- All qualifying entities are required to account for their subsidiaries on a fair value basis. This is a unique industry-specific solution introduced by the IASB.
- To qualify, entities need to meet three key requirements, including having a business purpose to earn returns solely from capital appreciation and/or investment income.
- Many investment funds are expected to qualify, including private equity funds, but real estate funds will face challenges.
- The consolidation exception extends to the parent of the investment entity only if the parent itself meets the definition of an investment entity.
The amendments are effective from January 2014; however, early adoption is permitted.