AASB 128 - Investments in Associates and Joint Ventures - August 2011
Discontinuing the use of the equity methDiscontinuing the use of the equity method
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Discontinuing the use of the equity method
22 An entity shall discontinue the use of the equity method from the date when its investment ceases to be an associate or a joint venture as follows:
(a) If the investment becomes a subsidiary, the entity shall account for its investment in accordance with AASB 3 Business Combinations and AASB 10.
(b) If the retained interest in the former associate or joint venture is a financial asset, the entity shall measure the retained interest at fair value. The fair value of the retained interest shall be regarded as its fair value on initial recognition as a financial asset in accordance with AASB 9. The entity shall recognise in profit or loss any difference between:
(i) the fair value of any retained interest and any proceeds from disposing of a part interest in the associate or joint venture; and
(ii) the carrying amount of the investment at the date the equity method was discontinued.
(c) When an entity discontinues the use of the equity method, the entity shall account for all amounts previously recognised in other comprehensive income in relation to that investment on the same basis as would have been required if the investee had directly disposed of the related assets or liabilities.
23 Therefore, if a gain or loss previously recognised in other comprehensive income by the investee would be reclassified to profit or loss on the disposal of the related assets or liabilities, the entity reclassifies the gain or loss from equity to profit or loss (as a reclassification adjustment) when the equity method is discontinued. For example, if an associate or a joint venture has cumulative exchange differences relating to a foreign operation and the entity discontinues the use of the equity method, the entity shall reclassify to profit or loss the gain or loss that had previously been recognised in other comprehensive income in relation to the foreign operation.
24 If an investment in an associate becomes an investment in a joint venture or an investment in a joint venture becomes an investment in an associate, the entity continues to apply the equity method and does not remeasure the retained interest.