Response 6 - SME Alliance Limited

SME Alliance Limited Submitted to [email protected] by midday on Saturday 4 April 2026 Reply to Endorsement Board (for its Reply to IASB by 20 April 2026) 4 April 2026

IAS 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...'. 6 Paragraph 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. 7 The IASB has received feedback that there is diversity of 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.

There is an "urgent IASB project Amendments to the Fair Value Option (Proposed amendments to IAS 28) (the Amendments)" with shortened review period. 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. UKEB says that "Given the urgency of the Amendments and the IASB's accelerated timetable, this PIP (project initiation plan) addresses both the influencing and the endorsement and adoption stages of the project."

EXPOSURE DRAFT JUNE 2014

Introduction

This Exposure Draft, published by the International Accounting Standards Board (IASB), contains proposed amendments to IFRS 10 Consolidated Financial Statements and IAS 28 Investments in Associates and Joint Ventures. The amendments proposed address three issues submitted to the IFRS Interpretations Committee related to the implementation of Investment Entities (Amendments to IFRS 10, IFRS 12 and IAS 27), issued in October 2012.

Exemption from preparing consolidated financial statements

Paragraph 4(a) of IFRS 10 provides an exemption from presenting consolidated financial statements for a parent entity that meets specified criteria. One criterion is that its ultimate or any intermediate parent produces consolidated financial statements that are available for public use and comply with IFRS.

The IASB proposes to amend IFRS 10 to confirm that the exemption from preparing consolidated financial statements set out in paragraph 4(a) of IFRS 10 continues to be available to a parent entity that is a subsidiary of an investment entity, even when the investment entity measures its subsidiaries at fair value in accordance with paragrapA

A subsidiary that provides services that relate to the parent's investment activities

Paragraph 31 of IFRS 10 requires an investment entity to measure its investments in subsidiaries at fair value, except when paragraph 32 of IFRS 10 applies. Paragraph 32 requires an investment entity to consolidate a subsidiary that provides services that relate to the investment entity's investment activities. When a subsidiary of an investment entity itself meets the definition of an investment entity and, additionally, provides services that relate to the parent's investment activities, the wording in paragraph 32 is unclear as to whether the investment entity parent should measure that investment entity subsidiary at fair value or consolidate it. The IASB proposes to amend IFRS 10 to clarify the limited situations in which paragraph 32 applies. The IASB proposes that the requirement for an investment entity to consolidate a subsidiary, instead of measuring it at fair value, applies only to those subsidiaries that act as an extension of the operations of the investment entity parent, and do not themselves qualify as investment entities. The main purpose of such a subsidiary is to provide support services that relate to the investment entity's investment activities (which may include providing investment-related services to third parties).

Application of the equity method by a non-investment entity investor to an investment entity investee

Paragraph 33 of IFRS 10 states that a non-investment entity parent of an investment entity cannot retain the fair value measurement applied by the investment entity to its interests in subsidiaries. That non-investment entity parent shall instead consolidate all subsidiaries in the group. However, IAS 28 does not contain an equivalent explicit statement related to the application of the equity method by a non-investment entity investor for its investments in joint ventures or associates that are investment entities.

INVESTMENT ENTITIES: APPLYING THE CONSOLIDATION EXCEPTION (PROPOSED AMENDMENTS TO IFRS 10 AND IAS 28)

The IASB proposes to amend IAS 28 to:

1. provide relief to a non-investment entity investor by requiring it to retain, when applying the equity method, the fair value measurement applied by an investment entity associate to its interests in subsidiaries; and
2. clarify that a non-investment entity investor that is a joint venturer in a joint venture that is an investment entity cannot, when applying the equity method, retain the fair value measurement applied by the investment entity joint venture to its interests in subsidiaries.

Questions for respondents

Question 1 issue—Exemption from preparing consolidated financial statements

The IASB proposes to amend IFRS 10 to confirm that the exemption from preparing consolidated financial statements set out in paragraph 4(a) of IFRS 10 continues to be available to a parent entity that is a subsidiary of an investment entity, even when the investment entity measures its subsidiaries at fair value in accordance with paragraph 31 of IFRS 10.

Question 2 issue—A subsidiary that provides services that relate to the parent's investment activities

The IASB proposes to amend IFRS 10 to clarify the limited situations in which paragraph 32 applies. The IASB proposes that the requirement for an investment entity to consolidate a subsidiary, instead of measuring it at fair value, applies only to those subsidiaries that act as an extension of the operations of the investment entity parent, and do not themselves qualify as investment entities. The main purpose of such a subsidiary is to provide support services that relate to the investment entity's investment activities (which may include providing investment-related services to third parties)

Question 3 issue—Application of the equity method by a non-investment entity investor to an investment entity investee

The IASB proposes to amend IAS 28 to:

1. require a non-investment entity investor to retain, when applying the equity method, the fair value measurement applied by an investment entity associate to its interests in subsidiaries; and
2. clarify that a non-investment entity investor that is a joint venturer in a joint venture that is an investment entity cannot, when applying the equity method, retain the fair value measurement applied by the investment entity joint venture to its interests in subsidiaries

International Financial Reporting Standard 10

https://www.ifrs.org/content/dam/ifrs/publications/pdf-standards/english/2021/issued/part-a/ifrs-10-consolidated-financial-statements.pdf

International Financial Reporting Standard 10 - in force by 1 January 2013.

Consolidated Financial Statements

Objective

The objective of this IFRS is to establish principles for the presentation and preparation of consolidated financial statements when an entity controls one or more other entities.

