IAS 28 Fair Value Option: IASB’s 2026 Amendments Explained
In June 2026 the International Accounting Standards Board issued targeted amendments clarifying the IAS 28 fair value option. It is a narrow change on the page, and a consequential one in practice: it decides who can measure investments in associates and joint ventures at fair value through profit or loss instead of applying the equity method — and it lines that eligibility up with the categories that IFRS 18 uses to present income and expenses.
At SW Accounting & Consulting Corp, we work with holding companies, family offices, and investment platforms that hold significant-influence stakes in operating businesses. The equity method is often the wrong economic answer for those investors, and IAS 28.18 has always offered a way out. The amendments now make clear who “us” is. Here is what changed, why the IASB acted, and what preparers should check before their first IFRS 18 reporting period.
What is the IAS 28 fair value option, and what actually changed? 📘
The IAS 28 fair value option lets specified entities measure investments in associates and joint ventures at fair value through profit or loss under IFRS 9, instead of applying the equity method. The 2026 amendments clarify which entities qualify.
IAS 28.18 has long allowed venture capital organisations, mutual funds, unit trusts, and “similar entities, including investment-linked insurance funds” to elect FVTPL for their investments in associates and joint ventures. The problem the IASB was solving is stated plainly in the Board’s June 2026 announcement: stakeholders were reading “similar entities” inconsistently, which produced diversity in practice and — with IFRS 18 landing — threatened to spread that diversity into the way investment-focused income is presented on the primary financial statements.
The amendments do not open the election to any entity that happens to hold a few equity stakes. They anchor it to main business activity, and they draw the boundary by describing the assets the entity invests in.
Who counts as a “similar entity” under the amended IAS 28 fair value option? 🎯
A “similar entity” is one whose main business activity is investing in a defined set of assets — investments in associates, joint ventures and unconsolidated subsidiaries; cash and cash equivalents; or other assets that generate a return individually and largely independently of the entity’s other resources.
Two design choices matter here. First, the test looks at main business activity, not at the number of investees or the size of the portfolio. A trading company that happens to own a 30% stake in a supplier is not suddenly eligible. Second, the assets list is deliberately aligned to how IFRS 18 will classify income and expenses in the primary statements. The point of the amendment is not to add a new category of investor — it is to close an interpretive gap so that the IAS 28 election maps cleanly onto IFRS 18’s investing and operating categories for those investors who were always intended to be inside it.
Practically, that means a preparer applying the election needs to be able to articulate, in the accounting policy note, why the entity’s main business activity meets the amended test. Boilerplate like “the entity is similar to a mutual fund” is not enough anymore.
How does the IAS 28 fair value option interact with IFRS 18? 🧭
IFRS 18 requires equity-method income to sit in the investing category, and it lets an eligible entity — one that invests in the specified assets as its main business activity — reclassify that same income to the operating category. IFRS 18.C7 also permits a one-time switch from equity method to the FVTPL election at initial application of IFRS 18.
This is where the change becomes structural, not just definitional. Under IFRS 18, income and expenses from associates, joint ventures and unconsolidated subsidiaries accounted for using the equity method sit in the investing category by default. If instead an entity does not use the equity method and holds those investments as part of its main business activity, IFRS 18 pushes the related income and expenses into the operating category. The IAS 28 fair value option is the bridge that lets qualifying investors move from the first pattern to the second.
IFRS 18.C7 gives an eligible IAS 28.18 entity a specific transition privilege: at the date it first applies IFRS 18, it can change its election from the equity method to fair value through profit or loss. That is not a routine accounting policy change — it is a purpose-built window, and it is one preparers should not miss.
What should preparers do before their first IFRS 18 reporting period? ✅
Confirm whether the entity qualifies under the amended test, decide whether to keep the equity method or switch to FVTPL under the IFRS 18.C7 transition, and update accounting policy documentation before the changeover date.
Concrete steps for the run-up to IFRS 18 adoption:
- Test eligibility under the amended IAS 28.18. Document that the entity’s main business activity is investing in the specified assets — investments in associates, joint ventures and unconsolidated subsidiaries; cash and cash equivalents; or other assets that generate a return individually and largely independently of other resources.
