If an entity had previously held an investment in another entity and by a further investment that investee became an associate or joint venture of the entity, at the date of the second investment, the previously held investment is revalued to fair value with any gain/loss being taken to profit or loss.

Question

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This statement is true according to the accounting standards. When an entity makes a further investment in an investee that results in the investee becoming an associate or joint venture, the previously held investment is revalued to fair value at the date of the second investment. Any gain or loss arising from the revaluation is recognized in profit or loss. This is in accordance with the requirements of IFRS 9 Financial Instruments and IAS 28 Investments in Associates and Joint Ventures.

If an Entity Had Previously Held an Investment in Another