AASB 128 - Investments in Associates and Joint Ventures - August 2015

This Accounting Standard (AASB 128, as compiled August 2015 and incorporating amendments to 7 November 2024) prescribes how an investor accounts for investments in associates and joint ventures, and sets out requirements for applying the equity method. Mechanically, it requires that an entity with joint control of, or significant influence over, an investee account for that investment using the equity method (paras 1, 2, 16). Under the equity method the investment is initially recognised at cost and thereafter adjusted for the investor’s share of post‑acquisition profit or loss and other comprehensive income of the investee; distributions received reduce the carrying amount (para 10). The Standard specifies when the equity method must be discontinued, how to treat changes in ownership interest, how to measure retained interests on discontinuation, and how to account for upstream and downstream transactions between investor and investee (paras 22-25, 28-31).

The Standard also lists limited exemptions from applying the equity method (para 17) and permits certain investment entities and investment funds to elect fair value through profit or loss instead of the equity method (paras 18-19). It clarifies treatment of long‑term interests that form part of the investor’s net investment and how AASB 9 Financial Instruments interacts with those interests (paras 14, 14A, 38). For not‑for‑profit entities, the Standard adds Australia‑specific measures including initial fair value measurement where consideration is significantly less than fair value to further the entity’s objectives (Aus10.1), and a definition note for AusCF entities (AusCF1).

On implementation timing, the compiled version applies to annual periods beginning on or after 1 January 2025, with a history of earlier mandatory and optional effective dates for prior amendments (compilation header; para 45 and the compilation table). The Standard is made under section 334 of the Corporations Act 2001 (Accounting Standard AASB 128 paragraph), and the compilation includes amendments introduced by a series of amending Standards listed in the compilation table.

Compiled AASB Standard	AASB 128

Investments in Associates and Joint Ventures

This compiled Standard applies to annual periods beginning on or after 1 January 2025. Earlier application is permitted for annual periods beginning after 24 July 2014 but before 1 January 2025. It incorporates relevant amendments made up to and including 7 November 2024.

Prepared on 25 February 2025 by the staff of the Australian Accounting Standards Board.

Compilation no. 8

Compilation date: 31 December 2024

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Contents

COMPARISON WITH IAS 28

ACCOUNTING STANDARD

AASB 128 INVESTMENTS IN ASSOCIATES AND JOINT VENTURES

from paragraph

Objective 1

Scope 2

Definitions 3

Significant influence 5

Equity method 10

Application of the equity method 16

Exemptions from applying the equity method 17

Classification as held for sale 20

Discontinuing the use of the equity method 22

Changes in ownership interest 25

Equity method procedures 26

Impairment losses 40

Separate financial statements 44

Effective date and transition 45

References to AASB 9 46

Withdrawal of IAS 28 (2003)

Commencement of the legislative instrument

Withdrawal of AASB pronouncements Aus47.2

COMPILATION DETAILS

Deleted IAS 28 Text

BASIS FOR CONCLUSIONS ON AASB 2011-5 AND AASB 2011-6

BASIS FOR CONCLUSIONS ON AASB 2015-4

AVailable on the AASB website

Basis for Conclusions on IAS 28

Australian Accounting Standard AASB 128 Investments in Associates and Joint Ventures (as amended) is set out in paragraphs 1 – Aus47.2. All the paragraphs have equal authority. Paragraphs in bold type state the main principles. AASB 128 is to be read in the context of other Australian Accounting Standards, including AASB 1048 Interpretation of Standards, which identifies the Australian Accounting Interpretations, and AASB 1057 Application of Australian Accounting Standards. In the absence of explicit guidance, AASB 108 Accounting Policies, Changes in Accounting Estimates and Errors provides a basis for selecting and applying accounting policies.

Comparison with IAS 28

AASB 128 Investments in Associates and Joint Ventures as amended incorporates IAS 28 Investments in Associates and Joint Ventures as issued and amended by the International Accounting Standards Board (IASB). Australian‑specific paragraphs (which are not included in IAS 28) are identified with the prefix “Aus”. Paragraphs that apply only to not-for-profit entities begin by identifying their limited applicability.

Tier 1

For-profit entities complying with AASB 128 also comply with IAS 28.

Not-for-profit entities’ compliance with IAS 28 will depend on whether any “Aus” paragraphs that specifically apply to not-for-profit entities provide additional guidance or contain applicable requirements that are inconsistent with IAS 28.

Tier 2

Entities preparing general purpose financial statements under Australian Accounting Standards – Simplified Disclosures (Tier 2) will not be in compliance with IFRS Standards.

AASB 1053 Application of Tiers of Australian Accounting Standards explains the two tiers of reporting requirements.

Accounting Standard AASB 128

The Australian Accounting Standards Board made Accounting Standard AASB 128 Investments in Associates and Joint Ventures under section 334 of the Corporations Act 2001 on 7 August 2015.

This compiled version of AASB 128 applies to annual periods beginning on or after 1 January 2025. It incorporates relevant amendments contained in other AASB Standards made by the AASB up to and including 7 November 2024 (see Compilation Details).

Accounting Standard AASB 128

Investments in Associates and Joint Ventures

Objective

1 The objective of this Standard is to prescribe the accounting for investments in associates and to set out the requirements for the application of the equity method when accounting for investments in associates and joint ventures.

AusCF1 AusCF entities are:

(a) not-for-profit entities; and

(b) for-profit entities that are not applying the Conceptual Framework for Financial Reporting (as identified in AASB 1048 Interpretation of Standards).

For AusCF entities, the term ‘reporting entity’ is defined in AASB 1057 Application of Australian Accounting Standards and Statement of Accounting Concepts SAC 1 Definition of the Reporting Entity also applies. For-profit entities applying the Conceptual Framework for Financial Reporting are set out in paragraph Aus1.1 of the Conceptual Framework.

Scope

2 This Standard shall be applied by all entities that are investors with joint control of, or significant influence over, an investee.

Definitions

3 The following terms are used in this Standard with the meanings specified:
An associate is an entity over which the investor has significant influence.
Consolidated financial statements are the financial statements of a group in which assets, liabilities, equity, income, expenses and cash flows of the parent and its subsidiaries are presented as those of a single economic entity.
The equity method is a method of accounting whereby the investment is initially recognised at cost and adjusted thereafter for the post-acquisition change in the investor’s share of the investee’s net assets. The investor’s profit or loss includes its share of the investee’s profit or loss and the investor’s other comprehensive income includes its share of the investee’s other comprehensive income.
A joint arrangement is an arrangement of which two or more parties have joint control.
Joint control is the contractually agreed sharing of control of an arrangement, which exists only when decisions about the relevant activities require the unanimous consent of the parties sharing control.
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.
A joint venturer is a party to a joint venture that has joint control of that joint venture.
Significant influence is the power to participate in the financial and operating policy decisions of the investee but is not control or joint control of those policies.
4 The following terms are defined in paragraph 4 of AASB 127 Separate Financial Statements and in Appendix A of AASB 10 Consolidated Financial Statements and are used in this Standard with the meanings specified in the Standards in which they are defined:
• control of an investee
• group
• parent
• separate financial statements
• subsidiary.

Significant influence

5 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, unless it can be clearly demonstrated that this is not the case. Conversely, if the entity holds, directly or indirectly (eg through subsidiaries), less than 20 per cent of the voting power of the investee, it is presumed that the entity does not have significant influence, unless such influence can be clearly demonstrated. A substantial or majority ownership by another investor does not necessarily preclude an entity from having significant influence.
6 The existence of significant influence by an entity is usually evidenced in one or more of the following ways:
(a) representation on the board of directors or equivalent governing body of the investee;
(b) participation in policy-making processes, including participation in decisions about dividends or other distributions;
(c) material transactions between the entity and its investee;
(d) interchange of managerial personnel; or
(e) provision of essential technical information.
7 An entity may own share warrants, share call options, debt or equity instruments that are convertible into ordinary shares, or other similar instruments that have the potential, if exercised or converted, to give the entity additional voting power or to reduce another party’s voting power over the financial and operating policies of another entity (ie potential voting rights). The existence and effect of potential voting rights that are currently exercisable or convertible, including potential voting rights held by other entities, are considered when assessing whether an entity has significant influence. Potential voting rights are not currently exercisable or convertible when, for example, they cannot be exercised or converted until a future date or until the occurrence of a future event.
8 In assessing whether potential voting rights contribute to significant influence, the entity examines all facts and circumstances (including the terms of exercise of the potential voting rights and any other contractual arrangements whether considered individually or in combination) that affect potential rights, except the intentions of management and the financial ability to exercise or convert those potential rights.
9 An entity loses significant influence over an investee when it loses the power to participate in the financial and operating policy decisions of that investee. The loss of significant influence can occur with or without a change in absolute or relative ownership levels. It could occur, for example, when an associate becomes subject to the control of a government, court, administrator or regulator. It could also occur as a result of a contractual arrangement.

Equity method

10 Under the equity method, on initial recognition the investment in an associate or a joint venture is recognised at cost, and the carrying amount is increased or decreased to recognise the investor’s share of the profit or loss of the investee after the date of acquisition. The investor’s share of the investee’s profit or loss is recognised 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 arising from changes in the investee’s other comprehensive income. Such changes include those arising from the revaluation of property, plant and equipment and from foreign exchange translation differences. The investor’s share of those changes is recognised in the investor’s other comprehensive income (see AASB 101 Presentation of Financial Statements).

Aus10.1 Notwithstanding paragraph 10, not-for-profit entities shall initially measure the cost of an investment in an associate or joint venture at fair value in accordance with AASB 13 Fair Value Measurement where the consideration for the investment is significantly less than fair value principally to enable the entity to further its objectives. AASB 1058 Income of Not-for-Profit Entities addresses the recognition of related amounts.

11 The recognition of income on the basis of distributions received may not be an adequate measure of the income earned by an investor on an investment in an associate or a joint venture because the distributions received may bear little relation to the performance of the associate or joint venture. Because the investor has joint control of, or significant influence over, the investee, the investor has an interest in the associate’s or joint venture’s performance and, as a result, the return on its investment. The investor accounts for this interest by extending the scope of its financial statements to include its share of the profit or loss of such an investee. As a result, application of the equity method provides more informative reporting of the investor’s net assets and profit or loss.
12 When potential voting rights or other derivatives containing potential voting rights exist, an entity’s interest in an associate or a joint venture is determined solely on the basis of existing ownership interests and does not reflect the possible exercise or conversion of potential voting rights and other derivative instruments, unless paragraph 13 applies.
13 In some circumstances, an entity has, in substance, an existing ownership as a result of a transaction that currently gives it access to the returns associated with an ownership interest. In such circumstances, the proportion allocated to the entity is determined by taking into account the eventual exercise of those potential voting rights and other derivative instruments that currently give the entity access to the returns.
14 AASB 9 Financial Instruments does not apply to interests in associates and joint ventures that are accounted for using the equity method. When instruments containing potential voting rights in substance currently give access to the returns associated with an ownership interest in an associate or a joint venture, the instruments are not subject to AASB 9\. In all other cases, instruments containing potential voting rights in an associate or a joint venture are accounted for in accordance with AASB 9.
14A An entity also applies AASB 9 to other financial instruments in an associate or joint venture to which the equity method is not applied. These include long-term interests that, in substance, form part of the entity’s net investment in an associate or joint venture (see paragraph 38). An entity applies AASB 9 to such long-term interests before it applies paragraph 38 and paragraphs 40–43 of this Standard. In applying AASB 9, the entity does not take account of any adjustments to the carrying amount of long-term interests that arise from applying this Standard.
15 Unless an investment, or a portion of an investment, in an associate or a joint venture is classified as held for sale in accordance with AASB 5 Non-current Assets Held for Sale and Discontinued Operations, the investment, or any retained interest in the investment not classified as held for sale, shall be classified as a non-current asset.

