DECA - Amendments to the Fair Value Option (IAS 28)

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12 August 2026
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August 2026

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Contents

Introduction

Purpose

1 The purpose of this [Draft] Endorsement Criteria Assessment ([Draft] ECA) is to determine whether Amendments to the Fair Value Option for Investments in Associates and Joint Ventures (Amendments to IAS 28 Investments in Associates and Joint Ventures) (the Amendments) issued by the International Accounting Standards Board (IASB) in June 2026 meet the UK’s statutory requirements for adoption as set out in Regulation 7 of Statutory Instrument 2019/6851 (SI 2019/685).

2 The Amendments shall be applied at the same time an entity applies IFRS 18 Presentation and Disclosure in Financial Statements, which has an effective date of 1 January 2027. If an entity has elected to apply IFRS 18 prior to its effective date and that earlier period begins before the issuance of the Amendments, the entity shall apply the Amendments from the beginning of the reporting period starting on or after the issuance of the Amendments.

3 The UKEB influenced the development of the Amendments and submitted a Final Comment Letter on 23 April 20262, in response to the IASB’s Exposure Draft ED/2026/1 Amendments to the Fair Value Option for Investments in Associates and Joint Ventures3 (ED).

Background to the Amendments

4 Table 1 in this [Draft] ECA provides a brief description of the Amendments.

Scope of the Adoption Assessment

5 The Amendments make changes to the mandatory parts of IAS 28. These changes to the mandatory parts of the standard form part of the UKEB’s adoption assessment.

6 As UK-adopted international accounting standards comprise only the mandatory4 sections of standard5, the amendments to the Basis for Conclusions of IAS 28 are not adopted by the Board and are not considered in this [Draft] ECA.

Structure of the Assessment

7 Tables 2-4 discuss how the Amendments meet the UK statutory requirements for adoption of new or amended international accounting standards described in Appendix B.

[Draft] Adoption Decision

8 [On the basis of these assessments, the UKEB [tentatively] concludes that the Amendments meet the statutory endorsement criteria. The UKEB is therefore [tentatively] of the view that it will adopt the Amendments for use in the UK.]

Description and Assessment of the Amendments

Description

Table 1: Amendments to IAS 28

Aspect Description
Title and issue date of final amendments Amendments to the Fair Value Option for Investments in Associates and Joint Ventures (Amendments to IAS 28) was issued on 26 June 2026.
Origin 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.

Paragraph 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…’.

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. However, where the entity elects to use the fair value option, any income or expenses arising from subsequent measurement of associates or joint ventures that are invested in as a main business activity must be classified in the operating category of the statement of profit or loss.

The IASB has received feedback from stakeholders, particularly from the insurance industry, that there is diversity in how the requirements for the fair value option in IAS 28 are applied, and that this diversity affects the classification of income and expenses in the statement of profit or loss when applying IFRS 18. While this might not have had a material financial reporting impact previously, it is expected that the classification split required under IFRS 18 between operating and investing in the statement of profit or loss could have a material financial reporting impact.

Further background information can be found on page 4 of the ED.
What has changed? The Amendments make the following changes to IAS 28:
  • Remove the wording ‘entities including investment-linked insurance funds’ in paragraphs 18 and 19.
  • Amend paragraph 18 to clarify that ‘similar entities include entities that have a main business activity of investing in particular types of assets’ and add a cross reference to paragraph 49(a) of IFRS 18.
  • Delete the example of an investment-linked insurance fund that is currently included in paragraph 18.
Other than the above key requirement changes, minor consequential editorial changes were made to paragraphs 18 and 19.
Transition requirements The amendments take effect when a company first applies IFRS 18.

If an entity has elected to apply IFRS 18 for an annual reporting period before 1 January 2027, and that earlier period begins before the issuance of the Amendments, the entity should apply the Amendments from the beginning of the reporting period starting on or after the issuance of the Amendments.

