associate or joint venture has issued equity instruments, the effect on its net
assets will be reflected in the associate’s or joint venture’s statement of changes in
equity. Where the investor has participated in the issue of these equity instruments, it will account for its cost of doing so by increasing its carrying amount of the associate or joint venture. If, as a consequence of the investor’s participation in such a transaction, the investee has become an associate or joint venture of the investor, or the investor has increased its percentage ownership interest in an existing associate or joint venture (but without obtaining control), the investor should account for this as an acquisition of an associate or joint venture or a piecemeal acquisition of an associate or joint venture (see 7.4.2 above). Thus, the amounts reflected in the associate’s or joint venture’s statement of changes in equity are effectively eliminated as part of applying the equity method. If, on the other hand, the investor has not participated in the issue of equity instruments reflected in the associate’s or joint venture’s statement of changes in equity, e.g. shares have been issued to third parties or the investor has not taken up its full allocation of a rights issue by the associate or joint venture, the investor’s proportionate interest in the associate or joint venture is diminished. In such situations, it should account for the transaction as a deemed disposal (see 7.12.5 below). 7.11.3 Equity-settled share-based payment transactions Another item that may feature in an associate’s or joint venture’s statement of changes in equity is the credit entry relating to any equity-settled share-based payment transactions of the associate or joint venture; the debit entry of such transactions is recognised by the associate or joint venture as an expense within its profit or loss. How should such a transaction be reflected by the investor in equity accounting for the associate or joint venture, particularly the impact of the credit to equity recognised by the associate or joint venture? As the share-based payment expense is included within the profit or loss of the associate or joint venture, this will be refleassociate or joint venture has issued equity instruments, the effect on its net assets will be reflected in the associate’s or joint venture’s statement of changes in equity. Where the investor has participated in the issue of these equity instruments, it will account for its cost of doing so by increasing its carrying amount of the associate or joint venture. If, as a consequence of the investor’s participation in such a transaction, the investee has become an associate or joint venture of the investor, or the investor has increased its percentage ownership interest in an existing associate or joint venture (but without obtaining control), the investor should account for this as an acquisition of an associate or joint venture or a piecemeal acquisition of an associate or joint venture (see 7.4.2 above). Thus, the amounts reflected in the associate’s or joint venture’s statement of changes in equity are effectively eliminated as part of applying the equity method. If, on the other hand, the investor has not participated in the issue of equity instruments reflected in the associate’s or joint venture’s statement of changes in equity, e.g. shares have been issued to third parties or the investor has not taken up its full allocation of a rights issue by the associate or joint venture, the investor’s proportionate interest in the associate or joint venture is diminished. In such situations, it should account for the transaction as a deemed disposal (see 7.12.5 below). 7.11.3 Equity-settled share-based payment transactions Another item that may feature in an associate’s or joint venture’s statement of changes in equity is the credit entry relating to any equity-settled share-based payment transactions of the associate or joint venture; the debit entry of such transactions is recognised by the associate or joint venture as an expense within its profit or loss. How should such a transaction be reflected by the investor in equity accounting for the associate or joint venture, particularly the impact of the credit to equity recognised by the associate or joint venture? As the share-based payment expense is included within the profit or loss of the associate or joint venture, this will be reflected in the share of the associate’s or joint venture’s profit or loss recognised in the investor’s profit or loss. [IAS 28.10]. As far as the credit to equity that is included in the associate’s or joint venture’s statement of changes in equity is concerned, there are two possible approaches: (a) ignore the credit entry; or (b) reflect the investor’s share of the credit entry as a ‘share of other changes in equity of associates or joint ventures’ in the investor’s statementcted in the share of the associate’s or joint venture’s profit or loss recognised in the investor’s profit or loss. [IAS 28.10]. As far as the credit to equity that is included in the associate’s or joint venture’s statement of changes in equity is concerned, there are two possible approaches: (a) ignore the credit entry; or (b) reflect the investor’s share of the credit entry as a ‘share of other changes in equity of associates or joint ventures’ in the investor’s statement