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Exposure Draft on Investment Entities (Amendments to Ind AS 110, Ind AS 112 and Ind AS 27) (Comments to be received by December 13, 2013).
November, 14th 2013
               Exposure Draft

            Investment Entities

        (Amendments to Ind AS 110,
         Ind AS 112 and Ind AS 27)


(Last date for Comments: December 13, 2013)




                  Issued by
         Accounting Standards Board
The Institute of Chartered Accountants of India
                                    Exposure Draft
                                 Investment Entities
                 Amendments to Ind AS 110, Ind AS 112 and Ind AS 27


Following is the Exposure Draft of Investment Entities (Amendments to Ind AS 110, Ind AS 112 and
Ind As 27) issued by the Accounting Standards Board of The Institute of Chartered Accountants of
India, for comments. The Board invites comments on any specific aspect of the Exposure Draft.
Comments are most helpful if they indicate the specific paragraph or group of paragraphs to which
they relate, contain a clear rationale and, where applicable, provide a suggestion for alternative
wording.

Comment should be submitted in writing to the Secretary, Accounting Standards Board, The Institute
of Chartered Accountants of India, ICAI Bhawan, Post Box No. 7100, Indraprastha Marg, New
Delhi 110 002, so as to be received not later than December 13, 2013. Comments can also be sent
by email to asb@icai.in or commentsasb@icai.in

(The Exposure Draft of the Indian Accounting Standard includes paragraphs set in bold type and
plain type, which have equal authority. Paragraphs in bold type indicate the main principles. This
Exposure Draft of the Indian Accounting Standard should be read in the context of its objective and
the Preface to the Statements on Accounting Standards)




Amendments to Ind AS 110 Consolidated Financial Statements

Paragraphs 2 and 4 are amended. New text is underlined and deleted text is struck through.


2      To meet the objective in paragraph 1, this Ind AS:

       (a) ...

       (c) sets out how to apply the principle of control to identify whether an investor controls an
           investee and therefore must consolidate the investee; and

       (d) sets out the accounting requirements for the preparation of consolidated financial
           statements.; and

       (e) defines an investment entity and sets out an exception to consolidating particular
           subsidiaries of an investment entity.
3       ...

4      An entity that is a parent shall present consolidated financial statements. This Ind AS applies
       to all entities, except as follows:

       (a)     ...

       (c)     an investment entity need not present consolidated financial statements if it is
               required, in accordance with paragraph 31 of this Ind AS, to measure all of its
               subsidiaries at fair value through profit or loss.

After paragraph 26, headings and paragraphs 27­33 are added.

Determining whether an entity is an investment entity

27     A parent shall determine whether it is an investment entity. An investment entity is an
       entity that:

       (a)     obtains funds from one or more investors for the purpose of providing those
               investor(s) with investment management services;

       (b)     commits to its investor(s) that its business purpose is to invest funds solely for
               returns from capital appreciation, investment income, or both; and

       (c)     measures and evaluates the performance of substantially all of its investments on
               a fair value basis.

       Paragraphs B85A­B85M provide related application guidance.

28     In assessing whether it meets the definition described in paragraph 27, an entity shall consider
        whether it has the following typical characteristics of an investment entity:

       (a)     it has more than one investment (see paragraphs B85O­B85P);
       (b)     it has more than one investor (see paragraphs B85Q­B85S);
       (c)     it has investors that are not related parties of the entity (see paragraphs B85T­B85U);
               and
       (d)     it has ownership interests in the form of equity or similar interests(see paragraphs
               B85V­B85W).





The absence of any of these typical characteristics does not necessarily disqualify an entity from
being classified as an investment entity. An investment entity that does not have all of these typical
characteristics provides additional disclosure required by paragraph 9A of Ind AS 112 Disclosure of
Interests in Other Entities.


29       If facts and circumstances indicate that there are changes to one or more of the three elements
          that make up the definition of an investment entity, as described in paragraph 27, or the
          typical characteristics of an investment entity, as described in paragraph 28, a parent shall
          reassess whether it is an investment entity.

30       A parent that either ceases to be an investment entity or becomes an investment entity shall
         account for the change in its status prospectively from the date at which the change in status
         occurred (see paragraphs B100­B101).

Investment entities: exception to consolidation

31       Except as described in paragraph 32, an investment entity shall not consolidate its
         subsidiaries or apply Ind AS 103 when it obtains control of another entity. Instead, an
         investment entity shall measure an investment in a subsidiary at fair value through
         profit or loss in accordance with Ind AS 39.

32        Notwithstanding the requirement in paragraph 31, if an investment entity has a subsidiary
         that provides services that relate to the investment entity's investment activities (see
         paragraphs B85C­B85E), it shall consolidate that subsidiary in accordance with paragraphs
         19­26 of this Ind AS and apply the requirements of Ind AS 103 to the acquisition of any
         such subsidiary.

33       A parent of an investment entity shall consolidate all entities that it controls, including those
         controlled through an investment entity subsidiary, unless the parent itself is an investment
         entity.


In Appendix A, a new definition is added. New text is underlined.


group                          ...
investment                     An entity that:

entity                        (a) obtains funds from one or more investors for the purpose of
                              providing those investor(s) with investment management services;

                              (b) commits to its investor(s) that its business purpose is to invest funds
                                  solely for returns from capital appreciation, investment income, or
                                  both; and

                              (c) measures and evaluates the performance of substantially all of its
                                  investments on a fair value basis.
In Appendix B, headings and paragraphs B85A­B85W are added.


