INTERNATIONAL ACCOUNTING STANDARD 27 SEPARATE FINANCIAL STATEMENTS | |
OBJECTIVE | 1 |
SCOPE | 2 |
DEFINITIONS | 4 |
PREPARATION OF SEPARATE FINANCIAL STATEMENTS | 9 |
DISCLOSURE | 15 |
EFFECTIVE DATE AND TRANSITION | 18 |
References to IFRS 9 | 19 |
WITHDRAWAL OF IAS 27 (2008) | 20 |
APPROVAL BY THE BOARD OF IAS 27 ISSUED IN DECEMBER 2003 | |
APPROVAL BY THE BOARD OF AMENDMENTS TO IAS 27: | |
Cost of an Investment in a Subsidiary, Jointly Controlled Entity or Associate (Amendments to IFRS 1 and IAS 27) issued in May 2008 | |
Investment Entities (Amendments to IFRS 10, IFRS 12 and IAS 27) issued in October 2012 | |
Equity Method in Separate Financial Statements (Amendments to IAS 27) issued in August 2014 | |
FOR THE ACCOMPANYING GUIDANCE LISTED BELOW, SEE PART B OF THIS EDITION
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TABLE OF CONCORDANCE | |
FOR THE BASIS FOR CONCLUSIONS, SEE PART C OF THIS EDITION
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BASIS FOR CONCLUSIONS | |
DISSENTING OPINIONS |
International Accounting Standard 27 Separate Financial Statements (IAS 27) is set out in paragraphs 1–20. All the paragraphs have equal authority but retain the IASC format of the Standard when it was adopted by the IASB. IAS 27 should be read in the context of its objective and the Basis for Conclusions, the Preface to IFRS Standards and the Conceptual Framework for Financial Reporting. IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors provides a basis for selecting and applying accounting policies in the absence of explicit guidance. [Refer:IAS 8 paragraphs 10–12]
1 | 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. |
2 | This Standard shall be applied in accounting for investments in subsidiaries, joint ventures and associates when an entity elects, or is required by local regulations, to present separate financial statements. |
3 | 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. |
4 | The following terms are used in this Standard with the meanings specified: Consolidated financial statements are the 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 are 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.
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5 | The following terms are defined in Appendix A of IFRS 10 Consolidated Financial Statements, Appendix A of IFRS 11 Joint Arrangements and paragraph 3 of IAS 28:
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6 | Separate financial statements are those presented in addition to consolidated financial statements or in addition to the financial statements of an investor that does not have investments in subsidiaries but has investments in associates or joint ventures in which the investments in associates or joint ventures are required by IAS 28 to be accounted for using the equity method, other than in the circumstances set out in paragraphs 8–8A. |
7 | 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. |
8 | An entity that is exempted in accordance with paragraph 4(a) of IFRS 10 from consolidation or paragraph 17 of IAS 28 (as amended in 2011) from applying the equity method may present separate financial statements as its only financial statements. |
8A | 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 paragraph 31 of IFRS 10 presents separate financial statements as its only financial statements. |
9 | Separate financial statements shall be prepared in accordance with all applicable IFRSs, except as provided in paragraph 10. |
10 | When an entity prepares separate financial statements, it shall account for investments in subsidiaries, joint ventures and associates either:
The entity shall apply the same accounting for each category of investments. [Refer:IAS 28 Basis for Conclusions paragraphs BC19F and BC19G] Investments accounted for at cost or using the equity method 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 for distribution (or included in a disposal group that is classified as held for sale or for distribution). The measurement of investments accounted for in accordance with IFRS 9 is not changed in such circumstances.
