Separate Financial Statements – FAQ | IFRS

Separate financial statements

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Separate financial statements – IAS 27 shall be applied in accounting for investments in subsidiaries, joint ventures and associates when an entity prepares separate financial statements.

The laws of some countries require companies to present separate financial statements prepared in accordance with local regulations, and those local regulations require the investments in subsidiaries, associates and joint ventures to be accounted for using equity method. However, under International Accounting Standard (“IAS”) 27, the investments in subsidiaries, associates and joint ventures in separate financial statements could only be accounted for at cost or in accordance with International Financial Reporting Standard (“IFRS”) 9. In order to tackle this issue, the International Accounting Standards Board has issued the amendments to IAS 27 to allow investments in subsidiaries, associates and joint ventures be accounted for using equity method.

Also in some countries there is no need to prepare and make public consolidated financial statements or as an addition to consolidated financial statement.


PREPARATION OF COMPANY FINANCIAL STATEMENTS


When an entity prepares separate or company financial statements, it shall account for investments in subsidiaries, joint ventures and associates either:Separate financial statements

  1. at cost; or
  2. in accordance with IFRS 9 Financial Instruments (using the equity method).

The entity shall apply the same accounting for each category of investments. Investments accounted for at cost shall be accounted for in accordance with IFRS 5 Non-current Assets Held for Sale and Discontinued Operations when they are classified as held for sale (or included in a disposal group that is classified as held for sale). The measurement of investments accounted for in accordance with IFRS 9 is not changed in such circumstances.

An entity shall recognise a dividend from a subsidiary, joint venture or associate in profit or loss in its separate financial statements when its right to receive the dividend is established.

Separate financial statements 2

Consolidated financial statements

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 or company financial statements

Financial statements presented by a parent (i.e. an investor with control of a subsidiary), an investor with joint control of, or significant influence over, an investee, in which the investments are accounted for at cost or in accordance with IFRS 9 Financial Instruments.

Separate financial statements are those presented in addition to consolidated financial statements or in addition to financial statements in which investments in associates or joint ventures are accounted for using the equity method, other than in the following circumstances:

  1. An entity may present separate financial statements as its only financial statements if:
    1. it is a wholly-owned subsidiary or is a partially-owned subsidiary of another entity and all its other owners, including those not otherwise entitled to vote, have been informed about, and do not object to, the parent not presenting consolidated financial statements;
    2. its debt or equity instruments are not traded in a public market;
    3. it did not file, nor is it in the process of filing, its financial statements with a securities commission or other regulatory organisation for the purpose of issuing any class of instruments
      in a public market; and
    4. its ultimate or any intermediate parent produces financial statements that are available for public use and comply with IFRS, in which subsidiaries are consolidated or are measured at fair value through profit or loss in accordance with IFRS.
  2. A parent entity which is an investment entity is exempted from presenting the consolidated financial statements. Such entity is required to measure its investments in its subsidiaries at fair value, with changes in fair value recognised through profit or loss for each period, unless that subsidiary is not itself an investment entity and whose main purpose and activities are providing services that relate to the parent’s investment activities, in which case the financial statements of the subsidiary are consolidated.

Requirement for separate or company financial statements

IAS 27 does not mandate which entities produce separate financial statements available for public use. It applies when an entity prepares separate or company financial statements that comply with International Financial Reporting Standards. [IAS 27 3]

Financial statements in which the equity method is applied are not separate financial statements. Similarly, the financial statements of an entity that does not have a subsidiary, associate or joint venturer’s interest in a joint venture are not separate financial statements. [IAS 27 7]

An investment entity that is required, throughout the current period and all comparative periods presented, to apply the exception to consolidation for all of its subsidiaries in accordance with of IFRS 10 Consolidated Financial Statements presents separate financial statements as its only financial statements. [IAS 27 8A]

[Note: The investment entity consolidation exemption was introduced into IFRS 10 by Investment Entities, issued on 31 October 2012 and effective for annual periods beginning on or after 1 January 2014.]


Disclosures IAS 27 Separate financial statements

IFRS

Disclosure requirements IAS 27 Separate financial statements

IAS 27 16

IAS 27 Separate financial statements

IAS 27 Separate financial statements

IAS 27 Separate financial statements

When a parent, in accordance with paragraph 4(a) of IFRS 10, elects not to prepare consolidated financial statements and instead prepares separate(d) financial statements, it shall disclose in those separate financial statements:

  1. the fact that the financial statements are separate(d) 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.
  2. a list of significant investments in subsidiaries, joint ventures, and associates, including:
    1. the name of those investees.
    2. the principal place of business (and country of incorporation, if different) of those investees.
    3. its proportion of the ownership interest (and its proportion of the voting rights, if different) held in those investees.
  3. a description of the method used to account for the investments listed under (b).
IAS 27 16A

When an investment entity that is a parent (other than a parent covered by paragraph 16) prepares, in accordance with paragraph 8A, separate financial statements as its only financial statements, it shall disclose that fact. The investment entity shall also present the disclosures relating to investment entities required by IFRS 12 Disclosure of Interests in Other Entities.

See also: The IFRS Foundation

Separate financial statements

Separate financial statements

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