Determining whether an entity is an investment entity

B85A An entity shall consider all facts and circumstances when assessing whether it is an
      investment entity, including its purpose and design. An entity that possesses the three
      elements of the definition of an investment entity set out in paragraph 27 is an investment
      entity. Paragraphs B85B­B85M describe the elements of the definition in more detail.

              Business purpose

B85B    The definition of an investment entity requires that the purpose of the entity is to invest
        solely for capital appreciation, investment income (such as dividends, interest or rental
        income), or both. Documents that indicate what the entity's investment objectives are, such
        as the entity's offering memorandum, publications distributed by the entity and other
        corporate or partnership documents, will typically provide evidence of an investment
        entity's business purpose. Further evidence may include the manner in which the entity
        presents itself to other parties (such as potential investors or potential investees); for
        example, an entity may present its business as providing medium-term investment for
        capital appreciation. In contrast, an entity that presents itself as an investor whose objective
        is to jointly develop, produce or market products with its investees has a business purpose
        that is inconsistent with the business purpose of an investment entity, because the entity will
        earn returns from the development, production or marketing activity as well as from its
        investments (see paragraph B85I).

B85C    An investment entity may provide investment-related services (eg investment advisory
        services, investment management, investment support and administrative services), either
        directly or through a subsidiary, to third parties as well as to its investors, even if those
        activities are substantial to the entity.

B85D An investment entity may also participate in the following investment-related activities,
     either directly or through a subsidiary, if these activities are undertaken to maximise the
     investment return (capital appreciation or investment income) from its investees and do not
     represent a separate substantial business activity or a separate substantial source of income
     to the investment entity:

        (a)      providing management services and strategic advice to an investee; and


        (b)      providing financial support to an investee, such as a loan, capital commitment or
                 guarantee.
B85E     If an investment entity has a subsidiary that provides investment-related services or
        activities, such as those described in paragraphs B85C­B85D, to the entity or other parties,
        it shall consolidate that subsidiary in accordance with paragraph 32.

         Exit strategies

B85F     An entity's investment plans also provide evidence of its business purpose. One feature that
        differentiates an investment entity from other entities is that an investment entity does not
        plan to hold its investments indefinitely; it holds them for a limited period. Because equity
        investments and non-financial asset investments have the potential to be held indefinitely,
        an investment entity shall have an exit strategy documenting how the entity plans to realise
        capital appreciation from substantially all of its equity investments and non-financial asset
        investments. An investment entity shall also have an exit strategy for any debt instruments
        that have the potential to be held indefinitely, for example perpetual debt investments. The
        entity need not document specific exit strategies for each individual investment but shall
        identify different potential strategies for different types or portfolios of investments,
        including a substantive time frame for exiting the investments. Exit mechanisms that are
        only put in place for default events, such as a breach of contract or non-performance, are not
        considered exit strategies for the purpose of this assessment.

B85G     Exit strategies can vary by type of investment. For investments in private equity securities,
        examples of exit strategies include an initial public offering, a private placement, a trade
        sale of a business, distributions (to investors) of ownership interests in investees and sales of
        assets (including the sale of an investee's assets followed by a liquidation of the investee).
        For equity investments that are traded in a public market, examples of exit strategies include
        selling the investment in a private placement or in a public market. For real estate
        investments, an example of an exit strategy includes the sale of the real estate through
        specialized property dealers or the open market.

B85H An investment entity may have an investment in another investment entity that is formed in
     connection with the entity for legal, regulatory, tax or similar business reasons. In this case,
     the investment entity investor need not have an exit strategy for that investment, provided
     that the investment entity investee has appropriate exit strategies for its investments.

        Earnings from investments

B85I    An entity is not investing solely for capital appreciation, investment income, or both, if the
        entity or another member of the group containing the entity (ie the group that is controlled
        by the investment entity's ultimate parent) obtains, or has the objective of obtaining, other
        benefits from the entity's investments that are not available to other parties that are not
        related to the investee. Such benefits include:

        (a)   the acquisition, use, exchange or exploitation of the processes, assets or technology of
              an investee. This would include the entity or another group member having
              disproportionate, or exclusive, rights to acquire assets, technology, products or
              services of any investee; for example, by holding an option to purchase an asset from
              an investee if the asset's development is deemed successful;

        (b)   joint arrangements (as defined in Ind AS 111) or other agreements between the entity
              or another group member and an investee to develop, produce, market or provide
              products or services;

        (c)   financial guarantees or assets provided by an investee to serve as collateral for
              borrowing arrangements of the entity or another group member (however, an
              investment entity would still be able to use an investment in an investee as collateral
              for any of its borrowings);

        (d)   an option held by a related party of the entity to purchase, from that entity or another
              group member, an ownership interest in an investee of the entity;

        (e)   except as described in paragraph B85J, transactions between the entity or another
              group member and an investee that:


              (i)     are on terms that are unavailable to entities that are not related parties of either
                      the entity, another group member or the investee;
              (ii)     are not at fair value; or
              (iii)    represent a substantial portion of the investee's or the entity's business
                      activity, including business activities of other group entities.