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E1 | [IFRIC® Update, January 2013, Agenda Decision, ‘IAS 28 Investment in Associates—Impairment of investments in associates in separate financial statements’ In the July 2012 meeting, the Interpretations Committee received an update on the issues that have been referred to the IASB and that have not yet been addressed. The Interpretations Committee asked the staff to update the analysis and perform further outreach on an issue about the impairment of investments in associates in separate financial statements. More specifically, the issue is whether, in its separate financial statements, an entity should apply the provisions of IAS 36 Impairment of Assets or IAS 39 Financial Instruments: Recognition and Measurement to test its investments in subsidiaries, joint ventures, and associates carried at cost for impairment. The Interpretations Committee noted that according to paragraph 38 of IAS 27 Consolidated and Separate Financial Statements an entity, in its separate financial statements, shall account for investments in subsidiaries, joint ventures and associates either at cost or in accordance with IAS 39 [paragraph 10 of IAS 27 (2011) has superseded paragraph 38 of IAS 27 (2008)]. The Interpretations Committee also noted that according to paragraphs 4 and 5 of IAS 36 and paragraph 2(a) of IAS 39, investments in subsidiaries, joint ventures, and associates that are not accounted for in accordance with IAS 39 are within the scope of IAS 36 for impairment purposes. Consequently, in its separate financial statements, an entity should apply the provisions of IAS 36 to test for impairment its investments in subsidiaries, joint ventures, and associates that are carried at cost in accordance with paragraph 38(a) of IAS 27 (2008) or paragraph 10(a) of IAS 27 Separate Financial Statements (2011). The Interpretations Committee concluded that in the light of the existing IFRS requirements an interpretation or an amendment to IFRSs was not necessary and consequently decided not to add this issue to its agenda.] |
E2 | [IFRIC® Update, January 2019, Agenda Decision, ‘IAS 27 Separate Financial Statements—Investment in a subsidiary accounted for at cost: Step acquisition’ The Committee received a request about how an entity applies the requirements in IAS 27 to a fact pattern involving an investment in a subsidiary. In the fact pattern described in the request, the entity preparing separate financial statements:
The request asked:
Question A IAS 27 does not define ‘cost’, nor does it specify how an entity determines the cost of an investment acquired in stages. The Committee noted that cost is defined in other IFRS Standards (for example, paragraph 6 of IAS 16 Property Plant and Equipment, paragraph 8 of IAS 38 Intangible Assets and paragraph 5 of IAS 40 Investment Property). The Committee observed that the two approaches outlined in the request arise from different views of whether the step acquisition transaction involves:
Based on its analysis, the Committee concluded that a reasonable reading of the requirements in IFRS Standards could result in the application of either one of the two approaches outlined in this agenda decision (ie fair value as deemed cost approach or accumulated cost approach). The Committee observed that an entity would apply its reading of the requirements consistently to step acquisition transactions. An entity would also disclose the selected approach applying paragraphs 117–124 of IAS 1 Presentation of Financial Statements if that disclosure would assist users of financial statements in understanding how step acquisition transactions are reflected in reporting financial performance and financial position. Question B In applying the accumulated cost approach, any difference between the fair value of the initial interest at the date of obtaining control of the subsidiary and its original consideration meets the definitions of income or expenses in the Conceptual Framework for Financial Reporting. Accordingly, the Committee concluded that, applying paragraph 88 of IAS 1, the entity recognises this difference in profit or loss, regardless of whether, before obtaining control, the entity had presented subsequent changes in fair value of the initial interest in profit or loss or other comprehensive income. For Question A, the Committee considered whether to develop a narrow-scope amendment to address how an entity determines the cost of an investment acquired in stages. The Committee observed that:
On balance, the Committee decided not to undertake standard-setting to address Question A. For Question B, the Committee concluded that the principles and requirements in IFRS Standards provide an adequate basis for an entity to determine its accounting. Consequently, the Committee decided not to add these matters to its standard-setting agenda.] |
E3 | [IFRIC® Update, January 2019, Agenda Decision, ‘IAS 27 Separate Financial Statements—Investment in a subsidiary accounted for at cost: Partial disposal’ The Committee received a request about how an entity applies the requirements in IAS 27 to a fact pattern involving an investment in a subsidiary. In the fact pattern described in the request, the entity preparing separate financial statements:
The request asked whether:
Question A Paragraph 9 of IAS 27 requires an entity to apply all applicable IFRS Standards in preparing its separate financial statements, except when accounting for investments in subsidiaries, associates and joint ventures to which paragraph 10 of IAS 27 applies. After the partial disposal transaction, the investee is not a subsidiary, associate or joint venture of the entity. Accordingly, the entity applies IFRS 9 for the first time in accounting for its retained interest in the investee. The Committee observed that the presentation election in paragraph 4.1.4 of IFRS 9 applies at initial recognition of an investment in an equity instrument. An investment in an equity instrument within the scope of IFRS 9 is eligible for the election if it is neither held for trading (as defined in Appendix A of IFRS 9) nor contingent consideration recognised by an acquirer in a business combination to which IFRS 3 Business Combinations applies. In the fact pattern described in the request, assuming the retained interest is not held for trading, the Committee concluded that (a) the retained interest is eligible for the presentation election in paragraph 4.1.4 of IFRS 9, and (b) the entity would make this presentation election when it first applies IFRS 9 to the retained interest (ie at the date of losing control of the investee). Question B Any difference between the cost of the retained interest and its fair value on the date the entity loses control of the investee meets the definitions of income or expenses in the Conceptual Framework for Financial Reporting. Accordingly, the Committee concluded that, applying paragraph 88 of IAS 1 Presentation of Financial Statements, the entity recognises this difference in profit or loss. This is the case regardless of whether the entity presents subsequent changes in fair value of the retained interest in profit or loss or OCI. The Committee also noted that its conclusion is consistent with the requirements in paragraph 22(b) of IAS 28 Investments in Associates and Joint Ventures and paragraph 11B of IAS 27, which deal with similar and related issues. The Committee concluded that the principles and requirements in IFRS Standards provide an adequate basis for an entity to account for a partial disposal transaction in its separate financial statements. Consequently, the Committee decided not to add this matter to its standard-setting agenda.] |
11 | If an entity elects, in accordance with paragraph 18 of IAS 28 (as amended in 2011), to measure its investments in associates or joint ventures at fair value through profit or loss in accordance with IFRS 9, it shall also account for those investments in the same way in its separate financial statements. |
11A | If a parent is required, in accordance with paragraph 31 of IFRS 10, to measure its investment in a subsidiary at fair value through profit or loss in accordance with IFRS 9, it shall also account for its investment in a subsidiary in the same way in its separate financial statements. |
11B | When a parent ceases to be an investment entity, or becomes an investment entity, it shall account for the change from the date when the change in status occurred, as follows:
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12 | Dividends from a subsidiary, a joint venture or an associate are recognised in the separate financial statements of an entity when the entity’s right to receive the dividend is established. The dividend is recognised in profit or loss unless the entity elects to use the equity method, in which case the dividend is recognised as a reduction from the carrying amount of the investment. |
13 | When a parent reorganises the structure of its group by establishing a new entity as its parent in a manner that satisfies the following criteria:
and the new parent accounts for its investment in the original parent in accordance with paragraph 10(a) in its separate financial statements, the new 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.E4 |
E4 | [IFRIC® Update, September 2011, Agenda Decision, ‘IAS 27 Separate Financial Statements—group reorganisations in separate financial statements’ The Interpretations Committee received a request asking for clarification of whether paragraphs 13 and 14 of IAS 27 apply either directly or by analogy to reorganisations of groups that result in the new intermediate parent having more than one direct subsidiary. The request addresses the accounting of the new intermediate parent for its investments in subsidiaries when it accounts for these investments in its separate financial statements at cost in accordance with paragraph 10(a)of IAS 27. The Committee noted that the normal basis for determining the cost of an investment in a subsidiary has to be applied to reorganisations that result in the new intermediate parent having more than one direct subsidiary. Paragraphs 13 and 14 of IAS 27 apply only when the assets and liabilities of the new group and the original group (or original entity) are the same before and after the reorganisation. The Committee observed that this condition is not met in reorganisations that result in the new intermediate parent having more than one direct subsidiary and that therefore these paragraphs in IAS 27 do not apply to such reorganisations, such as the reorganisations presented in the submission. Furthermore, the Committee noted that the Board explained in paragraph BC27 of IAS 27 that paragraphs 13 and 14 of IAS 27, respectively, do not apply to other types of reorganisations. In addition, the Committee noted that the guidance in paragraphs 13 and 14 of IAS 27 cannot be applied to reorganisations that result in the new intermediate parent having more than one direct subsidiary by analogy, because this guidance is an exception to the normal basis for determining the cost of an investment in a subsidiary under paragraph 10(a) of IAS 27. As a result, the Committee noted that there is already sufficient guidance in IAS 27. Consequently, the Committee decided not to add this issue to its agenda.] |
14 | Similarly, an entity that is not a parent might establish a new entity as its parent in a manner that satisfies the criteria in paragraph 13. The requirements in paragraph 13 apply equally to such reorganisations. In such cases, references to ‘original parent’ and ‘original group’ are to the ‘original entity’. |
15 | An entity shall apply all applicable IFRSs when providing disclosures in its separate financial statements, including the requirements in paragraphs 16–17. |
16 | When a parent, in accordance with paragraph 4(a) of IFRS 10, elects not to prepare consolidated financial statements and instead prepares separate financial statements, it shall disclose in those separate financial statements:
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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.