Application of the equity method

16 An entity with joint control of, or significant influence over, an investee shall account for its investment in an associate or a joint venture using the equity method except when that investment qualifies for exemption in accordance with paragraphs 17–19.

Exemptions from applying the equity method

17 An entity need not apply the equity method to its investment in an associate or a joint venture if the entity is a parent that is exempt from preparing consolidated financial statements by the scope exception in paragraphs 4(a), Aus4.1 and Aus4.2 of AASB 10 or if all the following apply:
(a) The entity is a wholly-owned subsidiary, or is a partially-owned subsidiary of another entity and its other owners, including those not otherwise entitled to vote, have been informed about, and do not object to, the entity not applying the equity method.
(b) The entity’s 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).
(c) The entity 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.
(d) The ultimate or any intermediate parent of the entity produces financial statements available for public use that comply with International Financial Reporting Standards, in which subsidiaries are consolidated or are measured at fair value through profit or loss in accordance with AASB 10.

Aus17.1 Notwithstanding paragraph 17(d), an entity that meets the criteria in paragraphs 17(a), 17(b) and 17(c) need not apply the equity method in accounting for an interest in an associate or joint venture if its ultimate or any intermediate parent produces financial statements that are available for public use in which subsidiaries are consolidated or are measured at fair value through profit or loss in accordance with AASB 10 and:

(a) the investor or the joint venturer and its ultimate or intermediate parent are:
(i) both not-for-profit entities complying with Australian Accounting Standards; or
(ii) both entities complying with Australian Accounting Standards – Simplified Disclosures; or
(b) the investor or the joint venturer is an entity complying with Australian Accounting Standards – Simplified Disclosures and its ultimate or intermediate parent is a not-for-profit entity complying with Australian Accounting Standards.

Aus17.2 Notwithstanding paragraphs 17 and Aus17.1, the ultimate Australian entity shall apply the equity method in accounting for interests in associates and joint ventures in accordance with this Standard when the ultimate Australian entity is required by legislation to prepare financial statements that comply with either Australian Accounting Standards or accounting standards, except if the ultimate Australian parent is required, in accordance with paragraph 31 of AASB 10, to measure all of its subsidiaries at fair value through profit or loss.

AusCFAus17.2 Notwithstanding paragraphs 17, Aus17.1 and Aus17.2, in respect of AusCF entities, the ultimate Australian entity shall apply the equity method in accounting for interests in associates and joint ventures in accordance with this Standard when either the entity or the group is a reporting entity, or both the entity and the group are reporting entities, except if the ultimate Australian parent is required, in accordance with paragraph 31 of AASB 10, to measure all of its subsidiaries at fair value through profit or loss.

18 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 AASB 9\. An example of an investment-linked insurance fund is a fund held by an entity as the underlying items for a group of insurance contracts with direct participation features. For the purposes of this election, insurance contracts include investment contracts with discretionary participation features. An entity shall make this election separately for each associate or joint venture, at initial recognition of the associate or joint venture. (See AASB 17 Insurance Contracts for terms used in this paragraph that are defined in that Standard.)
19 When an entity has an investment in an associate, a portion of which is held indirectly through 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 portion of the investment in the associate at fair value through profit or loss in accordance with AASB 9 regardless of whether the venture capital organisation, or the mutual fund, unit trust and similar entities including investment-linked insurance funds, has significant influence over that portion of the investment. If the entity makes that election, the entity shall apply the equity method to any remaining portion of its investment in an associate that is not held through a venture capital organisation, or a mutual fund, unit trust and similar entities including investment-linked insurance funds.

Classification as held for sale

20 An entity shall apply AASB 5 to an investment, or a portion of an investment, in an associate or a joint venture that meets the criteria to be classified as held for sale. Any retained portion of an investment in an associate or a joint venture that has not been classified as held for sale shall be accounted for using the equity method until disposal of the portion that is classified as held for sale takes place. After the disposal takes place, an entity shall account for any retained interest in the associate or joint venture in accordance with AASB 9 unless the retained interest continues to be an associate or a joint venture, in which case the entity uses the equity method.
21 When an investment, or a portion of an investment, in an associate or a joint venture previously classified as held for sale no longer meets the criteria to be so classified, it shall be accounted for using the equity method retrospectively as from the date of its classification as held for sale. Financial statements for the periods since classification as held for sale shall be amended accordingly.

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.

Changes in ownership interest

25 If an entity’s ownership interest in an associate or a joint venture is reduced, but the investment continues to be classified either as an associate or a joint venture respectively, the entity shall reclassify to profit or loss the proportion of the gain or loss that had previously been recognised in other comprehensive income relating to that reduction in ownership interest if that gain or loss would be required to be reclassified to profit or loss on the disposal of the related assets or liabilities.

Equity method procedures

26 Many of the procedures that are appropriate for the application of the equity method are similar to the consolidation procedures described in AASB 10\. Furthermore, the concepts underlying the procedures used in accounting for the acquisition of a subsidiary are also adopted in accounting for the acquisition of an investment in an associate or a joint venture.
27 A group’s share in an associate or a joint venture is the aggregate of the holdings in that associate or joint venture by the parent and its subsidiaries. The holdings of the group’s other associates or joint ventures are ignored for this purpose. When an associate or a joint venture has subsidiaries, associates or joint ventures, the profit or loss, other comprehensive income and net assets taken into account in applying the equity method are those recognised in the associate’s or joint venture’s financial statements (including the associate’s or joint venture’s share of the profit or loss, other comprehensive income and net assets of its associates and joint ventures), after any adjustments necessary to give effect to uniform accounting policies (see paragraphs 35–36A).
28 Gains and losses resulting from ‘upstream’ and ‘downstream’ transactions involving assets that do not constitute a business, as defined in AASB 3, between an entity (including its consolidated subsidiaries) and its associate or joint venture are recognised in the entity’s financial statements only to the extent of unrelated investors’ interests in the associate or joint venture. ‘Upstream’ transactions are, for example, sales of assets from an associate or a joint venture to the investor. The entity’s share in the associate’s or the joint venture’s gains or losses resulting from these transactions is eliminated. ‘Downstream’ transactions are, for example, sales or contributions of assets from the investor to its associate or its joint venture.
29 When downstream transactions provide evidence of a reduction in the net realisable value of the assets to be sold or contributed, or of an impairment loss of those assets, those losses shall be recognised in full by the investor. When upstream transactions provide evidence of a reduction in the net realisable value of the assets to be purchased or of an impairment loss of those assets, the investor shall recognise its share in those losses.
30 The gain or loss resulting from the contribution of non-monetary assets that do not constitute a business, as defined in AASB 3, to an associate or a joint venture in exchange for an equity interest in that associate or joint venture shall be accounted for in accordance with paragraph 28, except when the contribution lacks commercial substance, as that term is described in AASB 116 Property, Plant and Equipment. If such a contribution lacks commercial substance, the gain or loss is regarded as unrealised and is not recognised unless paragraph 31 also applies. Such unrealised gains and losses shall be eliminated against the investment accounted for using the equity method and shall not be presented as deferred gains or losses in the entity’s consolidated statement of financial position or in the entity’s statement of financial position in which investments are accounted for using the equity method.
31 If, in addition to receiving an equity interest in an associate or a joint venture, an entity receives monetary or non-monetary assets, the entity recognises in full in profit or loss the portion of the gain or loss on the non-monetary contribution relating to the monetary or non-monetary assets received.
31A The gain or loss resulting from a downstream transaction involving assets that constitute a business, as defined in AASB 3, between an entity (including its consolidated subsidiaries) and its associate or joint venture is recognised in full in the investor’s financial statements.
31B An entity might sell or contribute assets in two or more arrangements (transactions). When determining whether assets that are sold or contributed constitute a business, as defined in AASB 3, an entity shall consider whether the sale or contribution of those assets is part of multiple arrangements that should be accounted for as a single transaction in accordance with the requirements in paragraph B97 of AASB 10.
32 An investment is accounted for using the equity method from the date on which it becomes an associate or a joint venture. On acquisition of the investment, any difference between the cost of the investment and the entity’s share of the net fair value of the investee’s identifiable assets and liabilities is accounted for as follows:
(a) Goodwill relating to an associate or a joint venture is included in the carrying amount of the investment. Amortisation of that goodwill is not permitted.
(b) Any excess of the entity’s share of the net fair value of the investee’s identifiable assets and liabilities over the cost of the investment is included as income in the determination of the entity’s share of the associate or joint venture’s profit or loss in the period in which the investment is acquired.
Appropriate adjustments to the entity’s share of the associate’s or joint venture’s profit or loss after acquisition are made in order to account, for example, for depreciation of the depreciable assets based on their fair values at the acquisition date. Similarly, appropriate adjustments to the entity’s share of the associate’s or joint venture’s profit or loss after acquisition are made for impairment losses such as for goodwill or property, plant and equipment.
33 The most recent available financial statements of the associate or joint venture are used by the entity in applying the equity method. When the end of the reporting period of the entity is different from that of the associate or joint venture, the associate or joint venture prepares, for the use of the entity, financial statements as of the same date as the financial statements of the entity unless it is impracticable to do so.
34 When, in accordance with paragraph 33, the financial statements of an associate or a joint venture used in applying the equity method are prepared as of a date different from that used by the entity, adjustments shall be made for the effects of significant transactions or events that occur between that date and the date of the entity’s financial statements. In any case, the difference between the end of the reporting period of the associate or joint venture and that of the entity shall be no more than three months. The length of the reporting periods and any difference between the ends of the reporting periods shall be the same from period to period.
35 The entity’s financial statements shall be prepared using uniform accounting policies for like transactions and events in similar circumstances.
36 Except as described in paragraph 36A, if an associate or a joint venture uses accounting policies other than those of the entity for like transactions and events in similar circumstances, adjustments shall be made to make the associate’s or joint venture’s accounting policies conform to those of the entity when the associate’s or joint venture’s financial statements are used by the entity in applying the equity method.
36A Notwithstanding the requirement in paragraph 36, if an entity that is not itself an investment entity has an interest in an associate or joint venture that is an investment entity, the entity may, when applying the equity method, elect to retain the fair value measurement applied by that investment entity associate or joint venture to the investment entity associate’s or joint venture’s interests in subsidiaries. This election is made separately for each investment entity associate or joint venture, at the later of the date on which (a) the investment entity associate or joint venture is initially recognised; (b) the associate or joint venture becomes an investment entity; and (c) the investment entity associate or joint venture first becomes a parent.
37 If an associate or a joint venture has outstanding cumulative preference shares that are held by parties other than the entity and are classified as equity, the entity computes its share of profit or loss after adjusting for the dividends on such shares, whether or not the dividends have been declared.
38 If an entity’s share of losses of an associate or a joint venture equals or exceeds its interest in the associate or joint venture, the entity discontinues recognising its share of further losses. The interest in an associate or a joint venture is the carrying amount of the investment in the associate or joint venture determined using the equity method together with any long-term interests that, in substance, form part of the entity’s net investment in the associate or joint venture. For example, an item for which settlement is neither planned nor likely to occur in the foreseeable future is, in substance, an extension of the entity’s investment in that associate or joint venture. Such items may include preference shares and long-term receivables or loans, but do not include trade receivables, trade payables or any long-term receivables for which adequate collateral exists, such as secured loans. Losses recognised using the equity method in excess of the entity’s investment in ordinary shares are applied to the other components of the entity’s interest in an associate or a joint venture in the reverse order of their seniority (ie priority in liquidation).
39 After the entity’s interest is reduced to zero, additional losses are provided for, and a liability is recognised, only to the extent that the entity has incurred legal or constructive obligations or made payments on behalf of the associate or joint venture. If the associate or joint venture subsequently reports profits, the entity resumes recognising its share of those profits only after its share of the profits equals the share of losses not recognised.