B85J An investment entity may have a strategy to invest in more than one investee in the same
     industry, market or geographical area in order to benefit from synergies that increase the
     capital appreciation and investment income from those investees. Notwithstanding
     paragraph B85I(e), an entity is not disqualified from being classified as an investment entity
     merely because such investees trade with each other.



       Fair value measurement

B85K An essential element of the definition of an investment entity is that it measures and evaluates
     the performance of substantially all of its investments on a fair value basis because using fair
     value results in more relevant information than, for example, consolidating its subsidiaries or
     using the equity method for its interests in associates or joint ventures. In order to
     demonstrate that it meets this element of the definition, an investment entity:

       (a)    provides investors with fair value information and measures substantially all of its
              investments at fair value in its financial statements whenever fair value is required or
              permitted in accordance with Ind ASs; and

       (b)    reports fair value information internally to the entity's key management personnel (as
              defined in Ind AS 24), who use fair value as the primary measurement attribute to
               evaluate the performance of substantially all of its investments and to make
               investment decisions.


B85L In order to meet the requirement in B85K(a), an investment entity would:

       (a)     [Refer Appendix 1]

       (b)     elect the exemption from applying the equity method in Ind AS 28 for its investments
               in associates and joint ventures; and

       (c)     measure its financial assets at fair value using the requirements in Ind AS 39.

B85M [Refer Appendix 1]


      Typical characteristics of an investment entity

B85N In determining whether it meets the definition of an investment entity, an entity shall consider
    whether it displays the typical characteristics of one (see paragraph 28). The absence of one or
    more of these typical characteristics does not necessarily disqualify an entity from being
    classified as an investment entity but indicates that additional judgement is required in
    determining whether the entity is an investment entity.

      More than one investment

B85O An investment entity typically holds several investments to diversify its risk and maximise its
     returns. An entity may hold a portfolio of investments directly or indirectly, for example by
     holding a single investment in another investment entity that itself holds several investments.

B85P There may be times when the entity holds a single investment. However, holding a single
     investment does not necessarily prevent an entity from meeting the definition of an
     investment entity. For example, an investment entity may hold only a single investment when
     the entity:

       a)     is in its start-up period and has not yet identified suitable investments and, therefore,
              has not yet executed its investment plan to acquire several investments;

       b)     has not yet made other investments to replace those it has disposed of;

       c)     is established to pool investors' funds to invest in a single investment when that
              investment is unobtainable by individual investors (eg when the required minimum
              investment is too high for an individual investor); or

       d)     is in the process of liquidation.
       More than one investor

B85Q Typically, an investment entity would have several investors who pool their funds to gain
     access to investment management services and investment opportunities that they might not
     have had access to individually. Having several investors would make it less likely that the
     entity, or other members of the group containing the entity, would obtain benefits other than
     capital appreciation or investment income (see paragraph B85I).

B85R Alternatively, an investment entity may be formed by, or for, a single investor that represents
     or supports the interests of a wider group of investors (eg a pension fund, government
     investment fund or family trust).

B85S There may also be times when the entity temporarily has a single investor. For example, an
     investment entity may have only a single investor when the entity:

       (a)    is within its initial offering period, which has not expired and the entity is actively
              identifying suitable investors;

       (b)    has not yet identified suitable investors to replace ownership interests that have been
              redeemed; or

       (c)    is in the process of liquidation


Unrelated investors

B85T    Typically, an investment entity has several investors that are not related parties (as defined
        in Ind AS 24) of the entity or other members of the group containing the entity. Having
        unrelated investors would make it less likely that the entity, or other members of the group
        containing the entity, would obtain benefits other than capital appreciation or investment
        income (see paragraph B85I).

B85U However, an entity may still qualify as an investment entity even though its investors are
     related to the entity. For example, an investment entity may set up a separate `parallel' fund
     for a group of its employees (such as key management personnel) or other related party
     investor(s), which mirrors the investments of the entity's main investment fund. This
     `parallel' fund may qualify as an investment entity even though all of its investors are
     related parties.

       Ownership interests

B85V An investment entity is typically, but is not required to be, a separate legal entity. Ownership
     interests in an investment entity are typically in the form of equity or similar interests (eg
     partnership interests), to which proportionate shares of the net assets of the investment entity
     are attributed. However, having different classes of investors, some of which have rights
     only to a specific investment or groups of investments or which have different proportionate
     shares of the net assets, does not preclude an entity from being an investment entity.
B85W In addition, an entity that has significant ownership interests in the form of debt that, in
     accordance with other applicable Ind ASs, does not meet the definition of equity, may still
     qualify as an investment entity, provided that the debt holders are exposed to variable
     returns from changes in the fair value of the entity's net assets.

 In Appendix B, a heading and paragraphs B100­B101 are added.

Accounting for a change in investment entity status

B100   When an entity ceases to be an investment entity, it shall apply Ind AS 103 to any subsidiary
       that was previously measured at fair value through profit or loss in accordance with
       paragraph 31. The date of the change of status shall be the deemed acquisition date. The fair
       value of the subsidiary at the deemed acquisition date shall represent the transferred deemed
       consideration when measuring any goodwill or gain from a bargain purchase that arises
       from the deemed acquisition. All subsidiaries shall be consolidated in accordance with
       paragraphs 19­24 of this Ind AS from the date of change of status.

