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Under Ind AS 28, investment-oriented entities like venture capital organizations or mutual funds can elect to measure associates and joint ventures at fair value through profit or loss (FVTPL) instead of using the equity method. This election, made at initial recognition, recognizes that these entities prioritize fair value performance. Recent IASB proposals seek to clarify which "similar entities" qualify for this exemption, linking eligibility to a "main business activity" of investing to align with IFRS 18 presentation requirements. These changes are expected to be adopted in India to maintain international accounting convergence.
Investments in associates and joint ventures are ordinarily accounted for using the equity method under Ind AS 28 – Investments in Associates and Joint Ventures. However, the standard recognises that certain types of entities, particularly those engaged in investment activities, evaluate the performance of their investments on a fair value basis.
As per paragraph 18 of Ind AS 28, “When an investment in an associate or a joint venture is held by, or is held indirectly through, an entity that is a venture capital organisation, or a mutual fund, unit trust and similar entities including investment linked insurance funds, the entity may elect