- Model the presentation impact. If the entity currently uses the equity method, IFRS 18 will place that income in the investing category. If it elects FVTPL, remeasurement gains and losses will follow the operating classification path IFRS 18 sets for main-business-activity investors.
- Decide on the IFRS 18.C7 switch. This is a one-time opportunity to change the election at initial application. Weigh volatility of FVTPL results against the transparency of fair value measurement and the presentation benefit under IFRS 18.
- Refresh accounting policy notes and disclosures. The amended language belongs in the policy note, along with why the entity qualifies and, if the election is exercised, how it is applied consistently across the portfolio.
- Coordinate with valuation. Moving from equity method to FVTPL means recurring fair value measurement of each investment. Confirm the valuation process, inputs, and IFRS 13 fair value hierarchy classification before period one.
IAS 28 fair value option — before and after the 2026 amendments 📊
| Topic | Before the amendments | After the 2026 amendments |
|---|---|---|
| Who qualifies | Venture capital, mutual funds, unit trusts, investment-linked insurance funds, and “similar entities” (undefined). | Same list plus a defined “similar entities” test tied to main business activity and a specified asset list. |
| Eligibility test | Interpretive analogy to the listed investor types. | Main business activity of investing in defined assets (associates/JVs/unconsolidated subs, cash and equivalents, independently-returning assets). |
| IFRS 18 alignment | No explicit mapping. | Election aligned to IFRS 18’s investing/operating classification of associate, JV and unconsolidated-subsidiary income. |
| Transition | Ordinary IAS 8 policy change if switching methods. | IFRS 18.C7 permits a one-time switch from equity method to FVTPL at initial application of IFRS 18. |
| Effective date | n/a | Effective from the date an entity first applies IFRS 18. |
📌 Key Takeaways
- The IASB clarified the IAS 28 fair value option in June 2026 by defining “similar entities.”
- Eligibility now turns on main business activity of investing in a defined asset list.
- The election is aligned with IFRS 18‘s investing/operating classification of associate and JV income.
- IFRS 18.C7 gives eligible entities a one-time switch from equity method to FVTPL at first application.
- The amendments are effective from an entity’s first IFRS 18 reporting period.
Frequently Asked Questions ❓
Q. What is the IAS 28 fair value option?
It is the election in paragraph 18 of IAS 28 that lets specified entities measure investments in associates and joint ventures at fair value through profit or loss under IFRS 9, rather than applying the equity method. The 2026 amendments clarify which entities qualify.
Q. Do the amendments create a new category of investor?
No. They define “similar entities” — a term that already existed in IAS 28.18 — by anchoring it to main business activity of investing in a specified set of assets. The venture capital, mutual fund, unit trust and investment-linked insurance fund categories remain.
Q. When are the amendments effective?
They are effective when an entity first applies IFRS 18. There is no separate stand-alone effective date, so preparers should align the review with their IFRS 18 transition plan.
Q. What is the IFRS 18.C7 transition relief?
IFRS 18.C7 permits an entity that is eligible to apply IAS 28.18 to change its election from the equity method to fair value through profit or loss at the date it first applies IFRS 18. It is a one-time window tied to that adoption date.
Q. Where does the IAS 28 election show up on the primary statements under IFRS 18?
IFRS 18 places equity-method income in the investing category. If a main-business-activity investor does not apply the equity method — for example, because it uses the IAS 28 fair value option — the related income and expenses follow IFRS 18’s rules for that activity, generally in the operating category.
Q. Does US GAAP have an equivalent election?
US GAAP has its own fair value option under ASC 825 that can be applied to eligible equity method investments, but the eligibility and disclosure framework is different from IAS 28.18. Groups reporting under both frameworks should map the two paths side by side rather than assume equivalence.
If your entity is preparing for IFRS 18 and re-evaluating whether the equity method or the fair value option is the right answer under the amended IAS 28.18, contact SW Accounting & Consulting Corp for a transition review. Primary source: IASB — Amendments clarifying the fair value option in IAS 28 (June 2026). Standards referenced: IAS 28 Investments in Associates and Joint Ventures and IFRS 18 Presentation and Disclosure in Financial Statements.