B101   When an entity becomes an investment entity, it shall cease to consolidate its subsidiaries at
       the date of the change in status, except for any subsidiary that shall continue to be
       consolidated in accordance with paragraph 32. The investment entity shall apply the
       requirements of paragraphs 25 and 26 to those subsidiaries that it ceases to consolidate as
       though the investment entity had lost control of those subsidiaries at that date.

 In Appendix C, new paragraph C1B is added.


C1B     Investment Entities (Amendments to Ind AS 110, Ind AS 112 and Ind AS 27), amended
        paragraphs 2, 4 and Appendix A and added paragraphs 27­33, B85A­B85W, B100­B101.
        An entity shall apply those amendments for annual periods beginning on or after
        _____________________.
 Appendix
 Consequential amendments to other Standards
 This appendix sets out amendments to other Standards that are a consequence of the Investment
 Entities (Amendments to Ind AS 110, Ind AS 112 and Ind AS 27).

 Ind AS 101 First-time Adoption of Indian Accounting Standards

 Appendix C is amended. New text is underlined.

 This appendix is an integral part of the Ind AS. An entity shall apply the following requirements to
 business combinations that the entity recognised before the date of transition to Ind ASs. This
 Appendix should only be applied to business combinations within the scope of Ind AS 103 Business
 Combinations.

 In Appendix D, paragraphs D16­D17 are amended. New text is underlined.

D16    If a subsidiary becomes a first-time adopter later than its parent, the subsidiary shall, in its
       financial statements, measure its assets and liabilities at either:

        (a)    the carrying amounts that would be included in the parent's consolidated financial
               statements, based on the parent's date of transition to Ind ASs, if no adjustments were
               made for consolidation procedures and for the effects of the business combination in
               which the parent acquired the subsidiary (this election is not available to a subsidiary
               of an investment entity, as defined in Ind AS 110, that is required to be measured at
               fair value through profit or loss); or

        (b)    ...


D17   However, if an entity becomes a first-time adopter later than its subsidiary (or associate or joint
       venture) the entity shall, in its consolidated financial statements, measure the assets and
       liabilities of the subsidiary (or associate or joint venture) at the same carrying amounts as in
       the financial statements of the subsidiary (or associate or joint venture), after adjusting for
       consolidation and equity accounting adjustments and for the effects of the business
       combination in which the entity acquired the subsidiary. Notwithstanding this requirement, a
       non-investment entity parent shall not apply the exception to consolidation that is used by any
       investment entity subsidiaries.
 In Appendix E, after paragraph E5, a heading and paragraph E6 is added.

        Investment entities

 E6         A first-time adopter that is a parent shall assess whether it is an investment entity, as defined
            in Ind AS 110, on the basis of the facts and circumstances that exist at the date of transition
            to Ind ASs.

Ind AS 103 Business Combinations

 Paragraph 7 is amended and paragraph 2A is added. New text is underlined and deleted text is
 struck through.

 2A     The requirements of this Standard do not apply to the acquisition by an investment entity, as
        defined in Ind AS 110 Consolidated Financial Statements, of an investment in a subsidiary
        that is required to be measured at fair value through profit or loss.

 7     The guidance in Ind AS 110 Consolidated Financial Statements shall be used to identify the
        acquirer ...


 Ind AS 107 Financial Instruments: Disclosures

  Paragraph 3 is amended. New text is underlined and deleted text is struck through.

 3    This Ind AS shall be applied by all entities to all types of financial instruments, except:

      (a)         those interests in subsidiaries, associates or joint ventures that are accounted for in
                  accordance with Ind AS 110 Consolidated Financial Statements, Ind AS 27 Separate
                  Financial Statements or Ind AS 28 Investments in Associates and Joint Ventures.
                  However, in some cases, Ind AS 110, Ind AS 27 or Ind AS 28 require or permits an
                  entity to account for an interest in a subsidiary, associate or joint venture using Ind
                  AS 39; in those cases, entities shall apply the requirements of this Ind AS and, for
                  those measured at fair value, the requirements of Ind AS 113 Fair Value
                  Measurement. Entities shall also apply this Ind AS to all derivatives linked to
                  interests in subsidiaries, associates or joint ventures unless the derivative meets the
                  definition of an equity instrument in Ind AS 32.
Ind AS 7 Statement of Cash Flows

 Paragraphs 42A and 42B are amended and paragraph 40A is added. New text is underlined and
 deleted text is struck through.

40A    An investment entity, as defined in Ind AS 110 Consolidated Financial Statements, need not
       apply paragraphs 40(c) or 40(d) to an investment in a subsidiary that is required to be
       measured at fair value through profit or loss.

42A    Cash flows arising from changes in ownership interests in a subsidiary that do not result in a
       loss of control shall be classified as cash flows from financing activities, unless the
       subsidiary is held by an investment entity, as defined in Ind AS 110, and is required to be
       measured at fair value through profit or loss.


42B     Changes in ownership interests in a subsidiary that do not result in a loss of control, such as
       the subsequent purchase or sale by a parent of a subsidiary's equity instruments, are
       accounted for as equity transactions (see Ind AS 110 Consolidated Financial Statements),
       unless the subsidiary is held by an investment entity and is required to be measured at fair
       value through profit or loss. Accordingly, the resulting cash flows are classified in the same
       way as other transactions with owners described in paragraph 17.

Ind AS 12 Income Taxes

Paragraphs 58 and 68C are amended. New text is underlined.

