Document ID: chunk:federal_register_of_legislation:F2025C00172:body:0:p40
Version: federal_register_of_legislation:F2025C00172
Segment Type: other
Provision Reference: 
Character Range: 102393–105258

the investment entity investor need not have an exit strategy for that investment, provided that the investment entity investee has appropriate exit strategies for its investments.

Earnings from investments
B85I An entity is not investing solely for capital appreciation, investment income, or both, if the entity or another member of the group containing the entity (ie the group that is controlled by the investment entity's ultimate parent) obtains, or has the objective of obtaining, other benefits from the entity's investments that are not available to other parties that are not related to the investee. Such benefits include:
(a) the acquisition, use, exchange or exploitation of the processes, assets or technology of an investee. This would include the entity or another group member having disproportionate, or exclusive, rights to acquire assets, technology, products or services of any investee; for example, by holding an option to purchase an asset from an investee if the asset's development is deemed successful;
(b) joint arrangements (as defined in AASB 11) or other agreements between the entity or another group member and an investee to develop, produce, market or provide products or services;
(c) financial guarantees or assets provided by an investee to serve as collateral for borrowing arrangements of the entity or another group member (however, an investment entity would still be able to use an investment in an investee as collateral for any of its borrowings);
(d) an option held by a related party of the entity to purchase, from that entity or another group member, an ownership interest in an investee of the entity;
(e) except as described in paragraph B85J, transactions between the entity or another group member and an investee that:
(i) are on terms that are unavailable to entities that are not related parties of either the entity, another group member or the investee;
(ii) are not at fair value; or
(iii) represent a substantial portion of the investee's or the entity's business activity, including business activities of other group entities.
B85J An investment entity may have a strategy to invest in more than one investee in the same industry, market or geographical area in order to benefit from synergies that increase the capital appreciation and investment income from those investees. Notwithstanding paragraph B85I(e), an entity is not disqualified from being classified as an investment entity merely because such investees trade with each other.

Fair value measurement
B85K An essential element of the definition of an investment entity is that it measures and evaluates the performance of substantially all of its investments on a fair value basis, because using fair value results in more relevant information than, for example, consolidating its subsidiaries or using the equity method for its interests