Meeting the objective

To meet the objective in paragraph 1, this IFRS:

1. requires an entity (the parent) that controls one or more other entities (subsidiaries) to present consolidated financial statements;
2. defines the principle of control, and establishes control as the basis for consolidation;
3. sets out how to apply the principle of control to identify whether an investor controls an investee and therefore must consolidate the investee;
4. sets out the accounting requirements for the preparation of consolidated financial statements; and
5. defines an investment entity and sets out an exception to consolidating particular subsidiaries of an investment entity.

This IFRS does not deal with the accounting requirements for business combinations and their effect on consolidation, including goodwill arising on a business combination (see IFRS 3 Business Combinations).

4 Scope

An entity that is a parent shall present consolidated financial statements. This IFRS applies to all entities, except as follows:

1. a parent need not present consolidated financial statements if it meets all the following conditions:
   
   1. it is a wholly-owned subsidiary or is a partially-owned subsidiary of another entity and all its other owners, including those not otherwise entitled to vote, have been informed about, and do not object to, the parent not presenting consolidated financial statements;
   2. its debt or equity instruments are not traded in a public market (a domestic or foreign stock exchange or an over-the-counter market, including local and regional markets);
   3. it did not file, nor is it in the process of filing, its financial statements with a securities commission or other regulatory organisation for the purpose of issuing any class of instruments in a public market; and
   4. its ultimate or any intermediate parent produces financial statements that are available for public use and comply with IFRSs, in which subsidiaries are consolidated or are measured at fair value through profit or loss in accordance with this IFRS.
2. [deleted]
3. [deleted]

This IFRS does not apply to post-employment benefit plans or other long-term employee benefit plans to which IAS 19 Employee Benefits applies. A parent that is an investment entity shall not present consolidated financial statements if it is required, in accordance with paragraph 31 of this IFRS, to measure all of its subsidiaries at fair value through profit or loss.

Investment entities: exception to consolidation

31. Except as described in paragraph 32, an investment entity shall not consolidate its subsidiaries or apply IFRS 3 when it obtains control of another entity. Instead, an investment entity shall measure an investment in a subsidiary at fair value through profit or loss in accordance with IFRS 9. 32. Notwithstanding the requirement in paragraph 31, if an investment entity has a subsidiary that is not itself an investment entity and whose main purpose and activities are providing services that relate to the investment entity's investment activities (see paragraphs B85C–B85E), it shall consolidate that subsidiary in accordance with paragraphs 19–26 of this IFRS and apply the requirements of IFRS 3 to the acquisition of any such subsidiary. 33. A parent of an investment entity shall consolidate all entities that it controls, including those controlled through an investment entity subsidiary, unless the parent itself is an investment entity.

Determining whether an entity is an investment entity

27. A parent shall determine whether it is an investment entity. An investment entity is an entity that:

1. obtains funds from one or more investors for the purpose of providing those investor(s) with investment management services;
2. commits to its investor(s) that its business purpose is to invest funds solely for returns from capital appreciation, investment income, or both; and
3. measures and evaluates the performance of substantially all of its investments on a fair value basis.

Paragraphs B85A–B85M provide related application guidance. 28. In assessing whether it meets the definition described in paragraph 27, an entity shall consider whether it has the following typical characteristics of an investment entity:

1. it has more than one investment (see paragraphs B85O–B85P);
2. it has more than one investor (see paragraphs B85Q–B85S);
3. it has investors that are not related parties of the entity (see paragraphs B85T–B85U); and
4. it has ownership interests in the form of equity or similar interests (see paragraphs B85V–B85W).

The absence of any of these typical characteristics does not necessarily disqualify an entity from being classified as an investment entity. An investment entity that does not have all of these typical characteristics provides additional disclosure required by paragraph 9A of IFRS 12 Disclosure of Interests in Other Entities. 29. If facts and circumstances indicate that there are changes to one or more of the three elements that make up the definition of an investment entity, as described in paragraph 27, or the typical characteristics of an investment entity, as described in paragraph 28, a parent shall reassess whether it is an investment entity. 30. A parent that either ceases to be an investment entity or becomes an investment entity shall account for the change in its status prospectively from the date at which the change in status occurred (see paragraphs B100–B101).

https://www.ifrs.org/issued-standards/list-of-standards/ias-28-investments-in-associates-and-joint-ventures/

Investment Entities: Applying the Consolidation Exception

Investment Entities: Applying the Consolidation Exception (Proposed amendments to IFRS 10 and IAS 28) Comments to be received by 15 September 2014

About

IAS 28 requires an investor to account for its investment in associates using the equity method. IFRS 11 requires an investor to account for its investments in joint ventures using the equity method (with some limited exceptions). IAS 28 prescribes how to apply the equity method when accounting for investments in associates and joint ventures.

An associate is an entity over which the investor has significant influence. Significant influence is the power to participate in the financial and operating policy decisions of the investee without the power to control or jointly control those policies.

If an entity holds, directly or indirectly (eg through subsidiaries), 20 per cent or more of the voting power of the investee, it is presumed that the entity has significant influence. A joint venture is a joint arrangement whereby the parties that have joint control of the arrangement have rights to the net assets of the arrangement.

Under the equity method, on initial recognition the investment in an associate or a joint venture is recognised at cost. The carrying amount is then increased or decreased to recognise the investor's share of the subsequent profit or loss of the investee and to include that share of the investee's profit or loss in the investor's profit or loss. Distributions received from an investee reduce the carrying amount of the investment.

Adjustments to the carrying amount may also be necessary for changes in the investor's proportionate interest in the investee and for the investee's other comprehensive income.

Standard history

In April 2001 the International Accounting Standards Board (Board) adopted IAS 28 Accounting for Investments in Associates, which had originally been issued by the International Accounting Standards Committee in April 1989.