58     Current and deferred tax shall be recognised as income or an expense and included in profit
       or loss for the period, except to the extent that the tax arises from:

        (a)   ...

        (b) a business combination (other than the acquisition by an investment entity, as defined
            in Ind AS 110 Consolidated Financial Statements, of a subsidiary that is required to be
            measured at fair value through profit or loss) (see paragraphs 66 to 68).

68C      As noted in paragraph 68A, the amount of the tax deduction (or estimated future tax
        deduction, measured in accordance with paragraph 68B) may differ from the related
        cumulative remuneration expense. Paragraph 58 of the Standard requires that current and
        deferred tax should be recognised as income or an expense and included in profit or loss for
        the period, except to the extent that the tax arises from (a) a transaction or event that is
        recognised, in the same or a different period, outside profit or loss, or (b) a business
        combination (other than the acquisition by an investment entity of a subsidiary that is
        required to be measured at fair value through profit or loss). If the amount of the tax
        deduction (or estimated future tax deduction) exceeds the amount of the related cumulative
        remuneration expense, this indicates that the tax deduction relates not only to remuneration
        expense but also to an equity item. In this situation, the excess of the associated current or
        deferred tax should be recognised directly in equity.

Ind AS 24 Related Party Disclosures

Paragraphs 4 and 9 are amended. New text is underlined.

4          Related party transactions and outstanding balances with other entities in a group are
        disclosed in an entity's financial statements. Intragroup related party transactions and
        outstanding balances are eliminated, except for those between an investment entity and its
        subsidiaries measured at fair value through profit or loss, in the preparation of consolidated
        financial statements of the group.

9      The terms `control' and `investment entity', `joint control', and `significant influence'
       are defined in Ind AS 110, Ind AS 111 Joint Arrangements and Ind AS 28 Investments
       in Associates and Joint Ventures respectively and are used in this Standard with the
       meanings specified in those Ind ASs.

Ind AS 32 Financial Instruments: Presentation

Paragraph 4 is amended. New text is underlined and deleted text is struck through.

4     This Standard shall be applied by all entities to all types of financial instruments except:

      (a) those interests in subsidiaries, associates or joint ventures that are accounted for in
           accordance with Ind AS 110 Consolidated Financial Statements, Ind AS 27 Separate
           Financial Statements or Ind AS 28 Investments in Associates and Joint Ventures.
           However, in some cases, Ind AS 110, Ind AS 27 or Ind AS 28 require or permits an entity
           to account for an interest in a subsidiary, associate or joint venture using Ind AS 39; in
           those cases, entities shall apply the requirements of this Standard. Entities shall also
           apply this Standard to all derivatives linked to interests in subsidiaries, associates or joint
           ventures.

Ind AS 34 Interim Financial Reporting

Paragraph 16A is amended. New text is underlined.

16A     In addition to disclosing significant events and transactions in accordance with paragraphs
        15­15C, an entity shall include the following information, in the notes to its interim
        financial statements, if not disclosed elsewhere in the interim financial report. The
        information shall normally be reported on a financial year-to-date basis.

    (a) ...
     (k) for entities becoming, or ceasing to be, investment entities, as defined in Ind AS 110
          Consolidated Financial Statements, the disclosures in Ind AS 112 Disclosure of Interests in
          Other Entities paragraph 9B.

Ind AS 39 Financial Instruments: Recognition and Measurement

Paragraphs 2 and 80 are amended. New text is underlined and deleted text is struck through.

2    This Standard shall be applied by all entities to all types of financial instruments except:

     (a)      those interests in subsidiaries, associates and joint ventures that are accounted for in
               accordance with Ind AS 110 Consolidated Financial Statements, Ind AS 27 Separate
               Financial Statements or Ind AS 28 Investments in Associates and Joint Ventures.
               However, in some cases, Ind AS 110, Ind AS 27 or Ind AS 28 require or permit an entity
               to account for entities shall apply this Standard to an interest in a subsidiary, associate or
               joint venture that according to Ind AS 27 or Ind AS 28 is accounted for under in
               accordance with some or all of the requirements of this Standard. Entities shall also
               apply this Standard to derivatives on an interest in a subsidiary, associate or joint
               venture unless the derivative meets the definition of an equity instrument of the entity in
               Ind AS 32 Financial Instruments: Presentation.

     (b)      ...

     (g)      any forward contract between an acquirer and a selling shareholder to buy or sell an
              acquiree that will result in a business combination within the scope of Ind AS 103
              Business Combinations at a future acquisition date. The term of the forward contract
              should not exceed a reasonable period normally necessary to obtain any required
              approvals and to complete the transaction.

80         ... It follows that hedge accounting can be applied to transactions between entities in the
           same group only in the individual or separate financial statements of those entities and not
           in the consolidated financial statements of the group, except for the consolidated financial
           statements of an investment entity, as defined in Ind AS 110, where transactions between an
           investment entity and its subsidiaries measured at fair value through profit or loss will not
           be eliminated in the consolidated financial statements. ...
Amendments to Appendix 1 of Ind AS 110, "Consolidated Financial Statements"

 The following point is added in Appendix 1

6. IFRS 10 requires all investments to be measured at fair value to qualify for the exemption from
   consolidation available to an investment entity. Since, Ind AS 40, Investment Properties requires
   all investment properties to be measured at cost initially and cost less depreciation subsequently,
   sub- paragraph (a) of B85L, paragraph B85M and Example 3 of Illustrative Examples have been
   deleted as these deal with investment property measured at fair value which is not relevant in the
   Indian context.
The following section, Illustrative Examples, is inserted into Ind AS 110.