Impairment losses

40 After application of the equity method, including recognising the associate’s or joint venture’s losses in accordance with paragraph 38, the entity applies paragraphs 41A–41C to determine whether there is any objective evidence that its net investment in the associate or joint venture is impaired.
41 \[Deleted\]
41A The net investment in an associate or joint venture is impaired and impairment losses are incurred if, and only if, there is objective evidence of impairment as a result of one or more events that occurred after the initial recognition of the net investment (a ‘loss event’) and that loss event (or events) has an impact on the estimated future cash flows from the net investment that can be reliably estimated. It may not be possible to identify a single, discrete event that caused the impairment. Rather the combined effect of several events may have caused the impairment. Losses expected as a result of future events, no matter how likely, are not recognised. Objective evidence that the net investment is impaired includes observable data that comes to the attention of the entity about the following loss events:
(a) significant financial difficulty of the associate or joint venture;
(b) a breach of contract, such as a default or delinquency in payments by the associate or joint venture;
(c) the entity, for economic or legal reasons relating to its associate’s or joint venture’s financial difficulty, granting to the associate or joint venture a concession that the entity would not otherwise consider;
(d) it becoming probable that the associate or joint venture will enter bankruptcy or other financial reorganisation; or
(e) the disappearance of an active market for the net investment because of financial difficulties of the associate or joint venture.
41B The disappearance of an active market because the associate’s or joint venture’s equity or financial instruments are no longer publicly traded is not evidence of impairment. A downgrade of an associate’s or joint venture’s credit rating or a decline in the fair value of the associate or joint venture, is not of itself, evidence of impairment, although it may be evidence of impairment when considered with other available information.
41C In addition to the types of events in paragraph 41A, objective evidence of impairment for the net investment in the equity instruments of the associate or joint venture includes information about significant changes with an adverse effect that have taken place in the technological, market, economic or legal environment in which the associate or joint venture operates, and indicates that the cost of the investment in the equity instrument may not be recovered. A significant or prolonged decline in the fair value of an investment in an equity instrument below its cost is also objective evidence of impairment.
42 Because goodwill that forms part of the carrying amount of the net investment in an associate or a joint venture is not separately recognised, it is not tested for impairment separately by applying the requirements for impairment testing goodwill in AASB 136 Impairment of Assets. Instead, the entire carrying amount of the investment is tested for impairment in accordance with AASB 136 as a single asset, by comparing its recoverable amount (higher of value in use and fair value less costs of disposal) with its carrying amount whenever application of paragraphs 41A–41C indicates that the net investment may be impaired. An impairment loss recognised in those circumstances is not allocated to any asset, including goodwill, that forms part of the carrying amount of the net investment in the associate or joint venture. Accordingly, any reversal of that impairment loss is recognised in accordance with AASB 136 to the extent that the recoverable amount of the net investment subsequently increases. In determining the value in use of the net investment, an entity estimates:
(a) its share of the present value of the estimated future cash flows expected to be generated by the associate or joint venture, including the cash flows from the operations of the associate or joint venture and the proceeds from the ultimate disposal of the investment; or
(b) the present value of the estimated future cash flows expected to arise from dividends to be received from the investment and from its ultimate disposal.
Using appropriate assumptions, both methods give the same result.
43 The recoverable amount of an investment in an associate or a joint venture shall be assessed for each associate or joint venture, unless the associate or joint venture does not generate cash inflows from continuing use that are largely independent of those from other assets of the entity.

Separate financial statements

44 An investment in an associate or a joint venture shall be accounted for in the entity’s separate financial statements in accordance with paragraph 10 of AASB 127.

Effective date and transition

45 An entity shall apply this Standard for annual periods beginning on or after 1 January 2018. Earlier application is permitted for periods beginning after 24 July 2014 but before 1 January 2018. If an entity applies this Standard earlier, it shall disclose that fact and apply AASB 10, AASB 11 Joint Arrangements, AASB 12 Disclosure of Interests in Other Entities and AASB 127 at the same time.
45A AASB 2014-7 Amendments to Australian Accounting Standards arising from AASB 9 (December 2014), issued in December 2014, amended the previous version of this Standard as follows: amended paragraphs 40–42 and added paragraphs 41A–41C. An entity shall apply those amendments when it applies AASB 9.
45B AASB 2014-9 Amendments to Australian Accounting Standards – Equity Method in Separate Financial Statements, issued in December 2014, amended paragraph 25 in the previous version of this Standard. An entity shall apply that amendment for annual periods beginning on or after 1 January 2016 retrospectively in accordance with AASB 108 Accounting Policies, Changes in Accounting Estimates and Errors. Earlier application is permitted. If an entity applies that amendment for an earlier period, it shall disclose that fact.
45C AASB 2014-10 Amendments to Australian Accounting Standards – Sale or Contribution of Assets between an Investor and its Associate or Joint Venture, issued in December 2014, in conjunction with AASB 2015‑10 Amendments to Australian Accounting Standards – Effective Date of Amendments to AASB 10 and AASB 128, AASB 2017‑5 Amendments to Australian Accounting Standards – Effective Date of Amendments to AASB 10 and AASB 128 and Editorial Corrections, AASB 2021-7 Amendments to Australian Accounting Standards – Effective Date of Amendments to AASB 10 and AASB 128 and Editorial Corrections, and AASB 2024‑4 Amendments to Australian Accounting Standards – Effective Date of Amendments to AASB 10 and AASB 128, amended paragraphs 28 and 30 and added paragraphs 31A–31B. An entity shall apply those amendments prospectively to the sale or contribution of assets occurring in annual periods beginning on or after 1 January 2028. Earlier application is permitted. If an entity applies those amendments earlier, it shall disclose that fact.
45D AASB 2015-5 Amendments to Australian Accounting Standards – Investment Entities: Applying the Consolidation Exception, issued in January 2015, amended the previous version of this Standard as follows: amended paragraphs 17, Aus17.1, Aus17.2, 27 and 36 and added paragraph 36A. An entity shall apply those amendments for annual periods beginning on or after 1 January 2016. Earlier application is permitted. If an entity applies those amendments for an earlier period, it shall disclose that fact.
45E AASB 2017-1 Amendments to Australian Accounting Standards – Transfers of Investment Property, Annual Improvements 2014–2016 Cycle and Other Amendments, issued in February 2017, amended paragraphs 18 and 36A. A for-profit entity shall apply those amendments retrospectively in accordance with AASB 108 for annual periods beginning on or after 1 January 2018. A not-for-profit entity shall apply those amendments retrospectively in accordance with AASB 108 for annual periods beginning on or after 1 January 2019. Earlier application is permitted. If an entity applies those amendments for an earlier period, it shall disclose that fact.
45F AASB 17, issued in July 2017, amended paragraph 18. An entity shall apply that amendment when it applies AASB 17.
45G AASB 2017-7 Amendments to Australian Accounting Standards – Long-term Interests in Associates and Joint Ventures, issued in December 2017, added paragraph 14A and deleted paragraph 41. An entity shall apply those amendments retrospectively in accordance with AASB 108 for annual reporting periods beginning on or after 1 January 2019, except as specified in paragraphs 45H–45K. Earlier application is permitted. If an entity applies those amendments earlier, it shall disclose that fact.
45H An entity that first applies the amendments in paragraph 45G at the same time it first applies AASB 9 shall apply the transition requirements in AASB 9 to the long-term interests described in paragraph 14A.
45I An entity that first applies the amendments in paragraph 45G after it first applies AASB 9 shall apply the transition requirements in AASB 9 necessary for applying the requirements set out in paragraph 14A to long-term interests. For that purpose, references to the date of initial application in AASB 9 shall be read as referring to the beginning of the annual reporting period in which the entity first applies the amendments (the date of initial application of the amendments). The entity is not required to restate prior periods to reflect the application of the amendments. The entity may restate prior periods only if it is possible without the use of hindsight.
45J When first applying the amendments in paragraph 45G, an entity that applies the temporary exemption from AASB 9 in accordance with AASB 4 Insurance Contracts is not required to restate prior periods to reflect the application of the amendments. The entity may restate prior periods only if it is possible without the use of hindsight.
45K If an entity does not restate prior periods applying paragraph 45I or paragraph 45J, at the date of initial application of the amendments it shall recognise in the opening retained earnings (or other component of equity, as appropriate) any difference between:
(a) the previous carrying amount of long-term interests described in paragraph 14A at that date; and
(b) the carrying amount of those long-term interests at that date.

References to AASB 9

46 If an entity applies this Standard but does not yet apply AASB 9, any reference to AASB 9 shall be read as a reference to AASB 139.

Withdrawal of IAS 28 (2003)

47 [Deleted by the AASB]

Commencement of the legislative instrument

Aus47.1 [Repealed]

Withdrawal of AASB pronouncements

Aus47.2 This Standard repeals AASB 128 Investments in Associates and Joint Ventures issued in August 2011. Despite the repeal, after the time this Standard starts to apply under section 334 of the Corporations Act (either generally or in relation to an individual entity), the repealed Standard continues to apply in relation to any period ending before that time as if the repeal had not occurred.

\[Note: When this Standard applies under section 334 of the Corporations Act (either generally or in relation to an individual entity), it supersedes the application of the repealed Standard.\]

Compilation details
Accounting Standard AASB 128 Investments in Associates and Joint Ventures (as amended)

Note: Compilation details are not part of AASB 128.

This compiled Standard applies to annual periods beginning on or after 1 January 2025. It takes into account amendments up to and including 7 November 2024 was prepared on 25 February 2025 by the staff of the Australian Accounting Standards Board (AASB).

This compilation is not a separate Accounting Standard made by the AASB. Instead, it is a representation of AASB 128 (August 2015) as amended by other Accounting Standards, which are listed in the table below.

Table of Standards

Standard	Date made	FRL identifier	Commence-ment date	Effective date(annual periods… on or after …)	Application, saving or transitional provisions
AASB 128	7 Aug 2015	F2015L01543	31 Dec 2017	(beginning) 1 Jan 2018	see (a) below
AASB 2015-10	22 Dec 2015	F2016L00035	31 Dec 2015	(beginning) 1 Jan 2016	see (b) below
AASB 1058	9 Dec 2016	F2017L00042	31 Dec 2018	(beginning) 1 Jan 2019	see (c) below
AASB 2017-1	13 Feb 2017	F2017L00193	31 Dec 2017	FP (beginning) 1 Jan 2018NFP (beginning) 1 Jan 2019	see (d) below
AASB 17	19 Jul 2017	F2017L01184	31 Dec 2022	(beginning) 1 Jan 2023	see (e) below
AASB 2017-5	12 Dec 2017	F2018L00067	31 Dec 2017	(beginning) 1 Jan 2018	see (f) below
AASB 2017-7	12 Dec 2017	F2018L00065	31 Dec 2018	(beginning) 1 Jan 2019	see (g) below
AASB 2019-1	21 May 2019	F2019L00966	31 Dec 2019	(beginning) 1 Jan 2020	see (h) below
AASB 1060	6 Mar 2020	F2020L00288	30 Jun 2021	(beginning) 1 Jul 2021	see (i) below
AASB 2021-7	20 Dec 2021	F2021L01883	31 Dec 2021	(beginning) 1 Jan 2022	see (j) below
AASB 2022-7	15 Dec 2022	F2023L00018	31 Dec 2022	(beginning) 1 Jan 2023	see (k) below
AASB 18	7 Jun 2024	F2024L00708	31 Dec 2026	FP (beginning) 1 Jan 2027NFP (beginning) 1 Jan 2028	not compiled*
AASB 2024-4	7 Nov 2024	F2024L01481	31 Dec 2024	(beginning) 1 Jan 2025	see (l) below

* The amendments made by this Standard are not included in this compilation, which presents the principal Standard as applicable to annual periods beginning on or after 1 January 2025. The compilation includes amendments that apply mandatorily only to periods beginning on or after 1 January 2028. See AASB 2024-4.