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17 | When a parent (other than a parent covered by paragraphs 16–16A) or an investor with joint control of, or significant influence over, an investee prepares separate financial statements, the parent or investor shall identify the financial statements prepared in accordance with IFRS 10, IFRS 11 or IAS 28 (as amended in 2011) to which they relate. The parent or investor shall also disclose in its separate financial statements:E5
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E5 | [IFRIC® Update, March 2006, Agenda Decision, ‘IAS 27 Consolidated and Separate Financial Statements—Separate financial statements issued before consolidated financial statements’ The IFRIC considered a comment letter that had been received objecting to the draft reasons for not adding this to the IFRIC’s agenda. The comment letter argued that it is possible to interpret IAS 27 as permitting separate accounts to be published when there is a reasonable expectation that consolidated accounts will be published shortly. IFRIC members rejected this approach on the basis of the current text of the standard and reaffirmed the following text, previously published, of its reasons for not adding the item to its agenda. The IFRIC considered whether separate financial statements issued before consolidated financial statements could be considered to comply with IFRSs. The IFRIC noted that IAS 27 requires that separate financial statements should identify the financial statements prepared in accordance with paragraph 9 of IAS 27 to which they relate (the consolidated financial statements), unless one of the exemptions provided by paragraph 10 is applicable. The IFRIC decided that, since the Standard was clear, it would not expect diversity in practice and would not add this item to its agenda. [Since this agenda decision, paragraphs 9 and 10 of IAS 27 have been replaced by paragraph 4 of IFRS 10.]] |
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18A | Investment Entities (Amendments to IFRS 10, IFRS 12 and IAS 27), issued in October 2012, amended paragraphs 5, 6, 17 and 18, and added paragraphs 8A, 11A–11B, 16A and 18B–18I. An entity shall apply those amendments for annual periods beginning on or after 1 January 2014. Early adoption is permitted. If an entity applies those amendments earlier, it shall disclose that fact and apply all amendments included in Investment Entities at the same time. |
18B | If, at the date of initial application of the Investment Entities amendments (which, for the purposes of this IFRS, is the beginning of the annual reporting period for which those amendments are applied for the first time), a parent concludes that it is an investment entity, it shall apply paragraphs 18C–18I to its investment in a subsidiary. |
18C | At the date of initial application, an investment entity that previously measured its investment in a subsidiary at cost shall instead measure that investment at fair value through profit or loss as if the requirements of this IFRS had always been effective. The investment entity shall adjust retrospectively the annual period immediately preceding the date of initial application and shall adjust retained earnings at the beginning of the immediately preceding period for any difference between:
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18D | At the date of initial application, an investment entity that previously measured its investment in a subsidiary at fair value through other comprehensive income shall continue to measure that investment at fair value. The cumulative amount of any fair value adjustment previously recognised in other comprehensive income shall be transferred to retained earnings at the beginning of the annual period immediately preceding the date of initial application. |
18E | At the date of initial application, an investment entity shall not make adjustments to the previous accounting for an interest in a subsidiary that it had previously elected to measure at fair value through profit or loss in accordance with IFRS 9, as permitted in paragraph 10. |
18F | Before the date that IFRS 13 Fair Value Measurement is adopted, an investment entity shall use the fair value amounts previously reported to investors or to management, if those amounts represent the amount for which the investment could have been exchanged between knowledgeable, willing parties in an arm’s length transaction at the date of the valuation. [Refer:IFRS 10 Basis for Conclusions paragraph BC286] |
18G | If measuring the investment in the subsidiary in accordance with paragraphs 18C–18F is impracticable (as defined in IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors), an investment entity shall apply the requirements of this IFRS at the beginning of the earliest period for which application of paragraphs 18C–18F is practicable, which may be the current period. The investor shall adjust retrospectively the annual period immediately preceding the date of initial application, unless the beginning of the earliest period for which application of this paragraph is practicable is the current period. When the date that it is practicable for the investment entity to measure the fair value of the subsidiary is earlier than the beginning of the immediately preceding period, the investor shall adjust equity at the beginning of the immediately preceding period for any difference between:
If the earliest period for which application of this paragraph is practicable is the current period, the adjustment to equity shall be recognised at the beginning of the current period. [Refer:IFRS 10 Basis for Conclusions paragraph BC285] |
18H | If an investment entity has disposed of, or lost control of, an investment in a subsidiary before the date of initial application of the Investment Entities amendments, the investment entity is not required to make adjustments to the previous accounting for that investment. |
18I | Notwithstanding the references to the annual period immediately preceding the date of initial application (the ‘immediately preceding period’) in paragraphs 18C–18G, an entity may also present adjusted comparative information for any earlier periods presented, but is not required to do so. If an entity does present adjusted comparative information for any earlier periods, all references to the ‘immediately preceding period’ in paragraphs 18C–18G shall be read as the ‘earliest adjusted comparative period presented’. If an entity presents unadjusted comparative information for any earlier periods, it shall clearly identify the information that has not been adjusted, state that it has been prepared on a different basis, and explain that basis.
