SIC-20
Historical
Equity Accounting Method–Recognition of Losses
Addressed how much loss an investor should recognise under the equity method when its share of an associate's losses exceeds its interest in that associate. Superseded in 2003.
Historical Reference
SIC-20 was withdrawn in March 2003 when the IASB issued a revised IAS 28 Investments in Associates, which superseded SIC-20 by incorporating the net investment loss recognition limit directly into the equity method guidance.
This page is retained for historical and comparative reference. Entities should refer to the current standard that superseded this interpretation for authoritative guidance.
Current Standard
IAS 28 Investments in Associates and Joint Ventures 1
What SIC-20 Addressed (Historical)
What SIC-20 addressed
SIC-20 addressed how much loss an investor should recognise under the equity method when its share of an associate's losses exceeded its interest in that associate. It considered whether the investor should recognise losses beyond its carrying amount of the investment and how to treat any excess.
2
The Conclusion It Reached (Historical)
The conclusion it reached
SIC-20 concluded that an investor's share of losses under the equity method should not reduce the carrying amount of the investment below zero. Once the carrying amount is reduced to zero, the investor should discontinue recognising further losses unless it has incurred obligations or made payments on behalf of the associate. Any excess losses should be recognised only to the extent of the investor's net investment in the associate.
3
Where This Guidance Lives Today
Where this guidance lives today
Superseded byIAS 28 Investments in Associates
Why withdrawnThe 2003 revision incorporated the net investment loss recognition limit directly into IAS 28
Current statusSuperseded
Glossary
Equity method
A method of accounting for investments in associates where the investor's share of the associate's profit or loss is recognised in the investor's financial statements.
Net investment
The carrying amount of the investor's interest in an associate after deducting any impairment losses and excess losses that the investor is not required to recognise.
Financial statement key
BS Balance sheet
IS Income statement
SE Statement of changes in equity
OCI Other comprehensive income
SCF Statement of cash flows
History & Development
Jan-1999
In January 1999 the Standing Interpretations Committee issued SIC-20 Equity Accounting Method–Recognition of Losses.
Apr-2001
In April 2001 the International Accounting Standards Board adopted SIC-20.
Minor consequential amendment to SIC-20
Mar-2003
In March 2003 the Board issued a revised IAS 28 Investments in Associates which superseded SIC-20.
Superseded by revised IAS 28