Paragraph C7 of IFRS 18 includes provisions permitting an entity to change its election for measuring an investment in an associate or joint venture from the equity method to the fair value option under paragraph 18 of IAS 28.

If an entity makes such a change, the entity shall apply the change retrospectively, applying IAS 8. An entity applying paragraph 11 of IAS 27 shall make the same change in its separate financial statements.

Table 2: Technical Accounting Criteria Assessment

Criteria Assessment
Relevance and reliability It is anticipated that the Amendments will enable a broader range of entities, that invest in particular types of asset as a main business activity, to elect to measure investments in associates and joint ventures at fair value through profit or loss. For example, insurers, banks and investment property entities may be permitted to use the fair value option as a result of the Amendments.

The Amendments will allow newly-eligible entities to provide relevant information, both in terms of measurement and presentation:
  • Where associates or joint ventures are held as investments, measurement at fair value is expected to result in information that allows users of financial information to assess the stewardship of management.
  • Applying IFRS 18, where the entity elects to use the fair value option, any income or expenses arising from subsequent measurement of investments in associates or joint ventures, representing a main business activity, must be classified in the operating category of the statement of profit or loss. Such classification reflects the economic rationale for holding the investment.
Therefore, for entities affected, the Amendments will enable the provision of decision-useful information to users that is relevant to their buy, sell or hold decisions, or to their assessment of the stewardship of management.

Further, for those entities that will be newly eligible to elect to measure investments in associates and joint ventures at fair value through profit or loss, the Amendments will allow entities to faithfully represent the economic rationale for holding an investment. While additional judgement will be required to measure investments at fair value, requirements and guidance already available in IFRS 13 Fair Value Measurement mitigate against the risk of material error and bias.
Understandability In providing some clarity to the meaning of “similar entities” in IAS 28 to the requirements for entities with specified main business activities in IFRS 18, the Amendments ensure the consistency of requirements across IFRS Accounting Standards. This will help clarify users’ understanding of the scope of the fair value option in IAS 28, and, therefore, the information produced.
Comparability By clarifying the scope of the fair value option in IAS 28, the Amendments will limit diversity in interpretation of requirements. In addition, the Amendments will allow for consistent transition to IFRS 186. The Amendments therefore allow for the provision of comparable financial information between certain similar entities, as well as across years, by removing barriers to the use of the fair value option for entities that need to use it to reflect underlying economics.

The Amendments relate to an accounting policy choice permitted by IAS 28. While the Amendments do not introduce a new accounting policy choice to IAS 28, more entities are now in scope of that accounting policy choice, leading to a risk to the comparability of information they provide. However, this risk is mitigated by the requirements of IFRS 12 Disclosure of Interests in Other Entities, which requires an entity to disclose:
  • whether the investment in the joint venture or associate is measured using the equity method or at fair value; and
  • the fair value of its investment in the joint venture or associate where the investment is measured using the equity method (if there is a quoted market price for the investment).
Such disclosure will assist users of financial information when making comparisons between entities.
Conclusion Overall, the UKEB [tentatively] concludes that the Amendments meet the criteria of relevance, reliability, understandability and comparability required of the financial information needed for making economic decisions and assessing the stewardship of management, as required by Regulation 7(1)(c) of SI 2019/685.

Table 3: True and Fair View Assessment

Aspect Assessment
Description As discussed above, the Amendments are expected to meet the criteria of relevance, reliability, understandability and comparability of financial information. Reliability includes the notion of faithful representation of the economic substance of transactions and events. The technical accounting criteria assessment underpins the overall true and fair view assessment.
Conclusion The assessment has not identified any requirement of the Amendments, either alone or in conjunction with international accounting standards adopted for use in the UK, that would prevent individual or group accounts prepared using the Amendments from giving a true and fair view of the undertaking’s or group’s assets, liabilities, financial position and profit or loss. The Amendments provide clarity to the requirements in IAS 28 by introducing language consistent with that used in IFRS 18.