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18J | Equity Method in Separate Financial Statements (Amendments to IAS 27), issued in August 2014, amended paragraphs 4–7, 10, 11B and 12. An entity shall apply those amendments for annual periods beginning on or after 1 January 2016 retrospectively [Refer:Basis for Conclusions paragraph BC33] in accordance with IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors. Earlier application is permitted. If an entity applies those amendments for an earlier period, it shall disclose that fact. |
19 | If an entity applies this Standard but does not yet apply IFRS 9, any reference to IFRS 9 shall be read as a reference to IAS 39 Financial Instruments: Recognition and Measurement. |
20 | This Standard is issued concurrently with IFRS 10. Together, the two IFRSs supersede IAS 27 Consolidated and Separate Financial Statements (as amended in 2008). |
International Accounting Standard 27 Consolidated and Separate Financial Statements (as revised in 2003) was approved for issue by thirteen of the fourteen members of the International Accounting Standards Board. Mr Yamada dissented. His dissenting opinion related to consolidated financial statements and is set out after the Basis for Conclusions on IFRS 10 Consolidated Financial Statements.
Sir David Tweedie | Chairman |
Thomas E Jones | Vice-Chairman |
Mary E Barth | |
Hans-Georg Bruns | |
Anthony T Cope | |
Robert P Garnett | |
Gilbert Gélard | |
James J Leisenring | |
Warren J McGregor | |
Patricia L O’Malley | |
Harry K Schmid | |
John T Smith | |
Geoffrey Whittington | |
Tatsumi Yamada |
Cost of an Investment in a Subsidiary, Jointly Controlled Entity or Associate (Amendments to IFRS 1 First‑time Adoption of International Financial Reporting Standards and IAS 27) was approved for issue by eleven of the thirteen members of the International Accounting Standards Board. Professor Barth and Mr Danjou dissented. Their dissenting opinions are set out after the Basis for Conclusions.
Sir David Tweedie | Chairman |
Thomas E Jones | Vice-Chairman |
Mary E Barth | |
Stephen Cooper | |
Philippe Danjou | |
Jan Engström | |
Robert P Garnett | |
Gilbert Gélard | |
James J Leisenring | |
Warren J McGregor | |
John T Smith | |
Tatsumi Yamada | |
Wei-Guo Zhang |
Investment Entities (Amendments to IFRS 10, IFRS 12 and IAS 27) was approved for issue by the fifteen members of the International Accounting Standards Board.
Hans Hoogervorst | Chairman |
Ian Mackintosh | Vice-Chairman |
Stephen Cooper | |
Philippe Danjou | |
Martin Edelmann | |
Jan Engström | |
Patrick Finnegan | |
Amaro Luiz de Oliveira Gomes | |
Prabhakar Kalavacherla | |
Patricia McConnell | |
Takatsugu Ochi | |
Paul Pacter | |
Darrel Scott | |
Chungwoo Suh | |
Zhang Wei-Guo |
Equity Method in Separate Financial Statements was approved for issue by the fourteen members of the International Accounting Standards Board.
Hans Hoogervorst | Chairman |
Ian Mackintosh | Vice-Chairman |
Stephen Cooper | |
Philippe Danjou | |
Martin Edelmann | |
Patrick Finnegan | |
Amaro Luiz de Oliveira Gomes | |
Gary Kabureck | |
Suzanne Lloyd | |
Takatsugu Ochi | |
Darrel Scott | |
Chungwoo Suh | |
Mary Tokar | |
Wei-Guo Zhang |