Other Comprehensive Income of Equity-Accounted Investments That Will and Will Not Be Reclassified to Profit or Loss: What Is the Distinction?

Under IFRS/TFRS, the "other comprehensive income (OCI)" items of investments accounted for using the equity method (IAS 28 / TAS 28) are split into two groups:

1. Items that will be reclassified to profit or loss (recyclable OCI)

These are items in the OCI of the associate or joint venture that may subsequently be reclassified to profit or loss.

🔹 Examples:

• Foreign currency translation differences (IAS 21): If the associate or joint venture has a different functional currency, translation differences are carried in OCI. When the investment is disposed of, these cumulative translation differences are reclassified to the investor's profit or loss.

• Cash flow hedge reserves (IFRS 9 / TFRS 9): OCI items arising from the associate's or joint venture's effective hedging relationships also belong to this group.

2. Items that will not be reclassified to profit or loss (non-recyclable OCI)

These items are never transferred to profit or loss and remain in equity.

🔹 Examples:

• Actuarial gains and losses on defined benefit plans (IAS 19 / TAS 19): The investor's share of the associate's or joint venture's actuarial differences is recognised in OCI and is not transferred to profit or loss.

• Equity instruments at fair value through other comprehensive income (FVOCI equity): If the associate or joint venture carries such an instrument in OCI, the investor also recognises its share in OCI, and it is not transferred to profit or loss.

• Revaluation surpluses on property, plant and equipment (IAS 16 / TAS 16): The share of the associate's or joint venture's revaluation surpluses also belongs to this group.

3. Presentation

For investments accounted for using the equity method, the investor:

• Recognises its share of the associate's or joint venture's net profit or loss in the income statement.

• Recognises its share of the associate's or joint venture's OCI in its own statement of OCI and reports it split into items "that will be reclassified / that will not be reclassified".

The investor's statement of OCI therefore has two separate sections:

a) Share of OCI that will not be reclassified (e.g. actuarial differences).

b) Share of OCI that will be reclassified (e.g. translation differences).

Summary:

• A) Will be reclassified: Translation differences, hedge reserves → transferred to profit or loss on disposal.

• B) Will not be reclassified: Actuarial differences, FVOCI equity instruments, revaluation surpluses → remain in equity.