The UKEB is satisfied, therefore, that the circumstances in which the application of the Amendments would result in accounts which did not give a true and fair view would be extremely rare.

Overall, the UKEB [tentatively] concludes that the Amendments are not contrary to the true and fair view principle set out in Regulation 7(1)(a) of SI 2019/685.

Table 4: UK Long Term Public Good

Aspect Assessment
Description of entities that will be impacted The Amendments clarify that entities with a main business activity of investing in particular types of assets (as set out in paragraph 49(a) of IFRS 18) are eligible to elect the fair value option in IAS 28.

This clarification is understood to be consistent with existing practice in the UK and, based on stakeholder engagement, expected to be primarily of relevance to insurance entities.

Moreover, the Amendments would not disturb any existing fair value elections for investments in associates and joint ventures. The changes would apply to entities newly eligible to use the fair value exemption in paragraph 18 of IAS 28, and to those entities that choose to change their election to measure an investment in an associate or joint venture from the equity method to fair value through profit or loss as permitted by paragraph C7 of IFRS 18.
Do the amendments improve financial reporting? The Amendments are expected to improve the quality of financial reporting because:
  • They improve consistency across IFRS Accounting Standards and provide clarity about the meaning of ‘similar entities’ in paragraph 18 of IAS 28.
  • They would reduce the risk of different interpretations between the requirements in paragraph 18 of IAS 28 and paragraph 49(a) of IFRS 18.
  • They would result in a more faithful representation of income and expenses from associates and joint ventures. In particular, for investments in associates and joint ventures that an entity invests in as a main business activity, paragraph 55 of IFRS 18 requires that the entity classifies the income and expenses from these investments in the operating category if the assets are not accounted for applying the equity method. This would better reflect the underlying economic substance of these investments.
  • They are expected to reduce diversity in practice on how entities interpret the use of the fair value option in IAS 28.
Costs for preparers and users Preparers:
The UKEB conducted a proportionate qualitative assessment of the costs and benefits that are likely to materialise, if preparers elect to apply the Amendments.7

Based on the qualitative assessment conducted, the UKEB expects that, at a market level, preparers applying the Amendments are expected to incur minimal, if any, implementation costs.

To start with, the Amendments would affect only entities that, on transition to IFRS 18, elect to apply the fair value option in the future. They would not affect entities that already use the fair value option, as the existing reference to venture capital organisations, mutual funds or unit trusts has not been deleted from IAS 28. [Whilst the Amendments remove the wording ‘entities including investment-linked insurance funds’ in paragraphs 18 and 19 of IAS 28, stakeholder feedback indicates this is not expected to impact the eligibility of these entities to apply the fair value option in IAS 28].

Preparers may incur some incremental costs to measure investments at fair value, especially in absence of reliable market information (i.e. Level 3 of the fair value hierarchy). For example, they may incur costs to develop unobservable inputs using the best information available in the circumstances. However, entities can elect to use the fair value option, meaning that they would do so only if the benefits exceed the costs.

Moreover, individual preparers’ implementation costs will be partly offset by cost savings due to exemption from applying the requirements of the equity method of accounting in IAS 28 e.g. making adjustments to account for depreciation of the investee’s depreciable assets based on their fair values at the acquisition date per paragraph 32 of IAS 28.

Overall, stakeholder feedback indicates that interpreting the scope of the fair value option in paragraph 18 of IAS 28 is not perceived to be a significant issue in the UK. Therefore, these incremental costs are expected to be minimal.

Users: Users are expected to incur minimal costs, if any, since the Amendments are consistent with existing practice that they already understand. Users may need to incur some minimal familiarisation costs or costs related to internal model updates when entities elect to apply the fair value option.

