Financial Reporting · Ind AS 28 Investments in Associates and Joint Ventures

Ind AS 28: Exemptions, Classification and Changes in Interest

Updated 5 October 2026 · Fact-checked

Ind AS 28 requires the equity method for associates and joint ventures, except for specified exemptions, held-for-sale portions and venture-capital-type entities. When your interest changes, the result decides the treatment: control brings in Ind AS 103, and loss of significant influence means the retained stake is fair valued with a gain or loss in profit or loss.

Understand Exemptions, Classification and Changes in Interest

The equity method is the default for an investment in an associate or joint venture. Ind AS 28 then gives you three sets of exceptions: exemptions from applying the method, held-for-sale treatment, and the rules for when the method stops or the stake changes.

Exemptions. You need not apply the equity method if you are an investor in an associate or joint venture that is itself a subsidiary of another entity, and you meet the intermediate-parent conditions for exemption from consolidation under Ind AS 110. This is a single test, and every condition must be met: you are a subsidiary of another entity, either wholly-owned or partly-owned with your other owners informed and not objecting; your debt or equity instruments are not traded in a public market; you have not filed, and are not filing, your financial statements with a securities regulator to issue instruments in a public market; and your ultimate or an intermediate parent publishes Ind AS consolidated statements for public use. Separately, venture capital organisations, mutual funds, unit trusts and similar entities (including investment-linked insurance funds) may elect to measure such investments at fair value through profit or loss under Ind AS 109.

Held for sale. If an investment, or a portion of it, meets the Ind AS 105 criteria, you apply Ind AS 105 to that portion. You measure it at the lower of carrying amount and fair value less costs to sell, and you stop equity accounting for it. The portion not held for sale stays under the equity method until the held-for-sale portion is disposed of. After that disposal, you assess the retained interest. If it is still an associate or joint venture, you continue the equity method. If not, you apply Ind AS 109 to it. If the held-for-sale criteria cease to be met, you apply the equity method retrospectively from the date of original classification as held for sale, and you amend the financial statements for the periods since then.

Discontinuing the equity method. You stop from the date the investee ceases to be an associate or joint venture. Three outcomes are possible. If it becomes a subsidiary, you apply Ind AS 103 and Ind AS 110. If the retained stake is a financial asset, you measure it at fair value, and that fair value is its initial carrying amount under Ind AS 109. If an associate becomes a joint venture or the reverse, you keep the equity method and do not remeasure the retained interest.

On loss of significant influence, you recognise in profit or loss the difference between (a) the fair value of any retained interest plus any disposal proceeds and (b) the carrying amount on that date. You also account for amounts previously held in OCI as if the investee had directly disposed of the related assets or liabilities. So items that would be reclassified, such as foreign currency translation differences, go to profit or loss: a credit balance is added to the gain and a debit balance is deducted. Items that would not be reclassified, such as a revaluation surplus, move within equity.

If your ownership falls but the investee stays an associate or joint venture, you keep the equity method. You reclassify to profit or loss only the proportionate share of OCI gains or losses that relates to the reduction, and only where those amounts would be reclassified on a direct disposal.

Key rules to remember

Gain or loss on loss of significant influence: Gain/loss = (Fair value of retained interest + Disposal proceeds) − Carrying amount of the investment at the date equity method stops; Recognised in profit or loss. Then adjust for OCI items that would be reclassified on a direct disposal: add credit balances to the gain and deduct debit balances.
Gain or loss on step acquisition (associate to subsidiary): Gain/loss = Acquisition-date fair value of previously held interest − Its carrying amount; Ind AS 103 treats it as if you disposed of the associate and acquired a subsidiary. Recognise in profit or loss. Then adjust for OCI items that would be reclassified on a direct disposal: add credit balances to the gain and deduct debit balances.
Goodwill in a step acquisition: Goodwill = Consideration transferred + NCI + Fair value of previously held interest − Net identifiable assets at fair value; NCI is at fair value or at proportionate share of net identifiable assets, as the question states.
Equity method continues, stake reduces: Reclassify to P&L = OCI balance × (Reduction in stake ÷ Stake before reduction); Only for OCI items that would be reclassified on a direct disposal of the related assets or liabilities.
Associate and joint venture swap: No remeasurement of the retained interest; Equity method continues when an associate becomes a joint venture or the reverse.
Held-for-sale measurement: Lower of (Carrying amount, Fair value less costs to sell); Applies to the portion classified as held for sale. The rest stays under the equity method.