(a) Entities may elect to apply this Standard to annual periods beginning after 24 July 2014 but before 1 January 2018, provided that AASB 10 Consolidated Financial Statements, AASB 11 Joint Arrangements, AASB 12 Disclosure of Interests in Other Entities and AASB 127 Separate Financial Statements are also applied to such periods.
(b) This Standard amended AASB 128 for annual periods beginning on or after 1 January 2018. Entities may elect to apply the amendments in this Standard to annual periods beginning before 1 January 2018.
(c) Entities may elect to apply this Standard to annual periods beginning before 1 January 2019, provided that AASB 15 Revenue from Contracts with Customers is also applied to the same period.
(d) For-profit (FP) entities and not-for-profit (NFP) entities may elect to apply the amendments made to AASB 128 by this Standard early, in advance of their specific mandatory effective dates.
(e) Entities may elect to apply this Standard to annual periods beginning before 1 January 2023, provided that AASB 9 Financial Instruments is also applied on or before the date of initial application of AASB 17. (AASB 17 was amended prior to its mandatory application by various amending Standards, including AASB 2022-8 Amendments to Australian Accounting Standards – Insurance Contracts: Consequential Amendments, made by the AASB on 15 December 2022.)
(f) AASB 2017-5 deferred the effective date of certain requirements included in AASB 128 to annual periods beginning on or after 1 January 2022 instead of 1 January 2018. Entities may elect to apply this Standard to annual periods beginning before 1 January 2018. Entities may elect to apply the deferred requirements to annual periods beginning before 1 January 2022. The deferred requirements were originally set out in AASB 2014-10 Amendments to Australian Accounting Standards – Sale or Contribution of Assets between an Investor and its Associate or Joint Venture.
(g) Entities may elect to apply this Standard to annual periods beginning before 1 January 2019.
(h) Entities may elect to apply this Standard to annual periods beginning before 1 January 2020.
(i) Entities may elect to apply this Standard to annual periods beginning before 1 July 2021.
(j) AASB 2021-7 again deferred the effective date of certain requirements included in AASB 128, to annual periods beginning on or after 1 January 2025 instead of 1 January 2022. Entities may elect to apply this Standard to annual periods beginning before 1 January 2022. Entities may elect to apply the deferred requirements to annual periods beginning before 1 January 2025. The deferred requirements were originally set out in AASB 2014-10.
(k) Entities may elect to apply this Standard to annual periods beginning before 1 January 2023.
(l) AASB 2024-4 again deferred the effective date of certain requirements included in AASB 128, to annual periods beginning on or after 1 January 2028 instead of 1 January 2025. Entities may elect to apply this Standard to annual periods beginning before 1 January 2025. Entities may elect to apply the deferred requirements to annual periods beginning before 1 January 2028. The deferred requirements were originally set out in AASB 2014-10.

Table of amendments

Paragraph affected	How affected	By … [paragraph/page]
AusCF1	added	AASB 2019-1 [page 21]
Aus10.1	added	AASB 1058 [page 24]
14A	added	AASB 2017-7 [page 5]
Aus17.1	amended	AASB 1060 [page 64]
Aus17.2	amended	AASB 2022-7 [10]
AusCFAus17.2	added	AASB 2022-7 [10]
18	amendedamended	AASB 2017-1 [page 7]AASB 17 [page 80]
28	amended (for certain periods)amended (for certain periods)amended (for certain periods)	AASB 2017-5 [9]AASB 2021-7 [10]AASB 2024-4 [9]
30	amended (for certain periods)amended (for certain periods)amended (for certain periods)	AASB 2017-5 [9]AASB 2021-7 [10]AASB 2024-4 [9]
31A-31B	deleted (for certain periods)deleted (for certain periods)deleted (for certain periods)	AASB 2017-5 [9]AASB 2021-7 [10]AASB 2024-4 [9]
36A	amended	AASB 2017-1 [page 8]
37	amended	AASB 2017-5 [25]
41	deleted	AASB 2017-7 [page 6]
42	amended	AASB 2021-7 [34]
45C	amendeddeleted (for certain periods)amendeddeleted (for certain periods)amendeddeleted (for certain periods)amended	AASB 2015-10 [11, 12]AASB 2017-5 [9]AASB 2017-5 [10, 11]AASB 2021-7 [10]AASB 2021-7 [11, 12]AASB 2024-4 [9]AASB 2024-4 [10, 11]
45E	added	AASB 2017-1 [page 8]
45F	added	AASB 17 [page 80]
45G-45K	added	AASB 2017-7 [page 6]
Aus47.1	repealed	Legislation Act 2003, s. 48D

Deleted IAS 28 text

Note: Deleted IAS 28 text is not part of AASB 128.

47 This Standard supersedes IAS 28 Investments in Associates (as revised in 2003).

Basis for Conclusions on AASB 2011-5 and AASB 2011-6

Note: This Basis for Conclusions accompanies, but is not part of, AASB 128. The Basis for Conclusions was originally published with AASB 2011-6 Amendments to Australian Accounting Standards – Extending Relief from Consolidation, the Equity Method and Proportionate Consolidation – Reduced Disclosure Requirements.

Introduction

BC1 This Basis for Conclusions summarises the Australian Accounting Standards Board’s considerations in reaching the conclusions in AASB 2011-5 Amendments to Australian Accounting Standards – Extending Relief from Consolidation, the Equity Method and Proportionate Consolidation and AASB 2011-6 Amendments to Australian Accounting Standards – Extending Relief from Consolidation, the Equity Method and Proportionate Consolidation – Reduced Disclosure Requirements. Individual Board members gave greater weight to some factors than to others.

Background

BC2 Paragraph 10 of AASB 127 Consolidated and Separate Financial Statements (in common with IAS 27 Consolidated and Separate Financial Statements) provides relief from preparing consolidated financial statements for parents that meet four criteria, including having an ultimate parent or an intermediate parent that prepares IFRS-compliant consolidated financial statements (paragraph 10(d)).
BC3 Due to the addition of Aus paragraphs in IFRSs as adopted in Australia, the financial statements of some entities applying Australian Accounting Standards are not IFRS compliant. This means that a parent that has an ultimate parent or other intermediate parent that prepares non-IFRS-compliant consolidated financial statements does not have access to the exemption from consolidation provided in paragraph 10 of AASB 127, even if the criteria in paragraphs 10(a) to 10(c) are met.
BC4 Similarly, investors need not apply the equity method when they meet the four criteria in paragraph 13(c) of AASB 128 Investments in Associates and venturers need not apply proportionate consolidation or the equity method when they meet the four criteria in paragraph 2(c) of AASB 131 Interests in Joint Ventures. The criteria in paragraph 10 of AASB 127, paragraph 13(c) of AASB 128 and paragraph 2(c) of AASB 131 are similar.
BC5 Consequently, the exemptions from the equity method and proportionate consolidation are also not available under those paragraphs to an investor or a venturer when its ultimate parent or intermediate parent prepares non-IFRS-compliant consolidated financial statements.
BC6 The AASB issued Exposure Draft ED 205 Extending Relief from Consolidation, the Equity Method and Proportionate Consolidation in September 2010. The AASB considered the submissions received from constituents and confirmed the principal approach proposed in the Exposure Draft.

New Zealand approach

BC7 During its development of ED 205, the AASB noted that a related issue was considered by the Financial Reporting Standards Board (FRSB) of the New Zealand Institute of Chartered Accountants in December 2008. This concerned the requirement in paragraph 10(d) of NZ IAS 27 Consolidated and Separate Financial Statements that the parent’s financial statements must be ‘available for public use’. Due to the reporting requirements in New Zealand, not all entities are required to file their financial statements with the Companies Office. Hence, when a parent of a group is not required to submit its financial statements, any intermediate subsidiaries were unable to use the paragraph 10 exemption. As a result, the FRSB inserted paragraph NZ 3.1 into NZ IAS 27 so that entities that qualify for differential reporting concessions were not required to comply with paragraph 10(d). In order to qualify for the exemption not to present consolidated financial statements, qualifying entities were still required to comply with all the other conditions in paragraph 10.
BC8 In addition, the AASB noted that the FRSB had inserted a similar exemption into NZ IAS 28 Investments in Associates (paragraph NZ 1.2) and NZ IAS 31 Interests in Joint Ventures (paragraph NZ 1.1), extending the relief from application of the equity method by investors and proportionate consolidation or the equity method by venturers.
BC9 The AASB did not follow the FRSB’s specific approach for qualifying entities, given the different issues faced by the two Boards and the different financial reporting framework in New Zealand, including its differential reporting framework that involves modifications to the recognition and measurement requirements of IFRSs.

Extending the exemptions

BC10 The AASB considered the limitations on the exemptions and developed a view that relief from consolidation, the equity method and proportionate consolidation should be extended to a not-for-profit or Tier 2 parent, investor or venturer if it:
(a) has a parent higher up in the group that prepares consolidated financial statements (whether or not IFRS-compliant) that are available for public use and:
(i) those consolidated financial statements incorporate the information that would otherwise have been presented in the parent’s consolidated financial statements or the investor’s or venturer’s financial statements; or
(ii) the parent, investor or venturer is an entity complying with Australian Accounting Standards – Reduced Disclosure Requirements (‘Tier 2’); and
(b) meets the criteria in paragraphs 10(a) to 10(c) of AASB 127, paragraphs 13(c)(i) to 13(c)(iii) of AASB 128 or paragraphs 2(c)(i) to 2(c)(iii) of AASB 131, as relevant.
BC11 This view is based on the principle that financial statement users would be able to satisfy their information needs through the consolidated financial statements prepared by the parent higher up in the group. However, the AASB decided that such relief should not be available in relation to the General Government Sector (GGS) of each Federal, State and Territory Government due to the unique circumstances related to the GGS, its relationship to the whole of government and its macro-economic significance. The AASB also decided that the partial consolidation basis for GGS financial statements required by AASB 1049 Whole of Government and General Government Sector Financial Reporting would not be amended.
BC12 Consistent with IAS 27, IAS 28 Investments in Associates and IAS 31 Interests in Joint Ventures, the AASB decided that the existing relief provided under paragraph 10 of AASB 127, paragraph 13(c) of AASB 128 and paragraph 2(c) of AASB 131 should be retained. The extension of relief on the basis set out in paragraph BC10 does not change the present requirements for relief when the ultimate or intermediate parent is a for-profit Tier 1 entity – that entity is still required to prepare IFRS-compliant consolidated financial statements.

Not-for-profit ultimate or intermediate parent

BC13 When the ultimate or intermediate parent is a not-for-profit Tier 1 entity, and the parent, investor or venturer is a for-profit Tier 1 entity, the relief is not available where there are differences in the basis of accounting between the not-for-profit and for-profit entities as a result of the not-for-profit entity applying Standards or Aus paragraphs that contain requirements that are inconsistent with IFRS requirements. Extending relief to the for-profit Tier 1 parent, investor or venturer in this case would be beyond the scope of the relief available under IFRSs. However, the relief is available when the not-for-profit entity is not required to apply such inconsistent requirements. This is indicated by footnote to the table in paragraph AG1 of the Australian application guidance added to AASB 127. In this case, the for-profit Tier 1 entity would be able to claim compliance with IFRSs in that the relief is within the scope of the relief available under IFRSs.
BC14 The AASB considered the extension of relief to a for-profit Tier 2 parent, investor or venturer that has a not-for-profit ultimate or intermediate parent. The table in the Basis for Conclusions in ED 205 proposed that relief should be available to a parent, investor or venturer in these circumstances, which appears to be inconsistent with the circumstances addressed in paragraph BC13. The AASB considered three approaches to addressing the apparent inconsistency:
(a) amend the table proposed in ED 205 to indicate that the relief would not be available;
(b) retain the approach proposed in ED 205, that the relief would be available, and extend the justification in the Basis for Conclusions for this position; or
(c) retain the approach proposed in ED 205 with no amendment to the justification.
BC15 The AASB adopted the approach in paragraph BC14(b), extending the relief, based on its judgement that the relief would be reasonable for Tier 2 parents, investors or venturers despite any differences in the basis of accounting in the consolidated financial statements of the ultimate or intermediate parent that are publicly available. Typically, the not-for-profit ultimate or intermediate parent would not be able to claim compliance with IFRSs, and the Tier 2 parent, investor or venturer could not do so.