In addition, users may incur minimal extra costs when an entity elects at the date of initial application of IFRS 18 to change its measurement model for an investment in an associate or joint venture from the equity method to fair value through profit or loss.
Benefits for preparers and users Preparers: The Amendments clarify eligibility to measure investments in associates and joint ventures using the fair value option in IAS 28.

Users: The Amendments should improve the usefulness of information presented to users of financial statements, particularly users focused on insurance entities, since the Amendments would result in a better presentation of the performance of investments in associates and joint ventures. In particular, the performance of these investments would be presented within the operating category of the statement of profit or loss, provided that the related requirements in paragraph 53 and 55 of IFRS 18 are met. This is expected to provide a better depiction of financial performance more in line with the underlying economics as they are an integral part of the business activity.
Whether the amendments are likely to have an adverse effect on UK economy The UKEB has not identified any factors that would indicate the Amendments leading to an adverse effect on the UK economy. This is on the basis that the Amendments are limited in scope and expected to improve financial reporting as compared to the current requirements of IAS 28. The Amendments should improve the quality of information provided to users of financial statements, since there will be less diversity in how the requirements for the fair value option in IAS 28 are applied which impact the classification of income and expenses in the statement of profit or loss in accordance with IFRS 18.

As such, if these Amendments were applied, they are not expected to have an adverse effect on the UK economy or economic growth.
Conclusion Having considered all relevant aspects, including the costs and benefits of implementing the Amendments, the UKEB [tentatively] concludes that the use of the Amendments is likely to be conducive to the long term public good in the UK as required by Regulation 7(1)(b) of SI 2019/685.

Do the Amendments lead to a significant change in accounting practice?

9 The UKEB is required to assess whether or not the Amendments are likely to lead to a ‘significant change in accounting practice’ and therefore meet the criteria for a post-implementation review.

10 The Amendments do not fundamentally change the requirements in IAS 28, or introduce new principles. The Amendments merely clarify that an entity 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. In addition, the Amendments are expected to be primarily of relevance to insurance entities in the UK.

11 As a result, the UKEB [tentatively] concludes that the Amendments are not likely to lead to a significant change in accounting practice and do not meet the criteria requiring a mandatory post-implementation review under Regulation 11 in SI 2019/685.

Appendix A: Glossary

Term Description
The Amendments Amendments to the Fair Value Option for Investments in Associates and Joint Ventures (Amendments to IAS 28)
ECA Endorsement Criteria Assessment
ED Exposure Draft
IASB International Accounting Standards Board
IAS International Accounting Standard
IAS 1 Presentation of Financial Statements
IAS 8 Basis of Preparation of Financial Statements
IAS 28 Investments in Associates and Joint Ventures
IFRS International Financial Reporting Standard(s)
IFRS 9 Financial Instruments
IFRS 13 Fair Value Measurement
SI Statutory Instrument
UKEB UK Endorsement Board

Appendix B: UK statutory requirements for adoption

Introduction

B1 This appendix sets out the UK statutory requirements for the adoption of new or amended international accounting standards, and the endorsement criteria assessment approach.

B2 Paragraph 1 of Regulation 7 of SI 2019/685 requires that an international accounting standard only be adopted if:

  1. the standard8 is not contrary to either of the following principles—
    1. an undertaking’s accounts must give a true and fair view of the undertaking’s assets, liabilities, financial position and profit or loss;
    2. consolidated accounts must give a true and fair view of the assets, liabilities, financial position and profit or loss of the undertakings included in the accounts taken as a whole, so far as concerns members of the undertaking;
  2. the use of the standard is likely to be conducive to the long term public good in the United Kingdom; and
  3. the standard meets the criteria of understandability, relevance, reliability and comparability required of the financial information needed for making economic decisions and assessing the stewardship of management.