How to solve Exemptions, Classification and Changes in Interest questions

Use this order for any question on exemptions, held for sale or a change in stake. Identify the event first. The event decides the standard and the accounting.

1Identify the event: exemption query, held-for-sale decision, stake increase, partial sale, or change in the nature of the investee.
2Test the exemption first. Check each condition (the investor is itself a subsidiary of another entity, wholly-owned or partly-owned with other owners informed and not objecting; no public market for its instruments; no regulator filing for a public issue; the parent's published Ind AS consolidated statements). Every condition must be met. For venture capital or mutual fund type entities, check the FVTPL election.
3If a sale is planned, check the Ind AS 105 criteria. Move only the affected portion to held for sale and keep equity-accounting the rest.
4After the event, ask whether significant influence still exists, and whether control or joint control now exists. The answer decides the route.
5Control gained: remeasure the old stake at fair value, take the gain or loss to profit or loss, and compute goodwill under Ind AS 103. Influence lost: add proceeds and fair value of the retained stake, subtract the carrying amount, and adjust for OCI reclassification (credit balances added, debit balances deducted). Influence kept: continue the equity method and reclassify OCI only for the reduced portion.
6Pass the journal entries. Derecognise the investment, record proceeds, record the retained stake at fair value, and move OCI balances.
7State the new carrying basis of any retained interest and its next measurement, for example Ind AS 109 for a financial asset.

Quickest way: Three-question triage

When to use it: Use it for case-scenario MCQs and the first minute of a written question.

Is there control now? If yes, treat it as Ind AS 103 step acquisition: fair value of the old stake, P&L gain, goodwill.
If not, is there still significant influence? If no, the retained stake is fair valued and a P&L gain or loss arises on (proceeds + fair value) minus carrying amount.
If yes, nothing is remeasured. Keep the equity method and reclassify only the proportionate OCI items.
For exemption questions, tick off every condition. One failed condition means the equity method applies.

Common mistakes in Exemptions, Classification and Changes in Interest

Remeasuring the retained stake when an associate becomes a joint venture, or the reverse.
Students link any change in stake with fair value remeasurement.
Fix: Remember that the equity method continues in these cases and the retained interest is not remeasured.
Taking only the gain on the shares sold and ignoring the fair value of the retained stake when influence is lost.
Students treat it as an ordinary partial sale.
Fix: Include both proceeds and the fair value of the retained stake against the full carrying amount.
Moving a revaluation surplus share to profit or loss on loss of significant influence.
Students reclassify all OCI balances.
Fix: Reclassify only items that would be reclassified on a direct disposal, such as translation differences. Add credit balances to the gain and deduct debit balances. Transfer non-reclassifiable items within equity.
Stopping the equity method for the whole investment when only a part is held for sale.
Students apply Ind AS 105 to the full investment.
Fix: Apply Ind AS 105 only to the portion held for sale. Keep equity accounting the rest until disposal.
Missing the conditions of the exemption, for example claiming it because the entity is a subsidiary without checking public trading of its instruments or the parent's consolidated statements.
Students remember only one condition.
Fix: Write the full set of conditions and test each one against the facts.
In a step acquisition, adding the carrying amount of the old stake into goodwill instead of its fair value.
Students carry over the old equity method balance.
Fix: Use acquisition-date fair value in the goodwill formula and book the difference from carrying amount as a gain or loss.

Worked examples

Example 1

Alpha Ltd holds 30% of Beta Ltd, an associate, with a carrying amount of ₹90,00,000 under the equity method. Alpha's share of Beta's foreign currency translation reserve (a credit in OCI) is ₹6,00,000. Alpha sells 20% of Beta for ₹80,00,000 cash. The fair value of the remaining 10% is ₹40,00,000. Alpha loses significant influence. Show the accounting.