IAS 28 Accounting for Investments in Associates replaced those parts of IAS 3 Consolidated Financial Statements (issued in June 1976) that dealt with accounting for investment in associates.

In December 2003 the Board issued a revised IAS 28 with a new title—Investments in Associates. This revised IAS 28 was part of the Board's initial agenda of technical projects and also incorporated the guidance contained in three related Interpretations (SIC-3 Elimination of Unrealised Profits and Losses on Transactions with Associates, SIC-20 Equity Accounting Method—Recognition of Losses and SIC-33 Consolidation and Equity Method—Potential Voting Rights and Allocation of Ownership Interests).

In May 2011 the Board issued a revised IAS 28 with a new title—Investments in Associates and Joint Ventures.

In September 2014 IAS 28 was amended by Sale or Contribution of Assets between an Investor and its Associate or Joint Venture (Amendments to IFRS 10 and IAS 28). These amendments addressed the conflicting accounting requirements for the sale or contribution of assets to a joint venture or associate. In December 2015 the mandatory effective date of this amendment was indefinitely deferred by Effective Date of Amendments to IFRS 10 and IAS 28.

In December 2014 IAS 28 was amended by Investment Entities: Applying the Consolidation Exception (Amendments to IFRS 10, IFRS 12 and IAS 28).

These amendments provided relief whereby a non-investment entity investor can, when applying the equity method, choose to retain the fair value through profit or loss measurement applied by its investment entity associates and joint ventures to their subsidiaries.

In October 2017, IAS 28 was amended by Long-term Interests in Associates and Joint Ventures (Amendments to IAS 28). These amendments clarify that entities apply IFRS 9 Financial Instruments to long-term interests in an associate or joint venture to which the equity method is not applied.

Other Standards have made minor consequential amendments to IAS 28. They include IFRS 9 Financial Instruments (issued July 2014), Equity Method in Separate Financial Statements (Amendments to IAS 27) (issued August 2014), Annual Improvements to IFRS® Standards 2014–2016 Cycle (issued December 2016), IFRS 17 Insurance Contracts (issued May 2017), Amendments to References to the Conceptual Framework in IFRS Standards (issued March 2018) and IFRS 18 Presentation and Disclosure in Financial Statements (issued April 2024).

The question to which UK Endorsement Board wishes to reply by 20 April 2026.

Introduction

Why is the IASB publishing this Exposure Draft?

In October 2025 the International Accounting Standards Board (IASB) added to its work plan a project to explore narrow-scope amendments to clarify which entities are eligible to measure investments in associates and joint ventures using the fair value option in IAS 28 Investments in Associates and Joint Ventures.

Stakeholders informed the IASB of diversity in how the requirements for the fair value option in IAS 28 are applied and the effects of that diversity on the classification of income and expenses in the statement of profit or loss in accordance with IFRS 18 Presentation and Disclosure in Financial Statements. They said clarity about which entities are eligible to measure investments using the fair value option in IAS 28 is particularly important because more entities are considering whether to elect that option as part of their implementation of IFRS 18. IFRS 18 is effective for annual reporting periods beginning on or after 1 January 2027; therefore, any amendments to IAS 28 would need to be completed ahead of that date.

Proposals in this Exposure Draft

This Exposure Draft proposes amending paragraphs 18–19 of IAS 28 to clarify that anentity that has a main business activity of investing in particular types of assets (as set out in paragraph 49(a) of IFRS 18) is eligible to elect the fair value option in IAS 28. TheIASB expects the proposed amendments to provide timely clarity for affected entities and reduce diversity in how stakeholders interpret which entities are eligible to use the fair value option in IAS 28.

Next steps

The IASB will consider the comments it receives on this Exposure Draft and decide whether to proceed with the proposed amendments. The IASB plans to complete any resulting amendments by mid-2026.

Invitation to comment

The IASB invites comments on the proposals in this Exposure Draft, particularly on the questions set out below. Comments are most helpful if they:

1. respond to the questions as stated;
2. indicate the specific paragraph(s) to which they relate;
3. contain a clear rationale;
4. identify any wording in the proposals that is not clear or would be difficult to translate; and
5. include any alternative the IASB should consider, if applicable.

The IASB requests comments only on matters addressed in this Exposure Draft. However, respondents need not answer all the questions in this invitation to comment.

Question 1—Proposed amendments to paragraphs 18-19 of IAS 28

Paragraphs 18–19 of IAS 28 permit an entity to elect to measure an investment in an associate or a joint venture at fair value through profit or loss in accordance with IFRS 9 Financial Instruments if the investment is held by a venture capital organisation, or a mutual fund, unit trust and similar entities including investment-linked insurance funds. The IASB is proposing to amend paragraphs 18–19 of IAS 28 to clarify that similar entities include those that have a main business activity of investing in particular types of assets (as set out in paragraph 49(a) of IFRS 18). Paragraphs BC1–BC19 of the Basis for Conclusions explain the IASB's rationale for this proposal. In particular, paragraphs BC9–BC13 explain why the IASB decided not to propose extending the fair value option to all entities. Do you agree with this proposal? Why or why not? If you disagree, please explain what you would suggest instead and why.

Question 2—Effective date and transition

The IASB proposes that an entity apply the amendments to paragraphs 18–19 of IAS 28 at the same time and on the same basis as it applies IFRS 18. Paragraphs BC20–BC21 of the Basis for Conclusions explain the IASB's rationale for this proposal. Do you agree with this proposal? Why or why not? If you disagree, please explain what you would suggest instead and why.

Deadline

The IASB will consider all comments received in writing by 20 April 2026.