Approach to the endorsement criteria

B3 This [Draft] ECA assesses the criteria above, in the following order:

  1. Whether the Amendments meets the criteria of relevance, reliability, understandability and comparability required of the financial information needed for making economic decisions and assessing the stewardship of management (Regulation 7(1)(c)). We refer to these criteria collectively as the ‘technical accounting criteria’ (refer to Table 2).
  2. Whether the Amendments are not contrary to the principle that an entity’s accounts must give a true and fair view (Regulation 7(1)(a)) (refer to Table 3).
  3. Whether use of the Amendments is likely to be conducive to the long term public good in the UK (Regulation 7(1)(b)). Regulation 7(2) of SI 2019/685 includes specific areas to consider for this assessment (refer to Table 4). They are:
    1. whether the Amendments are likely to improve the quality of financial reporting;
    2. the costs and benefits that are likely to result from the use of the Amendments; and
    3. whether the Amendments are likely to have an adverse effect on the economy of the UK, including on economic growth.

Technical accounting criteria: Relevance, Reliability, Understandability and Comparability9

B4 A description of the technical accounting criteria10 is provided below:

Technical criteria assessment Description
Relevance Information is relevant if it is capable of making a difference in the decision-making of users or in their assessment of the stewardship of management. The information may aid predictions of the future, confirm or change evaluations of the past, or both.
Reliability Financial information is reliable if, within the bounds of materiality, it:
a) can be depended on by users to represent faithfully what it either purports to represent or could reasonably be expected to represent;
b) is complete; and
c) is free from material error and bias.
Understandability Financial information should be readily understandable by users with a reasonable knowledge of business and economic activities and accounting, and a willingness to study the information with reasonable diligence.
Comparability Information is comparable if it enables users to identify and understand similarities in, and differences among, items. Information about an entity should be comparable with similar information about other entities and with similar information about the same entity for another period.

B5 In conducting the overall assessment against the technical accounting criteria, the UKEB adopts an absolute, rather than a relative, approach. This is an absolute assessment against the criteria (do the Amendments provide information that is understandable, relevant, reliable and comparable?) rather than a relative one (do the Amendments provide information that is more or less understandable, relevant, reliable and comparable than current, or any other, accounting?). When an assessment of any individual aspect or requirement of the Amendments uses comparative language (e.g. ‘enhances comparability’), this does not mean that the objective is to reflect a real comparison in relative terms. Instead, the objective is to explain that any individual aspect or requirement of the Amendments has the potential to “enhance” one or more of the qualitative characteristics.

B6 A separate comparative consideration of whether the Amendments are likely to enhance or maintain the quality of financial reporting is included within the UK long term public good assessment in Table 4.

True and fair view assessment11

B7 The first adoption criterion, set out in Regulation 7(1) of SI 2019/685, states that an international accounting standard can only be adopted if:

"[....] the standard is not contrary to either of the following principles—

(a) an undertaking’s accounts must give a true and fair view of the undertaking’s assets, liabilities, financial position and profit or loss; (b) consolidated accounts must give a true and fair view of the assets, liabilities, financial position and profit or loss of the undertakings included in the accounts taken as a whole, so far as concerns members of the undertaking; [....]"

B8 For the sake of brevity, UKEB refers to the assessment against this endorsement criterion as ‘the true and fair view assessment’ and to the principles set out in Regulation 7(1)(a) as the ‘true and fair principle’. However, these abbreviated expressions do not imply that the assessment has considered anything other than the full terms of the endorsement criterion set out above.

B9 The duty of the UKEB under Regulation 7(1)(a) is to determine generically, whether that standard is ‘not contrary’ to the true and fair principle. In other words, it is an ex-ante assessment. The UKEB has therefore considered whether the Amendments contain any requirements that would prevent accounts prepared using the Amendments from giving a true and fair view.

B10 The approach is to determine whether the Amendments are not contrary to the true and fair principle in respect of any of the specific items identified in Regulation 7(1)(a) (namely, the assets, liabilities, financial position and profit or loss) in the context of the preparation of the accounts as a whole. A holistic approach has been taken to this assessment, considering the impact of the Amendments taken as a whole, including its interaction with other UK-adopted international accounting standards.