For-profit public sector entities

BC16 The AASB decided that relief would not be available to a parent entity merely because the intermediate parent preparing consolidated financial statements is a for-profit Tier 1 public sector entity unable to claim compliance with IFRSs. This decision was made on the basis that a for-profit public sector entity may apply requirements in particular Standards, such as AASB 1004 Contributions, and Aus paragraphs in other Australian Accounting Standards that are inconsistent with an IFRS requirement. However, relief may be available to the parent entity on another basis permitted by the Standard.
BC17 Relief is (or is not) available to a for-profit public sector entity as the parent, investor or venturer on the same basis as for any other for-profit parent, investor or venturer.

Other changes

BC18 The AASB also decided that, consistent with paragraph 10(d) of AASB 127, the references to ‘Australian equivalents to IFRSs’ in paragraph 13(c)(iv) of AASB 128 and paragraph 2(c)(iv) of AASB 131 should be amended to ‘International Financial Reporting Standards’.
BC19 The AASB decided to include the summary table set out in the Basis for Conclusions in the Exposure Draft as Australian application guidance accompanying, but not part of, the amended AASB 127. Whereas the table in the Exposure Draft addressed relief in relation to both not-for-profit entities and entities applying reduced disclosure requirements under AASB 1053 Application of Tiers of Australian Accounting Standards, the table added to the AASB 127 guidance by AASB 2011-5 addresses not-for-profit entities but not reduced disclosure requirements.

Reduced disclosure requirements

BC20 Exposure Draft ED 205, in addition to addressing relief for not-for-profit entities, also proposed the extension of relief to entities applying Australian Accounting Standards – Reduced Disclosure Requirements under AASB 1053. The AASB decided that relief should be extended to Tier 2 entities, either on the same basis as for not-for-profit entities or as addressed in paragraphs BC14 and BC15. Accounting Standard AASB 2011‑6 provides this relief. That Standard also expands the table in the Australian application guidance accompanying AASB 127 to address entities applying reduced disclosure requirements.
BC21 Whereas AASB 2011-5 applies to annual reporting periods beginning on or after 1 July 2011, AASB 2011‑6 applies to annual reporting periods beginning on or after 1 July 2013, being the application date of the reduced disclosure requirements under AASB 1053. Accordingly, two amending Standards were prepared to reflect the different application dates. Early application of each Standard is permitted. Early application of AASB 2011-6 requires early application of AASB 1053.

Basis for Conclusions on AASB 2015-4

Note: This Basis for Conclusions accompanies, but is not part of, AASB 128. The Basis for Conclusions was originally published with AASB 2015-4 Amendments to Australian Accounting Standards – Financial Reporting Requirements for Australian Groups with a Foreign Parent.

Introduction

BC1 This Basis for Conclusions summarises the Australian Accounting Standards Board’s considerations in reaching the conclusions in AASB 2015-4 Amendments to Australian Accounting Standards – Financial Reporting Requirements for Australian Groups with a Foreign Parent. Individual Board members gave greater weight to some factors than to others.
BC2 In September 2014, the Board identified that the requirements of AASB 10 Consolidated Financial Statements and AASB 128 Investments in Associates and Joint Ventures in relation to the requirement for an Australian parent entity to apply the requirements of AASB 10 and/or AASB 128 when either the parent or the group is a reporting entity, or both the parent and the group are reporting entities, were not aligned. Specifically, AASB 10 requires the ultimate Australian parent to prepare consolidated financial statements, even where the entity has a foreign parent that prepares consolidated financial statements that comply with IFRSs, when either the parent or the group is a reporting entity or both the parent and the group are reporting entities. AASB 128 did not include a similar requirement in relation to the application of the equity method by the ultimate Australian parent.
BC3 The Board noted that this difference arose when issuing AASB 128 in 2011 in which the Board adopted the IFRS wording in IAS 28 paragraph 17(d) without amendment. The superseded AASB 128 Investments in Associates (July 2004) included similar relief for parent entities from applying the equity method in accounting for an interest in an associate or joint venture, but limited that relief to parent entities other than the ultimate Australian parent.
BC4 In December 2014 the Board decided that the relief in AASB 128 should apply to the ultimate Australian entity, rather than the ultimate Australian parent, to better align the requirements in AASB 128 with the relief available in AASB 10.
BC5 The Board decided to conduct further research before deciding whether to undertake a project to reconsider whether to limit the exceptions in AASB 10 and AASB 128 from presenting consolidated financial statements or applying the equity method to entities other than the ultimate Australian entity. In the interim, the Board decided to amend AASB 128 to require that the ultimate Australian entity apply the equity method in accounting for an interest in an associate or joint venture, to be consistent with the requirement in AASB 10 for the ultimate Australian parent to present consolidated financial statements when either the parent or the group is a reporting entity or both the parent and the group are reporting entities. The amendment aligns the requirements of AASB 10 and AASB 128 in this regard and is substantively consistent with the limitation on the relief previously available to entities under the superseded AASB 128.

1 AASB 128 - Investments in Associates and Joint Ventures - August 2015

Compiled AASB Standard	AASB 128

Investments in Associates and Joint Ventures

Prepared on 25 February 2025 by the staff of the Australian Accounting Standards Board.

Compilation no. 8

Compilation date: 31 December 2024

Obtaining copies of Accounting Standards

Compiled versions of Standards, original Standards and amending Standards (see Compilation Details) are available on the AASB website: aasb.gov.au and standards.aasb.gov.au.

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Contents

COMPARISON WITH IAS 28

ACCOUNTING STANDARD

AASB 128 INVESTMENTS IN ASSOCIATES AND JOINT VENTURES

AASB 128 is structured around a small set of core concepts and definitions that determine when the Standard applies and how measurement and recognition operate.

Scope and basic duty (paras 1-2, 16). The Standard applies to all entities that are investors with joint control or significant influence over an investee. The primary accounting method prescribed is the equity method. The objective is to provide accounting for investments in associates and requirements for the equity method (para 1).
Key definitions (para 3). The Standard defines associate, joint arrangement, joint control, joint venture, joint venturer and significant influence. An associate is an entity over which the investor has significant influence. Significant influence is the power to participate in financial and operating policy decisions without having control or joint control. These definitions feed directly into the scope (para 2).
Presumptions about ownership and influence (para 5). Holding 20 per cent or more of the voting power gives rise to a presumption of significant influence, and holding less than 20 per cent creates a presumption that significant influence does not exist. Both presumptions are rebuttable by specific evidence. The Standard lists objective indicators of significant influence including board representation, participation in policy decisions (including dividends), material transactions, managerial interchange, or provision of essential technical information (para 6).
Potential voting rights and “in substance” interests (paras 7-9, 12-14). Instruments such as options or convertible debt that could change voting power are considered when these rights are currently exercisable or convertible. Paragraphs 12-14 deal with when potential voting rights are treated as giving the entity an interest, including circumstances where an entity has, in substance, existing ownership because the transaction currently gives access to returns.
Equity method mechanics (paras 10, 26-36). Under the equity method the investment is initially recognised at cost and adjusted for the investor’s share of post‑acquisition profit or loss and other comprehensive income. Distributions reduce the carrying amount. The Standard specifies that the investor’s share of the investee’s profit or loss is recognised in the investor’s profit or loss; the investor’s share of the investee’s other comprehensive income is recognised in the investor’s other comprehensive income (para 10). The Standard also brings in consolidation‑style procedures for applying the equity method and sets rules on how to measure differences on acquisition (goodwill included within the carrying amount and not amortised, para 32).
Exemptions and elections (paras 17-19, Aus17.1-Aus17.2). Paragraph 17 provides conditions under which an entity need not apply the equity method, largely mirroring consolidation exemptions: wholly‑owned or partially‑owned subsidiaries meeting notice/no‑objection requirements, instruments not publically traded, no filings for public issuance, and an ultimate/intermediate parent that produces IFRS‑compliant consolidated financial statements available for public use. Special Australian variations include Aus17.1 and Aus17.2 which address not‑for‑profit and Tier 2 cases and require the ultimate Australian entity in certain circumstances to apply the equity method (Aus17.2, AusCFAus17.2).
Investment entity and fund fair value election (paras 18-19). Venture capital organisations, mutual funds, unit trusts and similar entities may elect to measure investments in associates or joint ventures at fair value through profit or loss in accordance with AASB 9, provided the election is made separately for each associate or joint venture at initial recognition. Paragraph 19 permits an investor to elect fair value for portions of an investment held indirectly through such funds.
Long‑term interests and interaction with AASB 9 (paras 14, 14A, 38). AASB 9 does not apply to interests accounted for under the equity method. However, paragraph 14A requires application of AASB 9 to other financial instruments in an associate or joint venture to which the equity method is not applied, such as long‑term interests that form part of the investor’s net investment. Those interests are accounted for under AASB 9 before applying the net investment rules in paragraph 38.
Impairment of net investment (paras 40-43). The Standard sets out objective evidence criteria for impairment of the net investment in an associate or joint venture (paras 41A-41C) and instructs that, where impairment indicators exist, the carrying amount is tested under AASB 136 as a single asset (para 42). The Standard clarifies that disappearance of an active market because equity instruments are no longer publicly traded is not of itself evidence of impairment (para 41B), but other adverse changes in the investee’s operating environment can be objective evidence of impairment (para 41C).
Treatment on change of classification, held for sale and discontinuation (paras 20-25). The Standard requires AASB 5 when investments meet held‑for‑sale criteria (para 20), retrospective re‑application of the equity method when an investment ceases to be held for sale (para 21), and specific accounting for when the investment becomes a subsidiary or the retained interest becomes a financial asset (para 22(b)). If an investor’s interest is reduced but the associate classification remains, OCI components may be reclassified to profit or loss where appropriate (para 25).
Application and transition (para 45 and compilation). The Standard includes detailed transition paths and links to the dates of other Standards such as AASB 9, AASB 17 and multiple amending Standards. Compiled effective date is for annual periods beginning on or after 1 January 2025, with various earlier application options.

Taken together these concepts determine when the equity method is compulsory, when fair value accounting is permitted instead, how to measure and test investments, and how to treat intra‑group transactions and changes in status. The Standard embeds cross‑references to AASB 9, AASB 136, AASB 5, AASB 10, AASB 3 and other Standards, making consistent policy alignment operationally necessary.

AASB 128 applies to “all entities that are investors with joint control of, or significant influence over, an investee” (para 2). That broad scope captures a variety of reporting entities in the Australian market and beyond where Australian Accounting Standards apply.