Illustrative Examples
These examples accompany, but are not part of, the Ind AS.

Example 1

IE1        An entity, Limited Partnership, is formed in 20X1 as a limited partnership with a 10-year
           life. The offering memorandum states that Limited Partnership's purpose is to invest in
           entities with rapid growth potential, with the objective of realising capital appreciation
           over their life. Entity GP (the general partner of Limited Partnership) provides 1 per cent
           of the capital to Limited Partnership and has the responsibility of identifying suitable
           investments for the partnership. Approximately 75 limited partners, who are unrelated to
           Entity GP, provide 99 per cent of the capital to the partnership.

IE2        Limited Partnership begins its investment activities in 20X1. However, no suitable
           investments are identified by the end of 20X1. In 20X2 Limited Partnership acquires a
           controlling interest in one entity, ABC Corporation. Limited Partnership is unable to
           close another investment transaction until 20X3, at which time it acquires equity interests
           in five additional operating companies. Other than acquiring these equity interests,
           Limited Partnership conducts no other activities. Limited Partnership measures and
           evaluates its investments on a fair value basis and this information is provided to Entity
           GP and the external investors.

IE3        Limited Partnership has plans to dispose of its interests in each of its investees during the
           10-year stated life of the partnership. Such disposals include the outright sale for cash, the
           distribution of marketable equity securities to investors following the successful public
           offering of the investees' securities and the disposal of investments to the public or other
           unrelated entities.

            Conclusion

IE4        From the information provided, Limited Partnership meets the definition of an investment
           entity from formation in 20X1 to 31 December 20X3 because the following conditions
           exist:


           (a)    Limited Partnership has obtained funds from the limited partners and is providing
                  those limited partners with investment management services;

           (b)    Limited Partnership's only activity is acquiring equity interests in operating
                  companies with the purpose of realising capital appreciation over the life of the
                  investments. Limited Partnership has identified and documented exit strategies for
                  its investments, all of which are equity investments; and
        (c)    Limited Partnership measures and evaluates its investments on a fair value basis
               and reports this financial information to its investors.

IE5      In addition, Limited Partnership displays the following typical characteristics of an
        investment entity:

        (a) Limited Partnership is funded by many investors;

        (b) its limited partners are unrelated to Limited Partnership; and

        (c) ownership in Limited Partnership is represented by units of partnership interests
            acquired through a capital contribution.

IE6      Limited Partnership does not hold more than one investment throughout the period.
        However, this is because it was still in its start-up period and had not identified suitable
        investment opportunities.

Example 2

IE7      High Technology Fund was formed by Technology Corporation to invest in technology
        start-up companies for capital appreciation. Technology Corporation holds a 70 per cent
        interest in High Technology Fund and controls High Technology Fund; the other 30 per
        cent ownership interest in High Technology Fund is owned by 10 unrelated investors.
        Technology Corporation holds options to acquire investments held by High Technology
        Fund, at their fair value, which would be exercised if the technology developed by the
        investees would benefit the operations of Technology Corporation. No plans for exiting
        the investments have been identified by High Technology Fund. High Technology Fund
        is managed by an investment adviser that acts as agent for the investors in High
        Technology Fund.

        Conclusion

IE8          Even though High Technology Fund's business purpose is investing for capital
        appreciation and it provides investment management services to its investors, High
        Technology Fund is not an investment entity because of the following arrangements and
        circumstances:

        (a) Technology Corporation, the parent of High Technology Fund, holds options to
            acquire investments in investees held by High Technology Fund if the assets
            developed by the investees would benefit the operations of Technology Corporation.
            This provides a benefit in addition to capital appreciation or investment income; and

        (b) the investment plans of High Technology Fund do not include exit strategies for its
            investments, which are equity investments. The options held by Technology
             Corporation are not controlled by High Technology Fund and do not constitute an
             exit strategy.


Example 3

[Refer Appendix 1]


Example 4

IE12      An entity, Master Fund, is formed in 20X1 with a 10-year life. The equity of Master Fund
          is held by two related feeder funds. The feeder funds are established in connection with
          each other to meet legal, regulatory, tax or similar requirements. The feeder funds are
          capitalised with a 1 per cent investment from the general partner and 99 per cent from
          equity investors that are unrelated to the general partner (with no party holding a
          controlling financial interest).

                     GP               Third Party                   Third Party              GP
                     1%                  99%                           99%                   1% 




                                                                                  Offshore
                           Domestic                                               Feeder 
                            Feeder 




                                                      Master




                                                     Portfolio of
                                                    Investments




IE13      The purpose of Master Fund is to hold a portfolio of investments in order to generate
          capital appreciation and investment income (such as dividends, interest or rental income).
          The investment objective communicated to investors is that the sole purpose of the
          Master-Feeder structure is to provide investment opportunities for investors in separate
          market niches to invest in a large pool of assets. Master Fund has identified and
          documented exit strategies for the equity and nonfinancial investments that it holds.
          Master Fund holds a portfolio of short- and medium-term debt investments, some of
        which will be held until maturity and some of which will be traded but Master Fund has
        not specifically identified which investments will be held and which will be traded.
        Master Fund measures and evaluates substantially all of its investments, on a fair value
        basis. In addition, investors receive periodic financial information, on a fair value basis,
        from the feeder funds. Ownership in both Master Fund and the feeder funds is
        represented through units of equity.

