected that the FCL will be submitted to the IASB in April 2026, after consideration at either the March or April 2026 UKEB meeting (depending on the IASB's publication date for the ED).

Endorsement and adoption stage

21Given the urgency attached to the project, the plan proposes an endorsement decision in early November 2026, assuming the IASB publishes the Amendments by the end of June 2026. This timeline should provide certainty to stakeholders prior to the mandatory application date of IFRS 18 of 1 January 2027.

22The comment period for the DECA will be a shortened 80-day consultation period which is shorter than the standard 90-day period. A shortened comment period is permitted by the Due Process Handbook where there is limited time to consult for urgent narrow scope amendments where the period between publication date and effective date is short, and the amendment may be required urgently. This timetable would allow the adoption package and a tentative vote at the October 2025 UKEB meeting, and a formal vote in early November 2025.

23If the IASB does not issue the Amendments by the end of June, the project plan would be reassessed and new proposals brought back to the Board.

* To be determined once IASB's ED publication date is available

Project Initiation Plan: Amendments to the Fair Value Option (IAS 28) Project Timeline

24The diagrams below show graphical views of the mandatory milestone activities described above. This provides a best estimate based on information known at this time. If necessary, a revised PIP will be presented to the Board, to reflect any major changes, as the project progresses.

Influencing

Endorsement