Primary affected parties

Investors with significant influence. Entities holding 20 per cent or more of voting power are presumed to have significant influence, and so are generally required to apply the equity method unless the presumption is rebutted (para 5). Entities holding less than 20 per cent are presumed not to have significant influence but may still be required to apply the Standard if significant influence can be clearly demonstrated (para 5). The investor’s responsibilities include recognising their share of an investee’s profit or loss and other comprehensive income (para 10).
Joint venturers and joint arrangements. Entities with joint control of an arrangement must account for investments in joint ventures using the equity method, subject to the same exceptions and elections as for associates (paras 3, 16).
Not‑for‑profit entities and AusCF entities. The Standard contains Australia‑specific provisions that apply to not‑for‑profit entities and to “AusCF entities” (AusCF1). For example, Aus10.1 requires not‑for‑profit entities to initially measure the cost of an investment at fair value under AASB 13 where consideration is significantly less than fair value principally to enable the entity to further its objectives. The presence of Aus paragraphs means that not‑for‑profit entities must check those specific rules in addition to the IASB‑aligned text.
Investment funds, venture capital organisations and similar entities. The Standard permits venture capital organisations, mutual funds, unit trusts and similar entities, including investment‑linked insurance funds, to elect at initial recognition to measure investments in associates or joint ventures at fair value through profit or loss under AASB 9 (para 18). That election is made separately for each associate or joint venture and is relevant for entities whose business model is to hold investment portfolios rather than exert influence.
Ultimate Australian entities and group parents. Australian “ultimate entity” considerations are given special treatment. Aus17.2 and AusCFAus17.2 require the ultimate Australian entity to apply the equity method in accounting for interests in associates and joint ventures when either the entity or the group is a reporting entity, or both are reporting entities, subject to limited exceptions. Paragraphs Aus17.1-Aus17.2 also expand the circumstances under which the equity method is required, and may therefore affect foreign‑owned Australian groups whose ultimate parents produce consolidated financial statements.
Tier 1 and Tier 2 reporters. The Comparison with IAS 28 section states that for‑profit entities complying with AASB 128 also comply with IAS 28, whereas Tier 2 entities using Simplified Disclosures will not comply with IFRS Standards. The compilation table and Basis for Conclusions (BC paragraphs) discuss relief and reduced disclosure requirements for Tier 2 entities and not‑for‑profit entities, which affects which entities may rely on exemptions or simplified disclosure pathways.

Secondary affected parties and operational impacts

Associates and joint ventures. Their accounting policies and reporting timelines will affect investors who must apply the equity method (para 33). Investors must use the associate’s or joint venture’s financial statements, adjust for uniform accounting policies (paras 35-36), and where necessary require the investee to prepare financial statements as of the investor’s reporting date (para 33). This raises data collection and timing effects on the investee’s operations.
Users of financial statements. Creditors, investors, analysts and regulators will see investor financial statements that reflect investee performance. The Standard explicitly frames this as providing more informative reporting than recognition based on distributions alone (para 11). But it also creates potential comparability differences between entities that elect fair value under para 18 and those that apply the equity method.
Auditors and preparers. The Standard implicates audit and assurance effort to verify the investor’s share of the investee’s results, impairment assessments, uniform accounting policy adjustments and compliance with cross‑referenced Standards such as AASB 9 and AASB 136.

Who is not directly affected

Entities that have neither joint control nor significant influence over an investee are outside the Standard’s scope (para 2).
Entities that qualify for the narrow exemptions in paragraph 17, and that elect or qualify to measure investment at fair value under paragraph 18-19, will not apply the equity method and instead follow those measurement bases.

Mechanisms by which affected parties change behaviour

Governance and ownership adjustments. Because the 20 per cent voting threshold creates a presumption of significant influence, investors may reconfigure ownership or contractual voting arrangements to avoid or secure significant influence, which changes reporting obligations (para 5).
Election choices. Qualifying funds and investment entities can elect fair value accounting, altering recognition timing and volatility in reported earnings. That election must be made at initial recognition for each associate or joint venture (para 18).
Reporting timetable alignment. Investors must obtain investee financial statements for equity accounting; paragraph 33 requires investees to prepare statements as at the investor’s reporting date unless impracticable, and paragraph 34 caps differences at three months.

In short, AASB 128 affects a broad range of corporate and not‑for‑profit entities engaged with associates and joint ventures, and it creates operational interdependencies between investors and investees via accounting, reporting and information‑sharing requirements.

AASB 128 allocates specific duties to investors and sets out permissible elections. These duties determine recognition, measurement, disclosure linkages and the mechanics for dealing with changes in status.

Primary duties imposed on investors

Apply the equity method unless an exemption applies (paras 10, 16). The central duty is to account for investments in associates and joint ventures using the equity method, recognising the investor’s share of profit or loss in the investor’s profit or loss and its share of other comprehensive income in the investor’s other comprehensive income (para 10).
Initial recognition at cost, with certain NFP exceptions (para 10; Aus10.1). The default is initial measurement at cost. For not‑for‑profit entities, Aus10.1 requires initial fair value measurement under AASB 13 where consideration is significantly less than fair value principally to further the entity’s objectives.
Adjust carrying amount for post‑acquisition changes and distributions (para 10). Carrying amounts increase or decrease for the investor’s share of investee profit or loss; distributions received reduce the carrying amount. Adjustments are also required for the investor’s proportionate interest in investee OCI items (para 10).
Use equity method procedures resembling consolidation (paras 26-36). Investors must aggregate group holdings for the group’s share (para 27), use the investee’s financial statements (para 33), and adjust accounting policies to achieve uniformity (paras 35-36). Where an associate has subsidiaries or further associates, the investor accounts for the investee’s share of its own associates and joint ventures (para 27).
Test for impairment of the net investment and apply AASB 136 when indicators exist (paras 40-43). After applying the equity method the investor must evaluate objective evidence of impairment (paras 41A-41C) and test the carrying amount under AASB 136 if indicators are present (para 42).
Discontinue the equity method on prescribed events and measure retained interests accordingly (paras 22-24). If the investee becomes a subsidiary, switch to merger/acquisition accounting per AASB 3 and AASB 10 (para 22(a)); if the retained interest becomes a financial asset, measure it at fair value under AASB 9 and recognise any difference in profit or loss (para 22(b)).

Duties around transactions between investor and investee

Eliminate investor’s share of gains or losses on upstream and downstream transactions that do not constitute a business, except to the extent of unrelated investors’ interests (para 28). For downstream transactions, the investor’s share of gains is eliminated; for upstream transactions, the investor recognises its share in losses. If downstream transactions evidence impairment of the asset, losses are recognised in full by the investor (para 29).
Account for contributions of non‑monetary assets that constitute a business differently (para 31A). Gains or losses from downstream transactions that constitute a business must be recognised in full.

Duties when share of losses reaches or exceeds carrying amount

Stop recognising further losses once the investor’s share of losses equals or exceeds its interest in the investee (para 38). The investor’s interest includes the carrying amount measured under equity method plus long‑term interests forming part of the net investment. Additional losses are recognised only if the investor has incurred legal or constructive obligations or made payments on behalf of the investee (para 39). Recognition of subsequent profits resumes only after prior unrecognised losses are recovered (para 39).

Exemptions and elective rights

Narrow exemption from equity method (para 17). An entity need not apply the equity method if it is a parent exempt from consolidation under AASB 10 scope exceptions or if all four conditions in para 17(a)-(d) are satisfied: wholly owned/other owners informed with no objection, no public market for instruments, no filing to issue instruments in public market, and the ultimate or intermediate parent produces IFRS‑compliant consolidated financial statements available for public use. Aus17.1 and Aus17.2 extend and clarify these rules for not‑for‑profit and Tier 2 circumstances and limit scope in relation to the ultimate Australian entity.
Fair value election for qualifying funds and investment entities (paras 18-19). Venture capital organisations, mutual funds, unit trusts and similar entities may elect to measure investments in associates or joint ventures at fair value through profit or loss under AASB 9. The election is made at initial recognition per associate or joint venture. Paragraph 19 allows election for portions held indirectly through such funds; if elected, the remainder of the investment must be equity‑accounted.
Special election for measurement of investment entity associates (para 36A). An entity that is not an investment entity may elect, when applying the equity method, to retain the fair value measurement applied by an investment entity associate or joint venture to that associate or joint venture’s interests in subsidiaries. The election is made separately for each investment entity associate or joint venture at the later of specified dates.

Requirements on disclosures and cross‑references

Use of other Standards. The Standard is not self‑contained for disclosures and related measurement. It requires application of and cross‑references to AASB 9 (or AASB 139 where AASB 9 is not yet applied, para 46), AASB 5 for held for sale classification (para 20), AASB 3 and AASB 10 on change to subsidiary status (para 22), and AASB 136 for impairment testing (para 42). Paragraph 45 lists transition and effective date linkages with other Standards such as AASB 9 and AASB 17.

Rights of entities

Election rights described above (paras 17-19, 36A). Entities have the right to elect not to apply the equity method in narrowly defined circumstances, and qualifying investment funds have the right to elect fair value accounting for each associate or joint venture at initial recognition. The election rights create choice in accounting treatment, subject to the Standard’s procedural constraints.

Operational duties

Timing coordination. If the investee’s reporting date differs, investee prepares financial statements as of the investor’s date unless impracticable (para 33). Adjustments must be made for significant events occurring between the investee’s reporting date and the investor’s reporting date, and any difference must not exceed three months (para 34).

In sum, AASB 128 imposes a structured set of recognition and measurement duties to ensure an investor’s reported financial position and performance incorporate its share of investee results, while preserving narrow exemptions and elections that allow alternative measurement bases under limited conditions. Compliance also requires active coordination with investees and reference to other AASB Standards.

The Standard itself does not prescribe penalties or enforcement mechanisms; it is an Accounting Standard made by the AASB and is tied to the Corporations Act through the procedural mechanics set out in the compilation. The Accounting Standard AASB 128 was made under section 334 of the Corporations Act 2001 (Accounting Standard AASB 128 paragraph), which is the statutory pathway by which accounting standards become legally enforceable for entities within the Corporations Act regime. The compilation notes make clear that when the Standard applies under section 334 of the Corporations Act, it supersedes the repealed AASB 128 (Aus47.2).

What follows from the instrument’s content and structure is the division between the Standard’s normative accounting obligations and the legal or regulatory consequences for failing to comply. The Standard sets mandatory accounting treatments for investors with joint control or significant influence (para 2, para 16), and entities that are required to apply the Standard under the Corporations Act will be expected to do so in preparing financial statements that comply with Australian Accounting Standards.

However, the Standard does not spell out enforcement powers, civil penalties or criminal sanctions; those matters are determined in other legislative provisions and regulatory frameworks. The compilation repeatedly links to other Standards and the Corporations Act for applicability and transitional arrangements, but it does not state which agency enforces compliance or the penalties for non‑compliance. Practitioners must therefore read AASB 128 together with the Corporations Act and relevant regulatory guidance to determine the consequences of non‑compliance in a particular context.

Practical enforcement implications to consider (grounded in the instrument’s cross‑reference structure)

Legal force through Corporations Act. The Standard’s legal effect for entities subject to the Corporations Act flows from its making under section 334. That is the mechanism by which the accounting rules become compulsory for Australian entities required to use Australian Accounting Standards. The Standard itself does not list penalties; those are the domain of the Corporations Act and associated regulator enforcement practice.
Audit and assurance expectations. Because the Standard prescribes accounting treatments used to prepare financial statements, auditors will need to form an opinion on whether the equity method has been applied appropriately, whether exemptions and elections are properly supported and disclosed, and whether impairment testing, fair value measurements and inter‑entity eliminations have been correctly applied (paras 10, 18, 40-43, 28-31). The Standard’s cross‑references to AASB 9, AASB 136 and other Standards create specific measurement and disclosure expectations that auditors will assess.
Disclosure and regulatory oversight linkages. The Standard requires entities to apply other AASB pronouncements and to disclose early application where permitted (para 45). Entities that fail to disclose application choices or to meet cross‑referenced measurement rules may be deficient in meeting the composite disclosure requirements expected of financial statements prepared under Australian Accounting Standards.
Transitional and retrospective application. The Standard provides multiple transition and effective date pathways (para 45 and sub‑paragraphs). Entities that do not follow the specified transition rules risk misstatements or disclosure deficiencies, which would be matters for auditors and potentially regulators.

Because the Standard does not itself set enforcement penalties, practitioners must map the accounting obligations to the enforcement regime in the Corporations Act, Australian Securities and Investments Commission practice, and contractual or lending covenants that rely on financial statements. The Standard’s text and compilation details mandate the accounting outcomes; enforcement is exercised through those external legal and regulatory mechanisms rather than through provisions contained within AASB 128 itself.

AASB 128 is not a freestanding rule set; it is explicitly designed to be read in the context of other Australian Accounting Standards and, where relevant, the Corporations Act. The Standard includes numerous cross‑references and interaction points.

