IAS 28 vs ASC 323: the equity method

Associates and joint ventures appear as a single line in the balance sheet, so it is easy to assume they are accounted for the same way everywhere. They mostly are, but IFRS and US GAAP part ways on who can use fair value instead, whose accounting policies apply, and what happens when the investment loses value. This guide compares IAS 28 with ASC 323 side by side, reworks the IAS 28 guide's example through an impairment and a recovery, and covers losses, contributions of a business, step acquisitions and the projects under way.

By Mirza Fahad Baig, Chartered Accountant (ICAP). Reviewed by Hamza Fida, Chartered Accountant (ICAP). Updated . 7 minute read.

Short answer

IAS 28 vs ASC 323 compares two versions of the same method. Both apply the equity method to investments over which the investor has significant influence, presumed at 20% or more of the voting power, and to joint ventures: the investment starts at cost, is adjusted for the investor's share of profit or loss, other comprehensive income and dividends, and basis differences and intercompany profits are eliminated. The differences sit around the method. US GAAP lets any investor elect the fair value option, while IFRS limits it to venture capital organizations, mutual funds and similar entities. IFRS requires the investee to use the investor's accounting policies; US GAAP does not. An impaired investment is tested against recoverable amount under IAS 36 and the impairment can be reversed under IFRS, while US GAAP writes an other-than-temporary decline down to fair value and never reverses it. US GAAP also uses the equity method for more than minor stakes in limited partnerships, usually 3% to 5%. Both boards are revising their standards. In this guide's example, the same investment is impaired by CU 48 million under IFRS and CU 78 million under US GAAP, and only the IFRS loss is reversed.

At a glance

Threshold
20%, both
Fair value option
Wider in US GAAP
Policies
Uniform under IFRS
Impairment
Reversible under IFRS
Partnerships
3% to 5% in US
Coming changes
Both boards active
IAS 28 vs ASC 323: the equity methodThreshold: 20%, both; Fair value option: Wider in US GAAP; Policies: Uniform under IFRS; Impairment: Reversible under IFRS; Partnerships: 3% to 5% in US; Coming changes: Both boards active.KEY FACTS AT A GLANCEIAS 28 vs ASC 323: the equity methodThreshold20%, bothFair value optionWider in US GAAPPoliciesUniform under IFRSImpairmentReversible under IFRSPartnerships3% to 5% in USComing changesBoth boards activeTax BakersIAS 28 vs ASC 323: the equity methodThreshold: 20%, both; Fair value option: Wider in US GAAP; Policies: Uniform under IFRS; Impairment: Reversible under IFRS; Partnerships: 3% to 5% in US; Coming changes: Both boards active.KEY FACTS AT A GLANCEIAS 28 vs ASC 323: the equitymethodThreshold20%, bothFair value optionWider in US GAAPPoliciesUniform under IFRSImpairmentReversible under IFRSPartnerships3% to 5% in USComing changesBoth boards activeTax Bakers
Key facts at a glance, as set out in this guide.

What do IAS 28 and ASC 323 have in common?

Both define significant influence as the power to participate in financial and operating policy decisions without control, presumed at 20% or more of the voting power and evidenced by board representation, material transactions or interchange of staff. Both record the investment at cost, identify basis differences between cost and the investor's share of the investee's net assets, amortize those that relate to depreciable assets, eliminate the investor's share of unrealized profits on transactions with the investee, and stop recognizing losses at zero unless the investor has an obligation to fund the investee. See IFRS 11 and IAS 28 and the equity method under ASC 323.

IAS 28 vs ASC 323: what are the differences?

IAS 28 vs ASC 323 at a glanceIAS 28 vs ASC 323 at a glanceTOPICIFRSUS GAAPFair value option for any investorNot allowedAllowedUniform accounting policiesRequiredNot requiredReverse an impairmentAllowedNot allowedFull gain on contributing a businessPractice variesRequiredEquity method for small LP stakesNot requiredUsually
Same method; IFRS is stricter on policies, US GAAP on impairment.
AreaIAS 28ASC 323
Fair value instead of the equity methodOnly venture capital organizations, mutual funds, unit trusts and similar entities, investment by investmentAny investor can elect the fair value option under ASC 825 when it first recognizes the investment
Investee's accounting policiesMust be aligned with the investor'sNeed not be aligned, as long as the investee follows US GAAP
Different reporting datesNo more than three months apart, adjusted for significant eventsA consistent lag, usually up to three months, with material events in the gap disclosed or recognized
ImpairmentWhole investment tested under IAS 36 when there is objective evidence of impairment; reversals allowedOther-than-temporary declines written down to fair value; no reversals
Losses beyond the investmentApplied to long-term interests that form part of the net investment, such as long-term loansApplied to other investments in the investee, such as loans and preferred stock, in order of seniority
Limited partnerships and similar entitiesSignificant influence judged in the usual wayThe equity method is generally used for more than minor interests, usually above 3% to 5%
Contributing a business to an associateGain limited to the other investors' share under IAS 28, full gain under IFRS 10; the fix is deferred, so practice variesFull gain, with the retained interest measured at fair value
Buying more shares to reach significant influenceNo specific guidance; policies varyCost of the new shares added to the existing basis and the equity method applied from then on, with no retrospective adjustment, under ASU 2016-07
Held for saleEquity method stops under IFRS 5Equity method continues until the sale

