REVISION OF IAS 28 AND FINANCIAL REPORTING CHALLENGES FOR PRIVATE AND PUBLIC SECTORS

Abstract

The research objective is a critical analysis of the systemic transformation of the equity method (EM) within the framework of the fundamental reform of IAS 28 and the global convergence of financial reporting standards for the private and public sectors. The relevance of the topic is driven by the revision of the EM to clarify and detail its core principles. It is substantiated that this transformation creates a risk of accounting metrics diverging from the fair value concept, which directly impacts the transparency and relevance of financial reporting for investors. The research methodology is based on a comprehensive analysis of the Exposure Draft ED/2024/7 in conjunction with the requirements of IFRS 18. The study employs comparative analysis of measurement bases, logical generalization, and a systemic approach to evaluating the implementation of these changes in the public finance sector (IPSAS 36). The research results prove that the modernization of IAS 28 reinforces the characteristics of the equity method as a controversial instrument. It is established that the unification of initial recognition approaches and the refusal to remeasure previously held interests in step acquisitions contradict the principle of reflecting real economic results. This creates a methodological basis for potential manipulation of equity amounts and the concealment of accumulated losses of associates and joint ventures. The reclassification of investment results in accordance with IFRS 18 and the introduction of Management-defined Performance Measures (MPM) shift the analytical focus from operating profit to explanatory notes. It is proved that for the public sector, these changes are critical, as the automatic translation of IFRS deficiencies may distort the valuation of net assets and hide real fiscal risks associated with strategic holdings. The practical value of the article lies in the development of conceptual frameworks for the adaptation of business entities to the updated regulatory environment. Approaches are proposed to enhance the analytical value of financial statement notes under the conditions of new data disaggregation. For the public sector, the research results serve as a methodological foundation for increasing public debt transparency and preventing the formation of latent off-balance sheet liabilities through associate and joint venture structures, which is strategically important for ensuring fiscal sustainability.