       Conclusion

IE14   Master Fund and the feeder funds each meet the definition of an investment entity. The
       following conditions exist:

       (a) both Master Fund and the feeder funds have obtained funds for the purpose of
           providing investors with investment management services;

       (b) the Master-Feeder structure's business purpose, which was communicated directly to
           investors of the feeder funds, is investing solely for capital appreciation and
           investment income and Master Fund has identified and documented potential exit
           strategies for its equity and non-financial investments.

       (c) although the feeder funds do not have an exit strategy for their interests in Master
           Fund, the feeder funds can nevertheless be considered to have an exit strategy for
           their investments because Master Fund was formed in connection with the feeder
           funds and holds investments on behalf of the feeder funds; and

       (d) the investments held by Master Fund are measured and evaluated on a fair value basis
           and information about the investments made by Master Fund is provided to investors
           on a fair value basis through the feeder funds.

IE15    Master Fund and the feeder funds were formed in connection with each other for legal,
        regulatory, tax or similar requirements. When considered together, they display the
        following typical characteristics of an investment entity:

       (a)    the feeder funds indirectly hold more than one investment because Master Fund
             holds a portfolio of investments;

       (b) although Master Fund is wholly capitalised by the feeder funds, the feeder funds are
           funded by many investors who are unrelated to the feeder funds (and to the general
           partner); and

       (c) ownership in the feeder funds is represented by units of equity interests acquired
           through a capital contribution.
Appendix
Consequential amendment to the guidance on implementing another Standard

This appendix contains an amendment to the guidance on implementing another Standard that is
necessary in order to ensure consistency with Investment Entities (Amendments to Ind AS 110, Ind
AS 112 and Ind AS 27) and the related amendments to other Ind ASs. Amended paragraphs are
shown with the new text underlined.

Ind AS 105 Non-current Assets Held for Sale and Discontinued Operations

  The paragraph above `Example 13' is amended. New text is underlined.

A subsidiary acquired with a view to sale is not exempt from consolidation in accordance with Ind
AS 110 Consolidated Financial Statements, unless the acquirer is an investment entity, as defined in
Ind AS 110, and is required to measure the investment in that subsidiary at fair value through profit
or loss. However, if it meets the criteria in paragraph 11, it is presented as a disposal group classified
as held for sale. Example 13 illustrates these requirements.




Example 13
...
Amendments to Ind AS 112 Disclosure of Interests in Other Entities


Paragraph 2 is amended. New text is underlined and deleted text is struck through.


2        To meet the objective in paragraph 1, an entity shall disclose:

          (a) the significant judgements and assumptions it has made in determining:

              (i)     the nature of its interest in another entity or arrangement;, and in determining
              (ii)     the type of joint arrangement in which it has an interest (paragraphs 7­9);
              (iii)    that it meets the definition of an investment entity, if applicable (paragraph
                      9A); and
          (b) ...
After paragraph 9, a heading and paragraphs 9A­9B are added.

          Investment entity status

9A           When a parent determines that it is an investment entity in accordance with
          paragraph 27 of Ind AS 110, the investment entity shall disclose information about
          significant judgements and assumptions it has made in determining that it is an
          investment entity. If the investment entity does not have one or more of the typical
          characteristics of an investment entity (see paragraph 28 of Ind AS 110), it shall
          disclose its reasons for concluding that it is nevertheless an investment entity.

9B        When an entity becomes, or ceases to be, an investment entity, it shall disclose the change
          of investment entity status and the reasons for the change. In addition, an entity that
          becomes an investment entity shall disclose the effect of the change of status on the
          financial statements for the period presented, including:

          (a) the total fair value, as of the date of change of status, of the subsidiaries that cease to
              be consolidated;
          (b) the total gain or loss, if any, calculated in accordance with paragraph B101 of Ind
              AS 110; and
          (c) the line item(s) in profit or loss in which the gain or loss is recognised (if not
              presented separately).

After paragraph 19, a heading and paragraphs 19A­19G are added.

Interests in unconsolidated subsidiaries (investment entities)

19A         An investment entity that, in accordance with Ind AS 110, is required to apply the
          exception to consolidation and instead account for its investment in a subsidiary at fair
          value through profit or loss shall disclose that fact.

19B        For each unconsolidated subsidiary, an investment entity shall disclose:

          (a) the subsidiary's name;

          (b) the principal place of business (and country of incorporation if different from the
              principal place of business) of the subsidiary; and

          (c) the proportion of ownership interest held by the investment entity and, if different, the
              proportion of voting rights held.


19C       If an investment entity is the parent of another investment entity, the parent shall also
          provide the disclosures in 19B(a)­(c) for investments that are controlled by its investment
          entity subsidiary. The disclosure may be provided by including, in the financial
      statements of the parent, the financial statements of the subsidiary (or subsidiaries) that
      contain the above information.