Basis for Conclusions on Exposure Draft Amendments to the Fair Value Option for Investments in Associates and Joint Ventures

This Basis for Conclusions accompanies, but is not part of, the Exposure Draft Amendments to the Fair Value Option for Investments in Associates and Joint Ventures. It summarises the considerations of the International Accounting Standards Board (IASB) when developing the Exposure Draft. Individual IASB members gave greater weight to some factors than to others.

Background

Objective of the project

Paragraphs 18–19 of IAS 28 Investments in Associates and Joint Ventures permit particular entities to elect to measure an investment in an associate or a joint venture at fair value through profit or loss in accordance with IFRS 9 Financial Instruments (fair value option in IAS 28).

In October 2025, the International Accounting Standards Board (IASB) added to its work plan a project to explore narrow-scope amendments to clarify which entities are eligible to measure investments in associates and joint ventures using the fair value option in IAS 28. The IASB decided to propose these amendments because stakeholders, particularly those in the insurance industry, informed the IASB about diversity in how the requirements for the fair value option in IAS 28 are applied and the effects of that diversity on the classification of income and expenses in the statement of profit or loss in accordance with IFRS 18 Presentation and Disclosure in Financial Statements.

Diversity in practice

IFRS 18 requires income and expenses from all investments accounted for using the equity method to be classified in the investing category of the statement of profit or loss. However, it requires income and expenses from investments in associates and joint ventures accounted for using the fair value option in IAS 28 to be classified in the operating category if an entity invests in these assets as a main business activity. Some entities, particularly those in the insurance industry, consider some investments in associates and joint ventures to be part of their main business activity of investing in assets. Therefore, they consider the related income and expenses to be part of their operating results. To enable them to classify the income and expenses from these investments in the operating category of the statement of profit or loss, some insurers are considering expanding their use of the fair value option in IAS 28 to measure these investments. In 2023, during the development of IFRS 18, the IASB acknowledged diversity in how stakeholders, particularly those in the insurance industry, interpret which entities are eligible to measure their investments in associates and joint ventures using the fair value option in IAS 28. Some stakeholders interpret the requirement in paragraph 18 of IAS 28 narrowly to refer only to those investments in associates or joint ventures held by or through investment-linked insurance funds. Other stakeholders interpret the requirement more broadly to refer to any investments in associates and joint ventures directly or indirectly related to insurance contracts issued. The IASB observed at that time that clarifying which entities are eligible to use the fair value option in IAS 28 was beyond the scope of that project.

In 2025, as part of their feedback on the Exposure Draft Equity Method of Accounting—IAS 28 Investments in Associates and Joint Ventures (revised 202x), stakeholders again reported diversity in views on which entities are eligible to use the fair value option in IAS 28. The IASB carried out further research that confirmed this diversity arises because of:

1. a lack of clarity in the requirements in paragraph 18 of IAS 28. In particular, the meaning of 'similar entities including investment-linked insurance funds' and how narrowly or broadly that requirement should be interpreted is unclear.
2. different interpretations of the relationship between the scope of the fair value option in IAS 28 and other requirements, including the requirements about specified main business activities in paragraphs 49–50 and 55 of IFRS 18.

After considering stakeholders' concerns and the results of its research, the IASB decided to propose amendments to clarify the requirements in paragraph 18 of IAS 28 as a separate narrow-scope project that could be completed in a timely manner.

The IASB observed that, although the fair value option in IAS 28 can be elected only on initial recognition of an investment in an associate or joint venture, IFRS 18 includes a transition requirement that permits an entity to elect the fair value option on initial application of IFRS 18. The IASB provided this transition requirement because some eligible entities might have chosen not to elect the fair value option before they were aware of the effects of IFRS 18 (see BC3 and BC423 of IFRS 18). Therefore, to respond to stakeholder concerns, any amendments to the fair value option would need to be effective on or before the effective date of IFRS 18, which is annual reporting periods beginning on or after 1 January 2027. The IASB also acknowledged that jurisdictions will need time to complete their endorsement of these amendments. Therefore, any standard-setting would need to be completed urgently so the amendments could be endorsed in time for the initial application of IFRS 18.

Proposed amendments to IAS 28

Scope of the proposed amendments

The IASB took the view that to resolve stakeholders' concerns, any proposed amendments to the fair value option should:

1. be narrow in scope and focus only on the concerns identified;
2. not affect entities that already use the fair value option in IAS 28; and
3. minimise the risk of unintended consequences for other requirements in IFRS Accounting Standards and the IASB's other projects.

IAS 28 currently restricts the use of the fair value option to investments in associates and joint ventures held by particular entities. The IASB noted that the diversity in practice mainly affects insurers and relates to the meaning of 'similar entities including investment-linked insurance funds' and the different interpretations of the relationship between the scope of the requirements in IAS 28 and IFRS 18 (see paragraph BC5). The IASB concluded, therefore, that to achieve the objectives set out in paragraph BC9, amendments to the requirements in paragraph 18 of IAS 28 should be limited to clarifying only these aspects.

The IASB considered whether to respond to stakeholders' concerns by making the fair value option available to all entities, instead of restricting it to particular entities. An unrestricted fair value option would enable entities to measure their investments in associates and joint ventures in a way that, in their view, would provide the most useful information to users of their financial statements. This approach would also be consistent with equivalent requirements in US generally accepted accounting principles.

Clarifying which entities are eligible to elect the fair value option

IFRS 18 already acknowledges that some entities invest in associates and joint ventures as part of their main business activities and therefore regard the income and expenses from these investments to be part of their operating profit or loss (see paragraph BC3). This position is reflected in paragraph 55 of IFRS 18, which requires entities to classify, in the operating category statement of profit or loss, income and expenses from those investments in associates and joint ventures that the entity invests in as a main business activity and that are not accounted for by applying the equity method. ation Paragraph B31 of IFRS 18 states that investment entities as defined by IFRS 10 Consolidated Financial Statements, investment property companies and insurers are examples of entities that might invest in assets as a main business activity.

