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The IASB’s Investment Entities project
Investors, preparers and the IASB all agree on a consolidation exception
The IASB undertook a project to change investment entity accounting in response to the many requests from investors who told them that consolidation does not provide useful or relevant information for investment entity financial statements (examples of investment entities include venture capital funds, private equity funds, and other investment funds). Those investors told the IASB that fair value, and information about how fair value is derived, is by far the most relevant measurement attribute for an investment entity’s investments.
This is because investment entities and their investors use fair value to evaluate their investments, which take the form of pooling investors’ funds, investing those funds for returns only from capital appreciation and investment income.
The project resulted in amendments to IFRS 10 Consolidated Financial Statements, which was issued in May 2011 and would have required all entities, including investment entities, to consolidate all subsidiaries. The IASB has worked to a tight deadline to make those amendments – IFRS 10 went into effect in January ...