Statutory context

Corporations Act 2001. The Standard was made under section 334 of the Corporations Act (Accounting Standard AASB 128 paragraph). The compilation emphasises that the Standard applies under the Corporations Act and that the repeal of earlier pronouncements is subject to transitional application under the Act (Aus47.2).

Accounting Standards and cross‑references

AASB 9 Financial Instruments (and AASB 139 where AASB 9 is not applied). Paragraph 14 states that AASB 9 does not apply to interests accounted for using the equity method, but paragraph 14A requires the application of AASB 9 to other financial instruments in an associate or joint venture to which the equity method is not applied (eg long‑term interests forming part of the investor’s net investment). Paragraph 46 clarifies that if an entity applies this Standard but not yet AASB 9, references to AASB 9 should be read as references to AASB 139.
AASB 10 Consolidated Financial Statements and AASB 3 Business Combinations. The Standard uses AASB 10 and AASB 3 as the reference points for changes when an investment becomes a subsidiary (para 22(a)) and in relation to exemptions from equity accounting when a parent is exempt from consolidation under AASB 10 (para 17). The Basis for Conclusions discusses alignment with AASB 10 and changes to the relief regime for ultimate Australian entities (BC2-BC5, BC3-BC5, BC2-BC4).
AASB 5 Non‑current Assets Held for Sale and Discontinued Operations. AASB 5 applies when an investment, or portion of it, in an associate or joint venture meets held‑for‑sale criteria (para 20). Paragraph 21 requires retrospective application of the equity method if the held‑for‑sale classification is later removed.
AASB 136 Impairment of Assets. The Standard incorporates AASB 136 for impairment testing of the net investment in an associate or joint venture once indicators are present (para 42). Paragraph 41A-41C sets out objective evidence criteria that trigger AASB 136 testing.
AASB 101 Presentation of Financial Statements. Paragraph 10 references AASB 101 for how the investor’s share of investee OCI is presented.
AASB 13 Fair Value Measurement and AASB 1058 Income of Not‑for‑Profit Entities. Aus10.1 requires not‑for‑profit entities to measure at fair value under AASB 13 in certain circumstances; AASB 1058 deals with recognition of related amounts. This creates a specific interaction between AASB 128 and the not‑for‑profit income recognition framework.
AASB 11 and AASB 12. The Standard is intended to be applied consistently with AASB 11 on joint arrangements and AASB 12 on disclosure of interests in other entities, and paragraph 45 requires entities that adopt early to apply those Standards concurrently.

Regulatory and reporting tiers

Tier 1 vs Tier 2. The Comparison with IAS 28 section explains that for‑profit entities complying with AASB 128 will comply with IAS 28, but Tier 2 entities using Simplified Disclosures will not be in compliance with IFRS Standards. The Basis for Conclusions (BC10-BC21) explains the AASB’s decisions about extending relief from the equity method to not‑for‑profit and Tier 2 entities, which affects how AASB 128 interacts with AASB 1053 (Application of Tiers of Australian Accounting Standards).

Practical cross‑standard consequences

Timing and preparation of investee financial statements. Paragraphs 33-34 require that an associate or joint venture prepare financial statements for the use of the investor as of the same reporting date, unless impracticable, and that differences be no more than three months. This imposes operational interaction with an investee’s statutory reporting obligations and with audit timing.
Measurement consistency. Paragraphs 35-36 require uniform accounting policies for like transactions and events. Where an associate uses different policies, adjustments are required. This interplay forces investors to reconcile differing accounting bases across standards and potentially reclassify or restate investee amounts to be consistent with the investor’s application of Australian Accounting Standards.
Interaction with legal definitions of control and influence. Paragraph 4 brings in definitions from AASB 127 and AASB 10 for control, group, parent, separate financial statements and subsidiary. The Standard therefore interacts with the broader legal characterisation of control in financial reporting law.
Transitional interaction. Paragraph 45 and its subparagraphs instruct entities how to apply amendments in the context of other Standards’ effective dates, for example requiring entities first applying AASB 9 to apply related amendments in AASB 2014‑7 when relevant, and giving specific transition rules for the 2017‑7 amendments concerning long‑term interests.

Limits of interaction specified in the instrument

The Standard does not itself amend statutory tax law, company law liability rules or enforcement provisions. Its interactions are procedural and measurement‑based, with legal force derived from the application under the Corporations Act and the broader corporate reporting regime.

In short, compliance with AASB 128 requires entities to coordinate across multiple AASB Standards and to consider their reporting tier and whether they are covered by the Corporations Act obligations that give the Standard statutory effect. The Standard’s numerous cross‑references create implementation dependencies that must be handled in concert with other accounting and reporting law.

AASB 128, as presented in the compilation, is the product of the original August 2015 Standard plus successive amendments up to 7 November 2024. The compilation includes a Table of Standards and a Table of amendments which together document the amendment history and effective dates.

Key milestones reflected in the compilation

AASB 128 issued 7 August 2015 (F2015L01543). The Accounting Standard AASB 128 (para under “Accounting Standard AASB 128”) notes it was made by the AASB under section 334 of the Corporations Act on 7 August 2015. The compilation itself applies to annual periods beginning on or after 1 January 2025 (compilation header), but individual amendments have their own effective dates.
Series of amending Standards and consequential amendments. The compilation table lists the amending Standards, dates made, FRL identifiers and effective dates. Notable amendments include:
- AASB 2015‑10 (22 Dec 2015, effective 1 Jan 2016) which amended AASB 128 for annual periods beginning 1 Jan 2018 in some respects (see table notes (b));
- AASB 1058 (9 Dec 2016, effective 1 Jan 2019) which added Aus10.1 addressing NFP measurement at fair value in certain cases;
- AASB 2017‑1 (13 Feb 2017) and AASB 2017‑5 (12 Dec 2017) which made targeted amendments including to paragraphs 18, 28, 30, 36A and others, with different effective dates for FP and NFP entities (notes (d) and (f));
- AASB 2017‑7 (12 Dec 2017) which added paragraph 14A and removed paragraph 41 in prior text, effective 1 Jan 2019 for most entities (see para 45G);
- AASB 17 (19 Jul 2017) which amended para 18 and has its own effective date interactions (para 45F);
- AASB 2021‑7 (20 Dec 2021) and AASB 2024‑4 (7 Nov 2024) which deferred effective dates of certain requirements (notes (j) and (l)) and again amended content such as paras 28, 30, 31A-31B and transition text.
Specific paragraph additions and deletions. The Table of amendments lists paragraph‑level changes. Examples include:
- AusCF1 added by AASB 2019‑1;
- Aus10.1 added by AASB 1058;
- Paragraph 14A added by AASB 2017‑7;
- Paragraph 36A added and later amended by AASB 2017‑1 and subsequent Standards;
- Paragraphs 31A-31B, 28 and 30 were amended or subject to effective date deferrals and later addition or deletion (AASB 2017‑5, AASB 2021‑7, AASB 2024‑4).
Deferred effective dates. The compilation table and paragraph 45 explain a history of deferred effective dates for certain amendments originally set for earlier years but deferred multiple times, with AASB 2024‑4 deferring certain requirements to annual periods beginning on or after 1 January 2028 (note (l)). Paragraphs 45C-45K detail transition rules for specific amendments such as those in AASB 2014‑7 and AASB 2017‑7.
Withdrawal and repeal. Aus47.2 records that this Standard repeals the August 2011 AASB 128 Investments in Associates and Joint Ventures, while maintaining application of the repealed Standard to periods ending before the new Standard’s commencement under the Corporations Act.

Basis for Conclusions and explanatory material

The compilation includes Basis for Conclusions material associated with various amending Standards (e.g. Basis for Conclusions on AASB 2011‑5, AASB 2015‑4). The Basis for Conclusions sections in the compilation record the AASB’s deliberations on topics such as extending relief for not‑for‑profit entities and Tier 2 reporters (BC1-BC21), the alignment of requirements with AASB 10 and treatment of foreign parents (BC1-BC5), and the rationale for amendments affecting investment entity accounting and long‑term interests (BC7-BC18).

How amendments changed the Standard’s mechanics

Measurement and impairment mechanics were adjusted by AASB 2014‑7 (paras 40-42 amended; paras 41A-41C added) and AASB 2017‑7 (para 14A and related changes). These amendments clarified impairment indicators and the treatment of long‑term interests by integrating AASB 9 rules for those interests (paras 14, 14A, 38, 40-43; para 45A, 45G).
The fair value election for certain investors and the scope of the equity method exemption were refined through AASB 2015‑5, AASB 2017‑1, Aus17.1/Aus17.2 amendments, and subsequent guidance on ultimate Australian entities (paras 17-19; Aus17.1-Aus17.2).
The sale or contribution of assets between investor and investee, in particular whether the assets constitute a business, received attention in amendments (paras 28, 30, 31A-31B), with varied effective dates and deferrals noted in the compilation.

For practitioners, the amendment history is operationally relevant because it affects which paragraphs are applicable for particular reporting periods, and because deferred effective dates mean that certain requirements may not be operative until as late as 2028 for specified amendments. The compilation provides the authoritative trail of amendments and their effective dates; entities must consult the compilation table and paragraph 45 subparagraphs to determine which amendments apply to a particular reporting period.

The compiled Standard and its accompanying material do not include, reference, or summarise any litigation or judicial decisions interpreting AASB 128. The document contains normative text, Basis for Conclusions and compilation details, but it does not record case law or adjudicative outcomes. The absence of litigation references in the Standard itself is not unusual; AASB Standards typically do not catalogue litigation.

Implications of no litigation history in the instrument

Reliance on the Standard and IASB materials. Without local case law in the Standard, users must rely on the text, the Basis for Conclusions, IASB guidance (IAS 28 as adopted), and professional practice and commentary for interpretive guidance. The compilation explicitly states that AASB 128 incorporates IAS 28 as amended by the IASB, with Australian‑specific paragraphs flagged as “Aus” (Comparison with IAS 28). Where Australian practice diverges via Aus paragraphs, those paragraphs take precedence for entities applying Australian Accounting Standards.
Predictability and interpretative gaps. The lack of documented litigation in the Standard means that certain contested areas (for example, the treatment of potential voting rights in complex convertible instruments, the correct application of paragraph 36A election scenarios, or the threshold for “significant influence” in marginal cases) may be subject to professional debate and to auditor judgement rather than settled judicial interpretation. Paragraphs 7-9 on potential voting rights and paragraphs 35-36 on uniform accounting policies provide bright‑line rules, but their application to complex fact patterns will depend on judgement.
Role of auditors and regulators. In the absence of court interpretations, auditors and regulatory bodies (for example, those enforcing the Corporations Act) will play a central role in shaping practice through audit opinions, regulatory comment letters and enforcement actions. The Standard itself does not name enforcement agencies, but its making under section 334 of the Corporations Act brings it into the statutory reporting framework for entities subject to that Act.
Use of international precedents. Given the Standard remains aligned with IAS 28 for for‑profit Tier 1 entities, practitioners can look to IASB interpretations, IFRS Interpretations Committee agenda decisions, and relevant international practice for persuasive guidance on ambiguous points, subject to checking for applicable Aus paragraphs.

What to watch for in future litigation risk areas

Application of the 20 per cent presumption and rebuttal (para 5). Disputes can arise over whether an entity has significant influence when power is exercised via contractual arrangements or when potential voting rights are involved (paras 7-9, 12-14).
Fair value elections and measurement under AASB 9 vs equity method interactions (paras 14, 14A, 18-19). Litigation or regulatory scrutiny could focus on whether an entity properly applied the elective fair value treatment for qualifying funds or properly accounted for long‑term interests under AASB 9.
Upstream and downstream transaction treatment and business‑vs‑non‑business tests (paras 28-31A). Determining whether transferred assets constitute a business under AASB 3 can be fact sensitive and has potential for dispute, particularly for private transactions between related parties.
Impairment testing of the net investment (paras 40-43). The Standard’s reliance on AASB 136 testing and its objective evidence list could be challenged in terms of application of value in use, cash flow estimation, and the treatment of goodwill embedded within the investment carrying amount (para 42).