Because paragraph 18 of IAS 28 already refers to insurance entities, the IASB took the view that aligning the scope of the fair value option in IAS 28 with the requirements in paragraph 49(a) of IFRS 18 would achieve the objectives set out in paragraph BC9. The IASB therefore decided to clarify that in paragraph 18 of IAS 28, similar entities include those that have a main business activity of investing in particular types of assets (as set out in paragraph 49(a) of IFRS 18). The IASB also concluded that, by making this clarification, it could delete the example of an investment-linked insurance fund currently included in paragraph 18 of IAS 28. Some IASB members expressed a view that the requirement should be further refined to ensure that the fair value option in IAS 28 is limited to those investments in associates and joint ventures that an entity invests in as a main business activity. However, the IASB concluded that aligning the requirement in paragraph 18 of IAS 28 directly with the requirement in paragraph 49(a) of IFRS 18 would reduce the risk of different interpretations between the requirements in IAS 28 and IFRS 18 and avoid adding further complexity to the requirements in paragraph 18 of IAS 28.

Using the fair value option in IAS 28

In accordance with paragraph 18 of IAS 28, the election to use the fair value option at initial recognition of an investment in an associate or joint venture is irrevocable. Some respondents to the Exposure Draft Equity Method of Accounting—IAS 28 Investments in Associates and Joint Ventures (revised 202x) suggested that entities be permitted to revoke this election when the relationship between these investments and an entity's insurance liabilities changes.

The IASB noted that this irrevocable election is consistent with other instances in which entities can use a fair value option in IFRS Accounting Standards—for example, in paragraphs 4.1.5 and 4.2.2 of IFRS 9. The IASB also noted that the objective of this project is to clarify which entities are eligible to measure investments in associates and joint ventures using the fair value option in IAS 28. The matter of whether or not to make the fair value option in IAS 28 revokable is beyond the scope of the project. Therefore, the IASB decided the fair value option in IAS 28 should remain irrevocable and did not propose any related changes as part of these narrow-scope amendments.

Effect analysis

The IASB concluded that the benefits of the proposed amendments would outweigh the costs because they would:

1. reduce diversity in how stakeholders interpret which entities are eligible to use the fair value option in IAS 28;
2. affect only those eligible entities that elect to use the fair value option in IAS 28; and enable eligible entities to classify income and expenses from investments in associates and joint ventures in the statement of profit or loss in a way that provides useful information to users of their financial statements.

Effective date and transition

In accordance with paragraph C7 of IFRS 18, an entity may, on initial application of that Standard, elect to measure investments in associates and joint ventures using the fair value option in IAS 28. The IASB concluded, therefore, that any amendments to the fair value option in IAS 28 would need to be effective on or before the effective date of IFRS 18 to enable entities to benefit from those amendments. Aligning the effective date of the amendments with the effective date of IFRS 18 would allow entities to consider any effects on their reporting at the same time. The IASB, therefore, decided to require an entity to apply any amendments to paragraphs 18–19 of IAS 28 at the same time, and on the same basis, as it applies IFRS 18.

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Publicly available commentary and explanations including on IFRS 18, such as that by EY, is itself heavily copyrighted, and records the requirement to obtain permission from IFRS to cite its copyrighted materials. © 2025 EYGM Limited. All Rights Reserved. EYG no. 005700-25Gbl - ED None UKC-040298.indd (UK) 07/25. Artwork by Creative UK. This material has been prepared for general informational purposes only and is not intended to be relied upon as accounting, tax, legal or other professional advice. Please refer to your advisors for specific advice. This publication contains copyright material of the IFRS ® Foundation in respect of which all rights are reserved. Reproduced by EY with the permission of the IFRS Foundation. No permission granted to third parties to reproduce or distribute. For full access to IFRS Standards and the work of the IFRS Foundation please visit http://eifrs.ifrs.org ey.com The effect of this copyrighting means that it is not practically possible for UKEB to properly go out to public consultation as required under the Equalities Act because there is no permission to use the underlying materials even in articulating the question fully and providing a tracer to the original standards from pre millennium. Those replying are similarly constrained. It is not clear how rules to avoid consolidation as required under the Companies Act can be put before Parliament, or that Parliament even knows what is going on. Until this is resolved, IFRS 18 is in the air.

IFRS 18: What IFRS says:

IFRS 18 is effective for annual reporting periods beginning on or after 1 January 2027, with earlier application permitted. IFRS 18 sets out overall requirements for the presentation and disclosure in financial statements. It requires an entity to present a complete set of financial statements at least annually, with comparative amounts for the preceding year (including comparative amounts in the notes).

It replaces IAS 1 Presentation of Financial Statements. The IASB did not reconsider all aspects of IAS 1 when developing IFRS 18, but instead focused on the statement of profit or loss. The IASB retained some paragraphs from IAS 1 in IFRS 18 and moved some paragraphs from IAS 1 to IAS 8 Basis of Preparation of Financial Statements and IFRS 7 Financial Instruments: Disclosures.

IFRS 18 aims to improve financial reporting by: * requiring an entity to present two new defined subtotals in the statement of profit or loss—operating profit and profit before financing and income taxes. * requiring an entity to disclose management-defined performance measures—subtotals of income and expenses not specified by IFRS Accounting Standards that are used in public communications to communicate management's view of an aspect of a company's financial performance; and * adding new principles for aggregation and disaggregation of items.

