IAS 27 Separate Financial Statements

Background

IAS 27 advises the accounting and disclosure requirements for investments in subsidiaries, joint ventures and associates when an entity requires to prepare separate financial statements. Separate financial statements are those presented in supplement to the set of consolidated financial statements.

 

Objective

The objective of this Standard is to prescribe the accounting and disclosure requirements for investments in subsidiaries, joint ventures and associates when an entity prepares separate financial statements.

 

Scope

·       This standard of ‘’Separate financial statements’’ shall be applied in accounting for investments when an entity elects or if its obliged by local regulations.

·       This standard does not mandate which entities produce separate financial statements. It applies when an entity prepares separate financial statements that comply with International Financial Reporting Standards.

 

Key definitions

Consolidated financial statements

Those financial statements of a group in which the assets, liabilities, equity, income, expenses and cash flows of the parent and its subsidiaries are presented as those of a single economic entity.

 

Separate financial statements

Those presented by an entity in which the entity could elect, subject to the requirements in this Standard, to account for its investments in subsidiaries, joint ventures and associates either at cost, in accordance with  IFRS 9 Financial Instruments, or using the equity method as described in IAS 28 Investments in Associates and Joint Ventures.

 

Preparation of separate financial statements

     1.     All other IFRS will be applicable on preparation of Separate financial statements, subject to     the compliance of point 2.

    2.     When the entity prepares separate financial statements, the investments in subsidiaries,       joint ventures and associates will be accounted by either:

(a)  at cost;

(b)  in accordance with IFRS 9 Financial Instruments; or

(c)   using the equity method as described in IAS 28 Investments in Associates and Joint Ventures.

Investments measured at cost or by using the equity method shall adhere the standard IFRS 5 Non‑current Assets Held for Sale and Discontinued Operations when they are classified as held for sale

 

    3.     If any entity opts to recognise its investments in associates or joint ventures at fair value     through profit or loss (FVTPL) according to IFRS 9 Financial Instruments, it shall be measure the investments in the same way in its separate financial statements.

 

    4.     Dividends from subsidiary, joint venture or an associate are recognised in the separate financial statements of an entity at the time when entity’s right to receive the dividend is established. The dividend is considered in profit or loss unless the entity chooses to use the equity method, as in that case the dividend is recognised through the reduction from the carrying amount of the investment.

 

    5.     Rearrangement of structure : When a parent restructure its group by forming a new entity as its parent and if that satisfies the following criterias:

 

(a)  the new parent obtains control of the original parent by issuing equity instruments in exchange for existing equity instruments of the original parent;

(b)  the assets and liabilities of the new group and the original group are the same immediately before and after the reorganisation; and

(c)   the owners of the original parent before the reorganisation have the same absolute and relative interests in the net assets of the original group and the new group immediately before and after the reorganisation, and the new parent accounts for its investment in the original parent shall measure cost at the carrying amount of its share of the equity items shown in the separate financial statements of the original parent at the date of the reorganisation.

 

       6.     Similarly, an entity that is not a parent might establish a new entity as its parent in a              manner that satisfies the criteria of point 5. The requirements in point 5 apply equally to          such reorganisations. In such cases, references to ‘original parent’ and ‘original group’ are     to the ‘original entity’.

   

      Disclosure

• ·       An entity shall apply all applicable IFRSs when providing disclosures in its separate financial statements.
• ·       If parent has elected to prepares separate financial statements, it shall disclose in those separate financial statements:

(a) the fact that the financial statements are separate financial statements; that the exemption from consolidation has been used; the name and principal place of business (and country of incorporation, if different) of the entity whose consolidated financial statements that comply with International Financial Reporting Standards have been produced for public use; and the address where those consolidated financial statements are obtainable.

(b) a list of significant investments in subsidiaries, joint ventures and associates, including:

(i) the name of those investees.

(ii) the principal place of business (and country of incorporation, if different) of those investees.

(iii) its proportion of the ownership interest (and its proportion of the voting rights, if different) held in those investees.

(c) a description of the method used to account for the investments listed under (b).