IAS 28 Fair Value Option: 2026 IASB Amendment Guide
If your entity holds investments in associates or joint ventures, the default IFRS treatment is the equity method. But IAS 28 fair value option has always let a narrow class of investment-style entities elect to measure those investments at fair value through profit or loss instead. The rub: the standard’s list of eligible ‘similar entities’ was open-ended, and practice diverged. On 26 June 2026, the International Accounting Standards Board (IASB) issued targeted amendments that link IAS 28 directly to the ‘specified main business activities’ concept in IFRS 18 — sharpening who qualifies and how gains and losses flow through the new IFRS 18 income statement.
At SW Accounting & Consulting Corp, we advise multinational clients and investment vehicles that report under IFRS or hold IFRS-reporting subsidiaries. Below is what the amendments actually change, who is affected, and what to do before adoption.
What is the IAS 28 fair value option? 🧭
It is a narrow election in paragraph 18 of IAS 28 that lets certain investment-style entities measure investments in associates and joint ventures at fair value through profit or loss instead of applying the equity method.
Under IAS 28 Investments in Associates and Joint Ventures, the default measurement basis is the equity method: the investor recognises its share of the investee’s post-acquisition profit or loss. Paragraph 18 carves out an exemption. When an investment in an associate or joint venture is held by, or held indirectly through, a venture capital organisation, mutual fund, unit trust or similar entity, the entity can instead elect to measure that investment at fair value through profit or loss, applying IFRS 9 Financial Instruments. The election is made separately for each associate or joint venture at initial recognition and is irrevocable.
The exemption exists because equity accounting is a poor fit for entities whose business model is holding assets at fair value. The problem, until now, was that the phrase ‘or similar entity’ was left undefined, and stakeholders reported inconsistent scoping in practice.
What did the IASB actually change on 26 June 2026? 📌
The IASB narrowed the ambiguity by defining a ‘similar entity’ through the ‘specified main business activities’ concept in IFRS 18, so eligibility now hangs on how the entity classifies its own business under IFRS 18.
The amendments do three things:
- Anchor the scope to IFRS 18. IAS 28 now explicitly states that ‘a similar entity includes one that has a main business activity of investing in particular types of assets (see paragraph 49(a) of IFRS 18)’. That ties eligibility to the same specified-main-business-activity assessment an entity performs for IFRS 18 presentation.
- Remove a legacy example. The prior reference to ‘investment-linked insurance funds’ is deleted — the IASB concluded that with the IFRS 18 link in place, the illustrative reference is no longer needed.
- Preserve the narrow character of the exemption. The amendment is not a general opening of the fair value option to all entities. It is a scope clarification meant to reduce divergent practice.
Practically, once IFRS 18 is applied, the same analysis that determines whether an entity has a specified main business activity of investing in particular types of assets also determines whether that entity is inside the IAS 28 fair value option gate.
How do fair-value gains and losses get classified under IFRS 18? 🧾
Eligibility for the fair value option is one question; where the fair-value gains and losses land in the IFRS 18 statement of profit or loss is a separate assessment tied to whether investing in associates or joint ventures is itself a specified main business activity.
IFRS 18 replaces IAS 1 for periods beginning on or after 1 January 2027 and introduces three defined categories in the statement of profit or loss — operating, investing and financing — along with the ‘specified main business activities’ concept that changes where certain items appear.
For entities using the amended IAS 28 fair value option, the classification test runs in two steps:
- Step 1 — Eligibility. Does the entity have a specified main business activity of investing in particular types of assets? If yes, associates and joint ventures held (whether directly or indirectly through such an entity) can be measured at fair value through profit or loss.
- Step 2 — Classification. Do the fair-value gains and losses from those associates or joint ventures sit in the operating category, or in the investing category? They sit in operating only if investing in associates or joint ventures is itself a specified main business activity of the reporting entity. If the main business activity is investing in some other asset class, those associate/JV gains and losses fall to the investing category.
The determination of a specified main business activity is made at the reporting entity level. That means a group can look different at the parent-consolidated level than at the subsidiary level. A subsidiary that itself invests in assets as its main business activity might present those fair-value movements in operating, while the parent — whose main business activity is not investing — presents the same movements in the investing category in the consolidated statements.
Who is affected by the IAS 28 fair value option amendment? 👥
The amendment is most relevant to investment vehicles, insurance-linked funds, holding structures and any entity whose main business activity involves investing in particular types of assets and that also holds associates or joint ventures.
In particular, the clarification matters for:
- Investment entities that hold associates alongside their main portfolio. An entity whose specified main business activity is investing in financial assets — and which incidentally holds associates or joint ventures — can measure those associates at fair value through profit or loss under the clarified scope.