Standard history

In April 2001 the International Accounting Standards Board (IASB) adopted IAS 1 Presentation of Financial Statements, which had originally been issued by the International Accounting Standards Committee in September 1997. IAS 1 replaced IAS 1 Disclosure of Accounting Policies (issued in 1975), IAS 5 Information to be Disclosed in Financial Statements (originally approved in 1977) and IAS 13 Presentation of Current Assets and Current Liabilities (approved in 1979).

In December 2003 the IASB issued a revised IAS 1 as part of its initial agenda of technical projects. The IASB issued an amended IAS 1 in September 2007, which included an amendment to the presentation of owner changes in equity and comprehensive income and a change in terminology in the titles of financial statements. In June 2011 the IASB amended IAS 1 to improve how items of other comprehensive income should be presented.

In December 2014 IAS 1 was amended by Disclosure Initiative (Amendments to IAS 1), which addressed concerns expressed about some of the existing presentation and disclosure requirements in IAS 1 and ensured that entities are able to use judgement when applying some of the existing requirements for presentation and disclosure and clarified the requirements in paragraph 82A of IAS 1 which are included in paragraphs 88–89 of IFRS 18.

In October 2018 the IASB issued Definition of Material (Amendments to IAS 1 and IAS 8). This amendment clarified the definition of material and how it should be applied by (a) including in the definition guidance that until now has featured elsewhere in IFRS Accounting Standards; (b) improving the explanations accompanying the definition; and (c) ensuring that the definition of material is consistent across all IFRS Accounting Standards. This amendment is included in Appendix A and paragraphs B1–B5 of IFRS 18.

In January 2020 the IASB issued Classification of Liabilities as Current or Non-current (Amendments to IAS 1). This clarified the criterion in IAS 1 for classifying a liability as non-current: the requirement for an entity to have the right to defer settlement of the liability for at least twelve months after the reporting period. These amendments are included in paragraphs 101, B99, B101, B102, B104, B105, B107 and B108 of IFRS 18.

In July 2020 the IASB issued Classification of Liabilities as Current or Non-current—Deferral of Effective Date which deferred the mandatory effective date of amendments to IAS 1 Classification of Liabilities as Current or Non-current to annual reporting periods beginning on or after 1 January 2023.

In February 2021 the IASB issued Disclosure of Accounting Policies which amended IAS 1 and IFRS Practice Statement 2 Making Materiality Judgements. The amendment amended IAS 1 to replace the requirement for entities to disclose their significant accounting policies with the requirement to disclose their material accounting policy information. The amendments are included in paragraph B112 of IFRS 18 and paragraphs 27A–27G in IAS 8 Basis of Preparation of Financial Statements.

In October 2022, the IASB issued Non-current Liabilities with Covenants. The amendments improved the information an entity provides when its right to defer settlement of a liability for at least twelve months is subject to compliance with covenants. The amendments also responded to stakeholders' concerns about the classification of such a liability as current or non-current. These amendments are included in paragraphs B99, B100, B102 and B106 of IFRS 18.

In April 2024, the IASB issued IFRS 18 Presentation and Disclosure in Financial Statements. IFRS 18 sets out overall requirements for the presentation and disclosure in financial statements. The IASB did not reconsider all aspects of IAS 1 when developing IFRS 18, but instead focused on the statement of profit or loss. The IASB retained some paragraphs from IAS 1 in IFRS 18 and moved some paragraphs from IAS 1 to IAS 8 and IFRS 7 Financial Instruments: Disclosures.

Other Standards have made minor consequential amendments to IFRS 18, including IFRS 19 Subsidiaries without Public Accountability: Disclosures (issued in May 2024). https://www.ifrs.org/content/dam/ifrs/publications/pdf-standards/english/2022/issued/part-a/ias-1-presentation-of-financial-statements.pdf?bypass=on INTERNATIONAL ACCOUNTING STANDARD 1 PRESENTATION OF FINANCIAL STATEMENTS https://www.icaew.com/technical/corporate-reporting/ifrs/ifrs-accounting-standards-tracker/ias-1-presentation-of-financial-statements https://aasb.gov.au/admin/file/content105/c9/IAS1_BC_1-22.pdf Includes statements on dissent https://www.ifrs.org/content/dam/ifrs/project/primary-financial-statements/ifrs-standard/projectsummary-ifrs18-april2024.pdf The International Accounting Standards Board (IASB) issued IFRS 18 Presentation and Disclosure in Financial Statements in April 2024.

IFRS 18 aims to improve how companies communicate in their financial statements, with a focus on information about financial performance in the statement of profit or loss. IFRS 18 is accompanied by limited amendments to the requirements in IAS 7 Statement of Cash Flows IFRS 18 is effective from 1 January 2027. Companies are permitted to apply IFRS 18 before that date. IFRS 18 replaces IAS 1 Presentation of Financial Statements. Requirements in IAS 1 that are unchanged have been transferred to IFRS 18 and other Standards. IFRS 18 will affect all companies in all industries. Although IFRS 18 will not affect how companies measure financial performance, it will affect how companies present and disclose financial performance.

FRS 18 aims to improve financial reporting by: * requiring additional defined subtotals in the statement of profit or loss; * requiring disclosures about management-defined performance measures; and * adding new principles for grouping (aggregation and disaggregation) of information.

IFRS 18 responds to stakeholder feedback that: * statements of profit or loss vary in structure and content. Adding defined subtotals to the statement of profit or loss makes companies' financial performance easier to compare and provides a consistent starting point for investors' analysis. * measures defined by management are useful to investors, but companies might not explain how these measures are calculated and why they are used. Requiring companies to disclose information about management-defined performance measures increases discipline over their use and transparency about their calculation. * investors would like to see information more appropriately grouped (aggregated or disaggregated) in the financial statements. Setting out requirements on whether information should be in the primary financial statements or the notes and providing principles on the level of detail needed improves effective communication of information.

