IAS 28 fair value option amendments: what changed for 2027

The IAS 28 fair value option amendments are a small change with a big clarification: the IASB has issued narrow-scope amendments to IAS 28 that settle exactly which investments in associates and joint ventures can be measured at fair value instead of using the equity method. They take effect in the first period you apply IFRS 18 — annual periods beginning on or after 1 January 2027, with early application permitted. If your group holds investments in other companies through an investment arm, this one is worth ten minutes of your time.

The background: who could skip the equity method

By default, IAS 28 says an investor with significant influence over an associate (or joint control of a joint venture) uses the equity method: you book your share of the investee's profit or loss each period, and the carrying amount moves with it.

But IAS 28 also contained an escape hatch. A venture capital organisation — or a mutual fund, unit trust and similar entities including investment-linked insurance funds — could elect to measure its associates and joint ventures at fair value through profit or loss under IFRS 9 instead. The election is made separately for each associate or joint venture. For an investor whose whole business is buying and selling stakes, fair value is the more faithful picture than a blended share of accounting profits.

The trouble was the phrase "similar entities". Different entities read those words differently, and insurance groups raised the flag — real diversity in practice had built up over who was allowed through the escape hatch. Without a fix, IFRS 18 — which reshapes the statement of profit or loss and classifies income and expenses by main business activities — would have widened that diversity.

What the IAS 28 fair value option amendments change

The amendments clarify explicitly that "similar entities" include "entities that have a specified main business activity of investing in particular types of assets that are defined in IFRS 18". In plain language: if investing in particular types of assets is your specified main business activity — the concept IFRS 18 introduces for classifying income and expenses — you are in the same camp as the venture capital firms, mutual funds, and unit trusts the standard already named.

Grant Thornton supports the change: when entities apply the new presentation standard in 2027, eligibility and presentation will run on the same definition, not two different ones.

Be clear about what this is not. This is a clarification of who qualifies for an existing election, not a new measurement rule. Nobody is being forced onto fair value, and nobody's numbers change unless they choose the option and qualify under the clarified test.

Who the IAS 28 fair value option amendments affect

Here's the point people miss: although the issue surfaced because of insurer feedback, the amendments matter to any entity that applies the fair value option, regardless of sector. Grant Thornton makes this explicit, and it's the most useful sentence in their insight.

For our readers, that means:

• SME groups with an investment-holding arm. If part of your group exists to hold and trade stakes in other businesses, check whether that arm now clearly qualifies under the specified-main-business-activity test.
• Family offices and investment vehicles in the Gulf and EU. The region's holding-company structures are exactly the kind of entity the clarified wording speaks to.
• Ordinary trading companies: mostly, this is a heads-up, not a fire drill. If your associates are operating businesses you hold for strategic reasons — not an investing activity — the clarification changes nothing for you. You stay on the equity method as before.

One transition nuance: when you first apply IFRS 18, an eligible entity gets a one-time chance to switch its election — from the equity method to fair value through profit or loss — for qualifying investments. Worth a planning conversation with your auditors now, not at year-end.

The 2027 timeline — and what to do in 2026

The IAS 28 fair value option amendments apply in the first reporting period in which the entity applies IFRS 18. That means annual periods beginning on or after 1 January 2027, with earlier application permitted — including when you adopt IFRS 18 early.

IFRS 18 replaces IAS 1 and reshapes the statement of profit or loss, so 2026 is the preparation year. If the fair value option touches your group, put these three steps on the agenda:

1. Check the eligibility test. If you apply the fair value option today, confirm your entity satisfies the clarified wording — a specified main business activity of investing in particular types of assets. Document your conclusion; this is exactly the judgment auditors will probe.
2. Pair it with your IFRS 18 prep. The presentation changes and the eligibility test now run on the same "main business activity" concept, so assess them together, not in two separate workstreams.
3. Decide early. The one-time right to change the election on first applying IFRS 18, and the option to early-adopt the amendments alongside early IFRS 18 adoption, are both decisions that need a deliberate yes or no — ideally documented before your 2027 year starts.

For the typical small trading business, the honest summary is this: the IAS 28 fair value option amendments are a cleanup job, not a revolution. But if your group holds investments through an investment-style arm, this small clarification answers a question that has genuinely been answered differently across the industry — and getting it right before 2027 is worth the hour it takes.

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