Limited Amendment to IAS 28: Who May Now Use Fair Value?

On 26 June 2026, the International Accounting Standards Board (IASB) issued a limited-scope amendment to International Accounting Standard 28 'Investments in Associates and Joint Ventures', in preparation for the effective date of International Financial Reporting Standard 18 'Presentation and Disclosure in Financial Statements'. Subsequently, represented by the Accounting Standards Board, the Saudi Organization for Chartered and Professional Accountants adopted this amendment, making it effective for entities subject to international standards in the Saudi market on the same timeline set by the IASB.

What the amendment actually changes

The amendment did not touch the substance of IAS 28, but was limited to paragraphs 18 and 19, which determine who may elect 'fair value' as an alternative to the 'equity method' when measuring an investment in an associate or joint venture. The main changes are:

• Expanding the exemption to include any entity whose 'specified main business activity' is investing in certain types of assets, according to the concept introduced by IFRS 18 in paragraph 49(a) — this exemption is not confined to a particular sector, though the examples in IFRS 18 mention real estate investment companies and insurance companies.
• Removing the example relating to 'investment-linked insurance funds' from the text of the standard, as the new clarification renders it unnecessary.
• Leaving unchanged the existing exemption for entities classified as 'a venture capital organisation, or a mutual fund, a unit trust or similar entity' — these remain eligible as they were.

Why the amendment is linked to IFRS 18

The driver behind the amendment is presentational rather than purely accounting: under IFRS 18, income and expenses from investments accounted for using the equity method are always classified in the 'investing category' in the statement of profit or loss, regardless of the entity's activity. Investments measured at fair value, however, may have their results classified in the 'operating category' if the entity invests in those assets as its main business activity. In other words: the choice of measurement method in IAS 28 directly determines where the effect appears in the statement of profit or loss after applying IFRS 18 — hence the need to clarify who is entitled to make that choice before IFRS 18 becomes mandatory.

Who needs to review their position

• Entities for which investing in certain types of assets constitutes their main business activity (regardless of sector), and which hold investments in associates or joint ventures that were not previously eligible for the fair value option.
• Groups that hold their investments indirectly through a subsidiary: eligibility here is based on the activity of the subsidiary holding the investment, which may differ from the main business activity of the group as a whole; whereas the classification of income and expenses in the consolidated statements is based on the main business activity of the group as a single unit.
• Entities currently applying the equity method and considering switching to fair value: they have only one opportunity to change the election, on first application of IFRS 18, and no change is available after that — the election is normally made on initial recognition of the investment and is not reopened.

Effective date and transition method

The amendment is applied on the same date the entity applies IFRS 18, i.e. for annual periods beginning on or after 1 January 2027, with early application permitted if the entity applies IFRS 18 early. Eligible entities that elect to switch from the equity method to fair value on that first application apply the change retrospectively in accordance with the requirements of IAS 8, including its disclosures, in addition to the disclosures in IFRS 12 regarding the classification of each material investment between the equity method and fair value.

An entity holding investments in associates or joint ventures that has not yet assessed its main business activity under the IFRS 18 concept will find itself required to make this assessment in one way or another on first application — and it is better to conduct it before the transition season rather than during it, because the decision affects the presentation of the entire statement of profit or loss, not just the investment line.

The information published here is general and does not constitute professional advice on a specific case. To obtain advice concerning your entity, contact us.

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