The 2018 revised Conceptual Framework sets out: * the objective of general purpose financial reporting; * the qualitative characteristics of useful financial information; * a description of the reporting entity and its boundary; * definitions of an asset, a liability, equity, income and expenses and guidance supporting these definitions; * criteria for including assets and liabilities in financial statements (recognition) and guidance on when to remove them (derecognition); * measurement bases and guidance on when to use them; * concepts and guidance on presentation and disclosure; and * concepts relating to capital and capital maintenance.

Standard history: Conceptual Framework for Financial Reporting was issued by the International Accounting Standards Board in September 2010. It was revised in March 2018.

The Conceptual Framework for Financial Reporting

STATUS AND PURPOSE OF THE CONCEPTUAL FRAMEWORK--

SP1.1 The Conceptual Framework for Financial Reporting (Conceptual Framework) describes the objective of, and the concepts for, general purpose financial reporting. The purpose of the Conceptual Framework is to:

1. assist the International Accounting Standards Board (Board) to develop IFRS Standards (Standards) that are based on consistent concepts;
2. assist preparers to develop consistent accounting policies when no Standard applies to a particular transaction or other event, or when a Standard allows a choice of accounting policy; and
3. assist all parties to understand and interpret the Standards.

SP1.2 The Conceptual Framework is not a Standard. Nothing in the Conceptual Framework overrides any Standard or any requirement in a Standard. SP1.3 To meet the objective of general purpose financial reporting, the Board may sometimes specify requirements that depart from aspects of the Conceptual Framework. If the Board does so, it will explain the departure in the Basis for Conclusions on that Standard. SP1.4 The Conceptual Framework may be revised from time to time on the basis of the Board's experience of working with it. Revisions of the Conceptual Framework will not automatically lead to changes to the Standards. Any decision to amend a Standard would require the Board to go through its due process for adding a project to its agenda and developing an amendment to that Standard. SP1.5 The Conceptual Framework contributes to the stated mission of the IFRS Foundation and of the Board, which is part of the IFRS Foundation. That mission is to develop Standards that bring transparency, accountability and efficiency to financial markets around the world. The Board's work serves the public interest by fostering trust, growth and long-term financial stability in the global economy. The Conceptual Framework provides the foundation for Standards that:

1. contribute to transparency by enhancing the international comparability and quality of financial information, enabling investors and other market participants to make informed economic decisions.
2. strengthen accountability by reducing the information gap between the providers of capital and the people to whom they have entrusted their money. Standards based on the Conceptual Framework provide information needed to hold management to account. As a source of globally comparable information, those Standards are also of vital importance to regulators around the world.
3. contribute to economic efficiency by helping investors to identify opportunities and risks across the world, thus improving capital allocation. For businesses, the use of a single, trusted accounting language derived from Standards based on the Conceptual Framework lowers the cost of capital and reduces international reporting costs.

The material included in Chapter 8 has been carried forward unchanged from the Conceptual Framework for Financial Reporting issued in 2010. That material originally appeared in the Framework for the Preparation and Presentation of Financial Statements issued in 1989.

• Concepts of capital+
• Concepts of capital maintenance and the determination of profit+
• Capital maintenance adjustments+
• Appendices+
• Board Approvals+
• Footnotes+ Copyright ©2021 IFRS Foundation

[1] Scope of fair value option (IAS 28)

1. The UKEB's draft comment letter (DCL) proposes rationalising the scope paragraph of the fair value option in IAS 28 to make it concise and principles-based. Do you agree with this position? Please explain why or why not. Yes ☐ No ☒ Explanation: Please see points under other

[2] Scope of fair value option (IAS 28): revocation (UKEB concern)

2. The UKEB's DCL raises a concern about ED paragraphs BC17 and BC 18, which refer to the ability to revoke the fair value option in IAS 28, as they do not relate to the scope of the fair value option in IAS 28. Do you agree with this position? Please explain why or why not. Yes ☐ No ☒ Explanation: Please see points under other

[3] Scope of fair value option (IAS 28)—fair value accounting as option

3: The IASB's Exposure Draft includes an alternative view supporting opening the fair value option in IAS 28 to all entities. This is addressed in Appendix A, paragraph A3 of the DCL. Do you have any comments on the alternative view or our view in relation to it, as set out in Appendix A, paragraph A3 of the DCL? Yes ☐ No ☒ Explanation: Please see points under other

[4] Other - effective date and transition

4: The UKEB's DCL supports the proposed amendments in relation to the effective date and transition. Do you agree with this position? Please explain why or why not. Yes ☐ No ☒ Explanation: please see points under other

[5] Other comments

Other comments

5. Do you have any other comments on the IASB's Exposure Draft or the UKEB's DCL you would like to share?

Thank-you for the opportunity to participate. UK Endorsement Board could helpfully explain to each of the IASB and the IFRS with each communication, exactly who it is, who it represents (Secretary of State), who it seeks to protect (UK public), which laws it must enforce through its endorsement of standards duties (Companies Acts, including Companies House register, various other registers, as the main list, AIM, over-the counter, international etc) and also how it goes about its business.

Fundamental aspects include the duty to consult and to be able to evaluate impact. If on each occasion, it set this out clearly in its responses, it would force a discipline. This is important in order to avoid rail-roading through changes (or endorsing changes) without either proper consultation or impact evaluation.

