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Commission Regulation
(EC) No 2238/2004 of 29 December 2004 amending
Regulation (EC) No 1725/2003 adopting certain
international accounting standards in accordance with
Regulation (EC) No 1606/2002 of the European Parliament
and of the Council, as regards IASs IFRS 1, IASs Nos 1
to 10, 12 to 17, 19 to 24, 27 to 38, 40 and 41 and SIC
Nos 1 to 7, 11 to 14, 18 to 27 and 30 to 33
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Scope
1. This Standard
shall be applied in accounting for investments in associates.
However, it does not apply to investments in associates
held by:
(a) venture capital
organisations, or
(b) mutual funds,
unit trusts and similar entities including investment-linked
insurance funds that upon initial recognition
are designated as at fair value through profit
or loss or are classified as held for trading and accounted
for in accordance with IAS 39 Financial
Instruments: Recognition and Measurement. Such
investments shall be measured at fair value in accordance
with IAS 39, with changes in fair value recognised in
profit
or loss in the period of the change.
Definitions
2. The following
terms are used in this Standard with the meanings specified:
An associate
is an entity, including an unincorporated entity such as
a partnership, over which the investor has significant
influence and that is neither a subsidiary nor
an interest in a joint venture.
Consolidated
financial statements are the financial statements of a
group presented as those of a single economic entity.
Control is
the power to govern the financial and operating policies
of an entity so as to obtain benefits from its
activities.
The equity method
is a method of accounting whereby theinvestment is initially
recognised at cost and adjusted thereafter for the
post-acquisition change in the investor’s share of net
assets of the investee. The profit or loss of
the investor includes the investor's share of
the profit or loss of the investee.
Joint control is the contractually
agreed sharing of control over an economic activity, and
exists only when the strategic financial and operating
decisions relating to the activity require the unanimous
consent of the parties sharing control (the venturers).
Separate
financial statements are those presented by a parent, an
investor in an associate or a venturer in a jointly
controlled entity, in which the investments are
accounted for on the basis of the direct equity
interest rather than on the basis of the reported results and
net assets of the investees.
Significant
influence is the power to participate in the financial and
operating policy decisions of the investee but is not
control or joint control over those policies.
A subsidiary
is an entity, including an unincorporated entity such as
a partnership, that is controlled by another entity (known
as the parent).
3. Financial
statements in which the equity method is applied are not
separate financial statements, nor are the financial
statements of an entity that does not have a subsidiary,
associate or venturer’s interest in a joint venture.
4. Separate
financial statements are those presented in addition to
consolidated financial statements, financial statements in
which investments are accounted for using the equity method
and financial statements in which venturers’ interests in
joint ventures are proportionately consolidated. Separate
financial statements may or may not be appended to, or
accompany, those financial statements.
5. Entities that are
exempted in accordance with paragraph 10 of IAS 27 Consolidated
and Separate Financial Statements from consolidation,
paragraph 2 of IAS 31 Interests in Joint Ventures from
applying proportionate consolidation or paragraph 13(c) of
this Standard from applying the equity method may present
separate financial statements as their only financial
statements.
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