An example: an impairment and a recovery

In the IAS 28 guide's example, an investor paid CU 400 million for 40% of an associate and, after its share of profit, the elimination of unrealized profit and dividends, carried it at CU 428 million at the end of year 1. In year 2 the associate breaks even, but a key customer leaves: the investment's value in use falls to CU 380 million and its fair value to CU 350 million, and the investor concludes the decline is other than temporary. In year 3 the associate wins a new contract and both measures recover to CU 440 million. All figures are in CU million.

Carrying amountIAS 28 with IAS 36ASC 323
End of year 1428428
Year 2 impairment(48) to recoverable amount, the higher of 380 and 350(78) to fair value
End of year 2380350
Year 3 recovery48 reversed, up to the amount had no impairment been recognizedNot reversed
End of year 3428350

IFRS recognizes a smaller loss, because value in use can exceed fair value, and reverses it when the recovery comes. US GAAP recognizes the larger loss and keeps the lower basis, so the CU 78 million difference only comes back as a higher gain when the investment is eventually sold. Under both, the investor's share of the associate's profits continues to be recognized on top of the carrying amount.

What is changing?

The IASB expects to issue a revised IAS 28 in the first half of 2027, effective for periods beginning on or after January 1, 2029, answering questions such as how to account for buying further interests and recognizing losses. Separately, amendments issued in June 2026 clarify which investors qualify for the fair value option under IAS 28, applied together with IFRS 18. The FASB has a project on improving equity method accounting, with an exposure draft expected in the fourth quarter of 2026.

Where to go next

See IFRS 10 vs ASC 810, IAS 36 vs US GAAP impairment and IFRS vs US GAAP key differences.

Keep going

Our free Excel models work through the examples in these guides, and the comparisons show where IFRS and US GAAP part ways. Every guide names the Chartered Accountant who wrote it and the one who reviewed it.

All IFRS vs US GAAP guides Free Excel models

Questions people ask

What is the difference between IAS 28 and ASC 323?

The equity method itself is the same; the differences are that US GAAP allows any investor a fair value option, does not require uniform accounting policies, writes impaired investments down to fair value without reversals, and applies the equity method to small stakes in limited partnerships.

Can an equity method impairment be reversed?

Under IFRS, yes, up to the carrying amount the investment would have had without the impairment. Under US GAAP, no.

Who can use the fair value option for associates?

Under US GAAP, any investor that elects it when the investment is first recognized; under IFRS, only venture capital organizations, mutual funds, unit trusts and similar entities.

When is a limited partnership interest accounted for using the equity method under US GAAP?

Generally when the interest is more than minor, which in practice usually means above 3% to 5%, because limited partners are presumed to have influence over partnership operations.

Sources

The standards, updates and other documents this guide draws on.

  1. IFRS Foundation: IAS 28 Investments in Associates and Joint Ventures
  2. FASB Accounting Standards Codification: Topic 323, Investments, Equity Method and Joint Ventures
  3. IFRS Foundation: IASB decisions, September 2026 meeting, including the Equity Method project
  4. UK Endorsement Board: Amendments to the Fair Value Option for Investments in Associates and Joint Ventures (IAS 28), June 2026
  5. Deloitte DART: Roadmap, equity method investments and joint ventures, identifying a joint venture
  6. CohnReznick: 2026 FASB update for not-for-profit and educational organizations, September 2026

Rules and fees change. If you are reading this long after October 26, 2026, confirm the figures with the source before you rely on them.

IFRS 11 and IAS 28Joint operations, joint ventures and the equity methodASC 323The equity method under ASC 323Accounting standardsIFRS vs US GAAP: the key differences in one guide

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This guide is general information. It is not tax or legal advice for your situation.