Show the solution

The stake falls from 30% to 10% and significant influence is lost, so the equity method stops at the date of sale.
Add the proceeds and the fair value of the retained stake: ₹80,00,000 + ₹40,00,000 = ₹1,20,00,000.
Subtract the carrying amount: ₹1,20,00,000 − ₹90,00,000 = ₹30,00,000 gain.
The translation reserve would be reclassified on a direct disposal of the related foreign operation. It is a credit balance, so add ₹6,00,000 to the gain.
Total gain in profit or loss = ₹30,00,000 + ₹6,00,000 = ₹36,00,000.
Record the retained 10% at fair value of ₹40,00,000 as a financial asset under Ind AS 109, at FVTPL, or at FVOCI if the equity election is made.

Answer: Gain in profit or loss is ₹36,00,000. The retained 10% is recorded at ₹40,00,000 and measured under Ind AS 109 afterwards.

Example 2

Pace Ltd holds 30% of Quest Ltd, an associate, with a carrying amount of ₹50,00,000. Its fair value at the acquisition date is ₹67,50,000. Pace buys a further 40% for ₹90,00,000 cash and gains control. Quest's identifiable net assets at fair value are ₹1,50,00,000. Pace measures NCI at proportionate share of net identifiable assets. No reclassifiable OCI balance is recognised on the associate. Compute the gain and goodwill.

Show the solution

Control is gained, so Ind AS 103 applies as an acquisition achieved in stages. The equity method stops at the acquisition date.
Remeasure the old stake to fair value: ₹67,50,000 − ₹50,00,000 = ₹17,50,000 gain in profit or loss.
There is no reclassifiable OCI balance, so no OCI adjustment is made to the gain. (If there were one, a credit balance would be added and a debit balance deducted.)
NCI is the remaining 30%: 30% × ₹1,50,00,000 = ₹45,00,000.
Goodwill = consideration ₹90,00,000 + NCI ₹45,00,000 + fair value of previous interest ₹67,50,000 − net identifiable assets ₹1,50,00,000.
₹90,00,000 + ₹45,00,000 + ₹67,50,000 = ₹2,02,50,000. Less ₹1,50,00,000 gives ₹52,50,000.

Answer: Gain on the previously held stake is ₹17,50,000 in profit or loss. Goodwill is ₹52,50,000. NCI is ₹45,00,000.

Exam tips

In theory answers, list the exemption conditions in full. Partial lists lose marks.
For loss of significant influence, always show the formula (proceeds + fair value of retained stake − carrying amount) and the OCI step as two lines.
In case MCQs, check whether the stake change leads to control, loss of influence, or neither. Many wrong options apply the wrong route.
When a question mentions a planned sale, check the Ind AS 105 criteria before computing anything. Split the investment into held-for-sale and retained portions.
Show journal entries when asked for the accounting. Examiners award marks for derecognition, retained stake at fair value and OCI reclassification.

Practice questions from Ind AS 28 Investments in Associates and Joint Ventures

Exemptions, Classification and Changes in Interest: frequently asked questions

When can I skip the equity method under Ind AS 28?

You can skip it if you are exempt from preparing consolidated statements under Ind AS 110 because you meet all the intermediate-parent conditions: you are a subsidiary of another entity (wholly-owned, or partly-owned with your other owners informed and not objecting), your instruments are not publicly traded, you have made no regulator filing for a public issue, and a parent publishes Ind AS consolidated statements. Venture capital organisations, mutual funds and similar entities can elect FVTPL instead.

What happens to OCI when significant influence is lost?

You treat OCI as if the investee had directly disposed of the related assets or liabilities. Items that would be reclassified, such as translation differences, go to profit or loss, with credit balances added to the gain and debit balances deducted. Items that would not, such as revaluation surplus, move within equity.

How is a step acquisition from associate to subsidiary accounted for?

Ind AS 103 applies. You remeasure the old stake to acquisition-date fair value, recognise the gain or loss, and include that fair value in the goodwill computation. The equity method stops on that date.

Do I remeasure when an associate becomes a joint venture?

No. The equity method continues and the retained interest is not remeasured. The same applies when a joint venture becomes an associate.

How is a part of an associate held for sale treated?

Apply Ind AS 105 to the portion held for sale, measured at the lower of carrying amount and fair value less costs to sell. Continue the equity method for the remaining portion until the held-for-sale portion is disposed of. Then assess the retained interest: keep the equity method if it is still an associate or joint venture, otherwise apply Ind AS 109.