In particular what might appear a small tweak to a book-keeping anomaly or inconvenience someone has spotted and complained, can mask fundamental unresolved issues that have been festering for a decade or two but have been masked by a plethora of changing nomenclature, moving provisions from one standard to another, and the habit of using cross references rather than complete sentences in English. In particular the habit from the turn of the millennium of launching projects and running projects, has meant that process has overwhelmed substance. The fundamentals that need to be set out before the public can be asked to contribute, furnishing them with pre-requisite materials to familiarise, is wholly absent. First, UKEB needs to be mindful of the work of others before launching on this exercise. https://committees.parliament.uk/committee/697/financial-services-regulation-committee/news/211242/financial-services-regulation-committee-publishes-private-markets-report/ Report: Private Markets: Unknown unknowns. This is mandatory reading for the UKEB team. It is not identified in its "project initiation". Familiarisation with the market and the rule of law with Parliamentary oversight is omitted.

Second, public protection involves engagement with the public: "What I learned from my first few weeks as a green MP. Most politicians have no clue how tough things are out there." Hannah Spencer MP writing in the Guardian Opinion section, Friday 3 April 2026. Unless there is true public engagement, and information to MPs, issues involving Parliament will not reach nor will the public be protected. UKEB is part of HM Gov and therefore part of the executive subjected to Parliamentary scrutiny. This exercise cuts this out.

Third, there appears on the part of UKEB a determination that IFRS 18 is in force 1 January 2027 (or earlier) come what may, and that other provisions must bend to eliminate foreseeable difficulties, in its enforcement. The duty of UKEB is to say "that is not a real constraint, a major review is required to evaluate whether the standard as it currently is can be implemented: we do not want anomalies continuing to arise both before and after implementation as that would be chaotic." It has not said it. This omission needs to be good. This deals with the expedited consultation period and the further omissions of deliberations.

Introduction

The objective of this Invitation to Comment is to obtain input from stakeholders on the UK Endorsement Board's (UKEB's) Draft Comment Letter (DCL) on the Exposure Draft (ED) Amendments to the Fair Value Option (IAS 28) published by the International Accounting Standards Board (IASB) on 19 February 2026. The IASB's comment period ends on 20 April 2026.

UK endorsement and adoption process

The UKEB is responsible for endorsement and adoption of IFRS for use in the UK and therefore is the UK's National Standard Setter for IFRS. The UKEB also leads the UK's engagement with the IFRS Foundation (Foundation) on the development of new standards, amendments and interpretations. This letter is intended to contribute to the IASB's due process. The views expressed by the UKEB in this letter are separate from, and will not necessarily affect the conclusions in, any endorsement and adoption assessment on new or amended International Accounting Standards undertaken by the UKEB.

Fourth, UKEB is not a policy setter. These standards seek to bring subjective performance measures into accounts and rely on concepts for standard setters which are outside UK law. This means that historic cost financial statements have become a matter of opinion and not matter of fact. This is hopeless.

Fifth, consolidation is required in the Companies Acts and there are provisions for accounting for joint ventures and associated companies using fair value equity accounting. Making up an exception for those not quoted or planning to list, if their owners do not object, is a recipe for creating uncertainty of who is in and who is out. Not consolidating because further up the chain is consolidation, is understandable. It was inevitable that others would want to join the bandwagon if they thought they could better mask what they are up to. The current rumblings have come from the insurers. It is the aftermath of big bang. The public expects the insurer to comply with its duties of utmost good faith in insurance contracts. This is two-way. They must deliver on this before engaging in alternative structures. Unequivocally the rules should not be bent, urgently or otherwise, on lobbying by insurers. Once they have paid out on admitted claims the position may be revisited. AVIVA has arrears from September 2014, by way of small example and RSA from August 2013. This is public. There is a wider issue of listed entities using private vehicles to prop up their balance sheets and what auditors must do, if they think that the preparer will not be stopped (duty not to upset the applecart and lose independence). This is complex. A review is required of the law on consolidation and other aggregations. The standards have become over complex and a barrier to understanding what is going on. This obfuscates. UKEB should slow the process and respond saying 1 January 2027 is not in stone and cannot be with fundamental deliberations to be done, possibly before summer recess but after forthcoming by-elections.

Sixth, there has been much in the news and in the courts emanating from the cult of hedge fund managers and owners. This is tied to reputation and leverage. Money can buy lawyers and secure benefits through the courts such as an adverse judgment not being delivered until one year plus from being heard. Money talks. UKEB needs to observe what is happening and make its work programme independent. Here there is no real urgency identified, therefore there is no need to create any. We are April and supporting SMEs from last year (FRC objectives) has not started. FRC's enforcement consultation responses due 9 January 2026 have not been published. UKEB's economics team should be more transparent and get help from the public.

Seventh, UKEB is aware of public goods and that there is little incentive on the market to research the preventative effects of medicine which is off patent and preventative medicine generally. It is informed about the National Institute for Health and Care Research. When considering “investors" it must consider those choosing to invest in public goods, not just those ready to trample on others to secure gain.

Eighth, we have endeavoured to collect above those pronouncements relevant to proper deliberation. We cannot in the time allowed do justice to the review but would welcome the UKEB being ready to actually collect the relevant materials and identifying the issues arising. We hope our contribution encourages this.

[6] Response generator (Large language model)

Response generation

6. Did you/your organisation use a large language model (e.g. Chat GPT, Microsoft Copilot) to create any part of your/its response (response to this Invitation to Comment or a comment letter you are submitting as part of your response)? Yes ☐ No ☒

7. If you answered yes to Question 6, please specify which model and what prompt(s) you used for the large language model. N/A

SME Alliance Limited City of London London EC2Y Saturday 4 April 2026