Definition of participation for the purposes of Article 18(7) CRR

In the context of Article 18(7) CRR, where an institutions holds a participation in another undertaking that is not an institution, financial institution or ancillary services undertaking, shall the default treatment for this participation be the equity method or shall the valuation be affected in accordance with the applicable accounting framework (Article 24(1) CRR), if that would result in a different measurement base?

Article 18(7) CRR requires an institution to apply the equity method where the institution (i) has a subsidiary which is an undertaking other than an institution, a financial institution or an ancillary services undertaking or (ii) holds a participation in such an undertaking. (emphasis added) Article 4(1)(35) provides the following definition for a participation: 'participation' means participation within the meaning of the first sentence of Article 17 of Fourth Council Directive 78/660/EEC of 25 July 1978 on the annual accounts of certain types of companies (1), or the ownership, direct or indirect, of 20 % or more of the voting rights or capital of an undertaking; Based on that definition, the scope of Article 18(7) CRR would cover not only subsidiaries, but also any other type of participation held in undertakings others than institutions, financial institutions or ancillary services undertakings. This broad scope could potentially conflict with Article 24(1) CRR. According to Article 24(1) CRR, participations, like any other asset, shall be measured in accordance with the applicable accounting framework. The measurement base according to the accounting framework might be different from the equity method (i.e. fair value or amortised cost).