19D   An investment entity shall disclose:

      (a) the nature and extent of any significant restrictions (eg resulting from borrowing
          arrangements, regulatory requirements or contractual arrangements) on the ability of
          an unconsolidated subsidiary to transfer funds to the investment entity in the form of
          cash dividends or to repay loans or advances made to the unconsolidated subsidiary
          by the investment entity; and

      (b) any current commitments or intentions to provide financial or other support to an
          unconsolidated subsidiary, including commitments or intentions to assist the
          subsidiary in obtaining financial support.


19E   If, during the reporting period, an investment entity or any of its subsidiaries has, without
      having a contractual obligation to do so, provided financial or other support to an
      unconsolidated subsidiary (eg purchasing assets of, or instruments issued by, the
      subsidiary or assisting the subsidiary in obtaining financial support), the entity shall
      disclose:

      (a) the type and amount of support provided to each unconsolidated subsidiary; and

      (b) the reasons for providing the support.

19F    An investment entity shall disclose the terms of any contractual arrangements that could
      require the entity or its unconsolidated subsidiaries to provide financial support to an
      unconsolidated, controlled, structured entity, including events or circumstances that could
      expose the reporting entity to a loss (eg liquidity arrangements or credit rating triggers
      associated with obligations to purchase assets of the structured entity or to provide
      financial support).

19G        If during the reporting period an investment entity or any of its unconsolidated
      subsidiaries has, without having a contractual obligation to do so, provided financial or
      other support to an unconsolidated, structured entity that the investment entity did not
      control, and if that provision of support resulted in the investment entity controlling the
      structured entity, the investment entity shall disclose an explanation of the relevant
      factors in reaching the decision to provide that support.
After paragraph 21, paragraph 21A is added.

21A           An investment entity need not provide the disclosures required by paragraphs 21(b)­
              21(c).

After paragraph 25, paragraph 25A is added.

25A           An investment entity need not provide the disclosures required by paragraph 24 for an
              unconsolidated structured entity that it controls and for which it presents the disclosures
              required by paragraphs 19A­19G.

In Appendix A, a term is added. New text is underlined.

The following terms are defined in Ind AS 27 (as amended), Ind AS 28 (as amended), Ind AS 110
and Ind AS 111 Joint Arrangements and are used in this Ind AS with the meanings specified in those
Ind ASs:

· associate
· consolidated financial statements
· control of an entity
· equity method
· group
· investment entity
· joint arrangement
· ...
Amendments to Ind AS 27 Separate Financial Statements


Paragraphs 5­6 are amended. New text is underlined.

5         The following terms are defined in Appendix A of Ind AS 110 Consolidated Financial
          Statements, Appendix A of Ind AS 111 Joint Arrangements and paragraph 3 of Ind AS 28
          Investments in Associates and Joint Ventures:

          · associate
          · control of an investee
          · group
          · investment entity
          · joint control
          · ...

6         Separate financial statements are those presented in addition to consolidated financial
          statements or in addition to financial statements in which investments in associates or
          joint ventures are accounted for using the equity method, other than in the circumstances
          set out in paragraphs 8­8A. Separate financial statements need not be appended to, or
          accompany, those statements.
 After paragraph 8, paragraph 8A is added.


8A       An investment entity that is required, throughout the current period and all comparative
         periods presented, to apply the exception to consolidation for all of its subsidiaries in
         accordance with paragraph 31 of Ind AS 110 presents separate financial statements as its
         only financial statements.

  After paragraph 11, paragraphs 11A­11B are added.

11A      If a parent is required, in accordance with paragraph 31 of Ind AS 110, to measure its
         investment in a subsidiary at fair value through profit or loss in accordance with Ind AS
         39, it shall also account for its investment in a subsidiary in the same way in its separate
         financial statements.

11B      When a parent ceases to be an investment entity, or becomes an investment entity, it shall
         account for the change from the date when the change in status occurred, as follows:

        (a)   when an entity ceases to be an investment entity, the entity shall, in accordance with
              paragraph 10, either:

              (i)    account for an investment in a subsidiary at cost. The fair value of the
                     subsidiary at the date of the change of status shall be used as the deemed cost
                     at that date; or

              (ii)   continue to account for an investment in a subsidiary in accordance with Ind
                     AS 39.

        (b)   when an entity becomes an investment entity, it shall account for an investment in a
              subsidiary at fair value through profit or loss in accordance with Ind AS 39. The
              difference between the previous carrying amount of the subsidiary and its fair value
              at the date of the change of status of the investor shall be recognised as a gain or loss
              in profit or loss. The cumulative amount of any fair value adjustment previously
              recognised in other comprehensive income in respect of those subsidiaries shall be
              treated as if the investment entity had disposed of those subsidiaries at the date of
              change in status.
After paragraph 16, paragraph 16A is added.

16A     When an investment entity that is a parent (other than a parent covered by paragraph
         16) prepares, in accordance with paragraph 8A, separate financial statements as its
         only financial statements, it shall disclose that fact. The investment entity shall also
         present the disclosures relating to investment entities required by Ind AS 112
         Disclosure of Interests in Other Entities.

Paragraph 17 is amended. New text is underlined.

17        When a parent (other than a parent covered by paragraphs 16­16A) or an investor
          with joint control of, or significant influence over, an investee prepares separate
          financial statements, the parent or investor shall identify the financial statements
          prepared in accordance with Ind AS 110, Ind AS 111 or Ind AS 28 (as amended in
          2011) to which they relate. The parent or investor shall also disclose in its separate
          financial statements:

          (a) ...

 
 
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