B11 For the purposes of the assessment, the UKEB considers the requirement in paragraph 6A of IAS 8 Basis of Preparation of Financial Statements to ‘present fairly the financial position, financial performance and cash flows of an entity’12 to be equivalent to the Companies Act 2006 requirement for accounts to give a true and fair view.

B12 This assessment is separate from the duty of directors under section 393(1) of the Companies Act 2006, which requires directors to be satisfied that a specific set of accounts gives a true and fair view of an undertaking’s or group’s assets, liabilities, financial position and profit or loss.

Do the Amendments lead to a Significant Change in Accounting Practice?

B13 A standard adopted by the UKEB under Regulation 6 of SI 2019/685 that it considers is likely to lead to a ‘significant change in accounting practice’, is subject to the requirements in paragraph 3 of Regulation 11 of SI 2019/685. This requires the UKEB to:

  1. carry out a review of the impact of the adoption of the standard; and
  2. publish a report setting out the conclusions of the review no later than 5 years after the date on which the standard takes effect (being the first day of the first financial year in respect of which it must be used)”.

B14 Paragraphs 9–11 discusses whether the Amendments lead to a significant change in accounting practice.

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Footnotes

  1. The International Accounting standards and European Public Limited-Liability Company (Amendment etc.) (EU Exit) Regulations 2019 No. 685 (SI 2019/685). ↩

  2. Final Comment Letter on the ED. ↩

  3. In February 2026, the IASB published an exposure draft (ED) Amendments to the Fair Value Option for Investments in Associates and Joint Ventures. ↩

  4. The introduction to the IASB’s yearly bound volumes differentiates between mandatory and non-mandatory sections of the standards. Mandatory pronouncements relate to IFRS Accounting Standards, IAS Standards, Interpretations and Mandatory Application Guidance. These are UK-adopted international accounting standards. Non-mandatory guidance includes Bases for Conclusion, Dissenting Opinions, Implementation Guidance and Illustrative Examples, together with the IFRS Practice Statements. These are not adopted by the UKEB as they are not international accounting standards, as defined in SI 2019/685. ↩

  5. The term ‘standard’ is used to refer to amendments to international accounting standards, in line with the definition of ‘international accounting standards’ in SI 2019/685, which includes ‘subsequent amendments to international accounting standards’. ↩

  6. IFRS 18.C7 permits an entity to change its election for measuring an investment in an associate or joint venture from the equity method to fair value through profit or loss on transition to IFRS 18. ↩

  7. According to SI 2019/685, in deciding whether the use of a standard is likely to be conducive to the long term public good in the United Kingdom, the UKEB must have regard to “the costs and benefits that are likely to result from the use of the standard.” ↩

  8. The term “standard” includes standards (International Accounting standards (IAS), International Financial Reporting standards (IFRS)), amendments to those standards and related Interpretations (Standing Interpretations Committee / International Financial Reporting Interpretations Committee interpretations) issued or adopted by the IASB. ↩

  9. Refer to Table 2 Technical accounting criteria assessment. ↩

  10. These descriptions are based on the qualitative characteristics of financial statements in the Framework for the Preparation and Presentation of Financial Statements adopted by the IASB in April 2001. These qualitative characteristics became part of the criteria for endorsement and adoption of IFRS in the EU’s IAS Regulation (1606/2002), and, subsequently, in SI 2019/685. ↩

  11. Refer to Table 3 True and fair view assessment. ↩

  12. The requirement in paragraph 6A of IAS 8 was moved from paragraph 15 of IAS 1 Presentation of Financial Statements unchanged following the issuance of IFRS 18 Presentation and Disclosure in Financial Statements. The title of IAS 8 was changed from Accounting Policies, Changes in Accounting Estimates and Errors to Basis of Preparation of Financial Statements. This change is effective on 1 January 2027. ↩