Given the Standard does not present litigation records, practitioners should monitor regulatory publications, audit guidance, IFRS Interpretations Committee outputs and any Securities Commission or court decisions that interpret these topics in Australia, and should document judgements and supporting evidence robustly when applying the Standard.

The Standard contains several provisions that commonly cause practical surprises or implementation pitfalls. The following are issues to flag, with direct paragraph references to the Standard.

The 20 per cent voting presumption is rebuttable (para 5). Holding 20 per cent or more presumes significant influence but does not make it automatic. Conversely, below 20 per cent may still be significant influence if facts indicate otherwise. Practitioners must document evidence when rebutting the presumption rather than assuming a mechanical outcome.
Potential voting rights complexity (paras 7-9, 12-14). Instruments convertible into voting power must be examined for whether they are currently exercisable or convertible. Paragraph 8 requires examining all facts and circumstances, excluding mere management intentions and financial capacity. Paragraph 12 limits interest determination to existing ownership unless paragraph 13 applies where “in substance” existing ownership arises from transactions giving current access to returns. These provisions create fact‑intensive assessments for instruments such as share warrants, options and long dated convertibles.
Exemption conditions are cumulative and operational (para 17). The exemption from the equity method requires satisfying all four conditions in para 17(a)-(d). The requirement to inform other owners and obtain no objection (para 17(a)) is an operational step that, if missed, invalidates the exemption. The exemption also depends on the ultimate or intermediate parent producing IFRS‑compliant consolidated financial statements available for public use (para 17(d)), with Australian specialisations in Aus17.1 and Aus17.2 that further restrict or extend relief.
Ultimate Australian entity rule (Aus17.2; AusCFAus17.2). For groups with a foreign parent and an ultimate Australian entity, the Standard may require the Australian ultimate entity to apply the equity method even where other consolidation relief might suggest otherwise. This is a common trap for cross‑border groups who assume that foreign parent filings automatically relieve an Australian entity from the equity method.
Fair value election for funds must be made at initial recognition and per associate/joint venture (para 18). The election is not a blanket election; it is made separately for each associate or joint venture at the initial recognition. Failure to document the election at the correct time can cause inconsistency and audit issues.
Long‑term interests interact with AASB 9 before applying equity method limitations (paras 14A, 38). Entities must apply AASB 9 to long‑term interests that form part of the net investment before applying paragraph 38. This sequencing can affect loss recognition and classification, and practitioners must keep the flow of standards application clear.
Timing and reporting period alignment (paras 33-34). Investors must use the most recent financial statements of the associate or joint venture and the investee is expected to prepare statements as of the investor’s reporting date unless impracticable. Differences are limited to three months and must be handled consistently period to period. This creates coordination work and potential remeasurement adjustments.
Upstream/downstream transaction elimination and business classification (paras 28-31A, 31B). Transfers that do not constitute a business require elimination of unrealised gains to the extent of unrelated investors’ interests. If the transfer constitutes a business, different recognition rules apply and gains may be recognised in full (para 31A). Determining whether an asset transfer is part of a business can involve multiple transactions and requires consideration of AASB 3’s business definition,which itself is judgement‑laden.
Treatment of goodwill and non‑amortisation (para 32). Goodwill relating to an associate or joint venture is included in the carrying amount and must not be amortised. Impairment, not amortisation, is the mechanism to reduce carrying amount, but the Standard instructs testing the entire carrying amount as a single asset under AASB 136 where indicators exist (para 42). Auditors often scrutinise how goodwill embedded in the investment is tested for impairment.
Stop recognising losses rule and recognition of liabilities (paras 38-39). When the investor’s share of losses equals or exceeds its interest, recognition of further losses ceases unless the investor has legal or constructive obligations or has made payments on behalf of the investee. Practitioners often misapply this by failing to consider long‑term interests that in substance form part of the net investment or by ignoring the requirement to recognise liabilities for obligations assumed.
Impairment evidence nuances (paras 41A-41C). Paragraph 41B clarifies that disappearance of an active market because equity instruments are no longer publicly traded is not of itself evidence of impairment. However, paragraph 41C lists adverse changes in the investee’s environment and a significant or prolonged decline in fair value as objective evidence. The distinction between fair value decline and objective impairment evidence is subtle and requires careful documentation.
Transition and deferred requirements (para 45 and table). Multiple amendments have different effective dates and deferred application windows (notably those deferred to 2025 or 2028). Entities must map which amendments apply to their reporting period and must correctly follow any retrospective or prospective application instructions in paragraphs 45A-45K.
Tier and NFP differences (Aus paragraphs and Comparison with IAS 28). Entities must check Aus paragraphs because guidance intended for not‑for‑profit and Tier 2 entities can change measurement, disclosure and relief eligibility. Treating Tier 2 entities as automatically IFRS‑compliant is a common error; the Comparison with IAS 28 makes the distinction explicit.
Documentation of elections and disclosure of early application (para 45 and various notes). Early application is often permitted for some amendments, but the Standard requires entities to disclose when they have applied the Standard earlier than the mandatory date. Failure to disclose early adoption is a disclosure deficiency.

These “gotchas” illustrate that the Standard’s principles are straightforward in the abstract, but the detail is operationally complex and requires careful attention to initial elections, sequencing with AASB 9 and other Standards, coordination with investees, and documentation of judgement.

Complying with AASB 128 requires a procedural and control framework that maps the Standard’s requirements into corporate reporting processes. Below is a practical, source‑grounded checklist and steps for entities that are investors with possible joint control or significant influence.

Identify all investments in potential associates and joint ventures (para 2; para 3 definitions).

Inventory holdings and contractual arrangements that may constitute joint control or significant influence. For each investee, document voting power and any potential voting rights (paras 5-9).
Apply the 20 per cent voting presumption in paragraph 5, and document any factual basis if the presumption is rebutted or if significant influence is claimed with less than 20 per cent.

Assess whether the equity method applies or an exemption/election is available (paras 16-19, Aus17.1-Aus17.2).

Check paragraph 17 criteria for the exemption from the equity method. Ensure the operational steps for an exemption are satisfied, including: informing other owners and obtaining no objection (para 17(a)); confirming instruments are not traded in a public market (para 17(b)); confirming no filing to issue instruments publicly (para 17(c)); and verifying the ultimate or intermediate parent’s consolidated financial statements are IFRS‑compliant and publicly available (para 17(d)).
Consider Aus17.1, Aus17.2 and AusCFAus17.2 for NFP and ultimate Australian entity situations. If the entity is a venture capital organisation, mutual fund, unit trust or similar, evaluate whether to elect fair value through profit or loss under para 18 or 19 and make the election separately for each associate or joint venture at initial recognition.

Determine initial measurement approach (para 10; Aus10.1).

Default initial recognition at cost (para 10). For not‑for‑profit entities where consideration is significantly less than fair value principally to enable the entity to further its objectives, measure initial cost at fair value under AASB 13 per Aus10.1. Document the rationale and the input used to determine “significantly less than fair value.”

Obtain and align investee financial statements (paras 27, 33-36).

Ensure the investor has access to the most recent financial statements of the investee (para 33). If the investee’s reporting date differs, request financial statements as of the investor’s reporting date or document impracticability and apply paragraph 34’s permitted adjustment process. Ensure the date difference does not exceed three months.
Apply uniform accounting policies for like transactions (para 35). Where the investee uses different policies, compute adjustments to align accounting policies when using the investee’s statements for equity accounting (para 36). Document adjustments and any elections such as paragraph 36A where applicable (investment entity associate fair value measurement retention).

Apply equity method mechanics (paras 10, 26-32).

After initial measurement, adjust the carrying amount for the investor’s share of investee profit or loss and OCI (para 10).
Reduce carrying amount by distributions received (para 10).
Include goodwill relating to the associate or joint venture in the carrying amount and do not amortise it (para 32(a)). Apply appropriate post‑acquisition adjustments for depreciation, impairment and other items measured at fair value at acquisition (para 32(b)).

Handle inter‑entity transactions properly (paras 28-31B).

Identify upstream and downstream transactions between the investor (including consolidated subsidiaries) and the investee. For assets that do not constitute a business, eliminate investor’s share of gains or losses to the extent of unrelated investors’ interests (para 28).
For downstream transactions providing evidence of impairment, recognise losses in full (para 29). For contribution of non‑monetary assets that constitute a business, apply paragraph 31A and recognise gains or losses in full.

Monitor loss recognition thresholds and obligations (paras 38-39).

Track the investor’s share of investee losses. If share of losses equals or exceeds the investor’s interest (including long‑term interests in paragraph 38), discontinue recognising further losses unless legal or constructive obligations exist or payments are made on behalf of the investee (para 39).
Maintain documentation on long‑term interests that, in substance, form part of the net investment and do not include ordinary trade receivables or adequately collateralised loans (para 38 examples).

Conduct impairment testing of net investment when indicators exist (paras 40-43).

Apply paragraphs 41A-41C to identify objective evidence of impairment. Where indicators exist, test the net investment under AASB 136 by comparing recoverable amount (value in use or fair value less costs of disposal) to carrying amount (para 42).
For value in use, estimate present value of the investor’s share of estimated future cash flows from the investee or present value of estimated cash flows expected from dividends and disposal (para 42). Document assumptions and discount rates.

Deal with classification as held for sale or changes to subsidiary status (paras 20-24).

If an investment or a portion meets AASB 5 criteria for held for sale, apply AASB 5 (para 20). For retained portions not held for sale, continue equity accounting until disposal; after disposal apply AASB 9 unless the retained interest remains an associate or joint venture.
On change to subsidiary status, apply AASB 3 and AASB 10 (para 22(a)). If the retained interest becomes a financial asset, measure at fair value under AASB 9 and recognise differences in profit or loss (para 22(b)). Reclassify OCI items on the same basis as if the investee had disposed of the related assets or liabilities (paras 22(c), 23).

Document elections, early application and transition positions (para 45 and compilation table).

If electing fair value for qualifying funds (paras 18-19), document the election separately for each associate or joint venture at initial recognition.
If taking advantage of exemptions under paragraph 17, keep contemporaneous evidence including notices to other owners and confirmations of no objection.
For early application of amendments or when applying amendments with retrospective effect, follow the transition rules in paragraphs 45A-45K and disclose early application as required.

Ensure cross‑standard consistency and disclosure (paras 10, 20, 42, 44, 46).

Apply AASB 9, AASB 136, AASB 5, AASB 3 and AASB 10 as required by the Standard; read references to AASB 9 as AASB 139 if AASB 9 is not yet applied (para 46).
For separate financial statements, comply with paragraph 10 of AASB 127 (para 44).
Ensure all disclosures required by cross‑referenced Standards are prepared and reconciled with equity method outcomes.

Establish internal controls and audit trails.

Keep supporting schedules showing calculation of investor’s share of profit or loss, OCI allocations, elimination of unrealised gains from transactions, adjustments for differing accounting policies, impairment assessments and rationale for any elections or exemptions taken.
Ensure the finance and corporate governance teams are aligned on communications with investees so timing and policy alignment issues are addressed promptly.

Training and governance.

Provide training for finance staff and auditors on the specific requirements in AASB 128, on the interaction with AASB 9 and AASB 136, and on the Australian‑specific Aus paragraphs affecting NFPs and ultimate Australian entities.

Following this checklist and documenting judgement calls and elections with reference to the specific paragraphs in AASB 128 will materially reduce implementation risk and provide an audit trail supporting the entity’s accounting choices.

AASB 128 - Investments in Associates and Joint Ventures - August 2015

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AASB 128 - Investments in Associates and Joint Ventures - August 2015

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1 AASB 128 - Investments in Associates and Joint Ventures - August 2015

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