When availed, such entities need not apply the equity method of the Standard, but they must disclose their involvements in accordance with what?
Question
When availed, such entities need not apply the equity method of the Standard, but they must disclose their involvements in accordance with what?
Solution
In situations where entities are exempt from applying the equity method under the relevant accounting standards, they must adhere to the disclosure requirements specified in the applicable financial reporting framework that governs their reporting. This typically involves:
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IFRS Standards: Under the International Financial Reporting Standards (IFRS), particularly IAS 28 (Investments in Associates and Joint Ventures), entities are required to disclose the nature and extent of their interests in associates and joint ventures when they are not using the equity method.
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GAAP Requirements: If the entity is following Generally Accepted Accounting Principles (GAAP), similar disclosure requirements exist, where entities must provide details about their investments and relationships with these entities, including any risks associated with such investments.
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Disclosure Content: Disclosures typically need to include the name and nature of the business of each associate or joint venture, the ownership interest held, and any relevant financial information that helps to understand their impact on the financial position of the entity.
In summary, entities must provide clear disclosures on their involvements in these entities according to the specific requirements set by the accounting standards they are following, which ensures transparency and comprehensibility for stakeholders.
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