- Groups with investment subsidiaries. If a parent that is not itself an investment-style entity holds a subsidiary that is, the associate held by that subsidiary can still be measured at fair value in the consolidated financial statements. The parent-level classification (operating vs. investing) will differ from the subsidiary-level classification.
- Entities that previously relied on the ‘investment-linked insurance funds’ example. The example is removed. The IASB’s view is that the IFRS 18-based ‘similar entity’ test is sufficient without it — but preparers should re-perform their scope conclusion using the new wording.
When does the IAS 28 fair value option amendment take effect? 📅
The amendments apply when the entity first applies IFRS 18 — annual reporting periods beginning on or after 1 January 2027, or earlier if IFRS 18 is early-adopted. Application is retrospective under IAS 8.
The IASB anchored the effective date to IFRS 18 so that the ‘specified main business activities’ language works consistently across the presentation and measurement standards. Two practical timing points follow:
- Retrospective application (IAS 8). If the entity elects to apply the amendments, it must apply them retrospectively under IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors. That triggers restatement of comparatives.
- Early adoption alignment. An entity that has early-adopted IFRS 18 (for example for a 30 June 2026 period-end) and elects the amended IAS 28 fair value option must apply the amendments retrospectively for the reporting period ending on or after issuance — the same 30 June 2026 period-end.
IAS 28 fair value option amendment at a glance 📊
| Item | Before the amendment | After the amendment |
|---|---|---|
| Scope of ‘similar entity’ | Open-ended; divergent practice | Includes entities with a main business of investing in particular assets per IFRS 18 §49(a) |
| Investment-linked insurance funds example | Included as illustration | Removed — no longer needed |
| Fair value election | Per associate/JV at initial recognition | Unchanged |
| Classification of gains/losses | IAS 1 — no split | Operating or investing per IFRS 18, based on specified main business activities |
| Effective date | — | Aligned to IFRS 18 — periods beginning on or after 1 January 2027 (earlier if IFRS 18 early-adopted) |
📌 Key Takeaways
- The IASB clarified the IAS 28 fair value option by anchoring ‘similar entity’ to IFRS 18’s specified main business activities.
- Eligibility (fair value vs. equity method) and IFRS 18 classification (operating vs. investing) are two separate tests.
- The investment-linked insurance funds example is removed; the IFRS 18 link replaces it.
- Effective when IFRS 18 is first applied — periods beginning on or after 1 January 2027. Retrospective under IAS 8.
Frequently Asked Questions ❓
Q. What exactly is the IAS 28 fair value option?
It is an election in paragraph 18 of IAS 28 that lets a narrow class of investment-style entities measure investments in associates and joint ventures at fair value through profit or loss (applying IFRS 9), instead of using the equity method. The election is made separately for each associate or joint venture at initial recognition.
Q. Who now qualifies as a ‘similar entity’ under the amended IAS 28?
Under the June 2026 amendments, a similar entity includes one that has a main business activity of investing in particular types of assets, as described in paragraph 49(a) of IFRS 18. Eligibility flows from the IFRS 18 specified-main-business-activities analysis.
Q. Does the amendment expand the fair value option to all entities?
No. The IASB was explicit that the change is a narrow scope clarification to reduce divergent practice. The exemption remains restricted to entities that meet the investment-style criteria under IAS 28 as clarified by IFRS 18.
Q. Where do the fair-value gains and losses appear in the IFRS 18 income statement?
In the operating category if investing in associates or joint ventures is itself a specified main business activity of the reporting entity. Otherwise, in the investing category. The presentation is determined at the reporting entity level and can differ between parent-consolidated and subsidiary-level financial statements.
Q. When does the amendment become effective?
It is effective when the entity first applies IFRS 18 — annual reporting periods beginning on or after 1 January 2027, or earlier if IFRS 18 is early-adopted. Application is retrospective in accordance with IAS 8.
Q. Does the amendment affect US GAAP reporters?
Not directly. IAS 28 is an IFRS standard. But US-headquartered groups with IFRS-reporting subsidiaries (or dual-reporting entities) should scope in the amendment for their IFRS financial statements and factor it into their IFRS 18 transition plan.
The IAS 28 fair value option amendment looks narrow on the page — but its interaction with IFRS 18 means the presentation of your associate and joint-venture results can shift meaningfully. If you would like a review of how the amended scope and the IFRS 18 classification tests apply to your entity, contact SW Accounting & Consulting Corp. Primary sources: the IASB news release (26 June 2026), IAS 28, IFRS 18, and IAS 8.
