This article explores the accounting requirements in the preparation of a separate financial statement. IAS 27 Separate Financial Statements provide guidance to the preparers on the accounting and disclosure requirements for an entity that has investments in subsidiaries, joint ventures and associates in their separate financial statements. Show
The common questions preparers asked are what does it mean by separate financial statements? How does it different from individual financial statements? Difference between individual financial statements and consolidated financial statementsSo, let’s find out what is separate financial statements and what are the disclosure requirements for separate financial statements. There are three concepts that we need to understand – individual financial statements, consolidated financial statements and separate financial statements. Individual financial statementsAn individual financial statement is not a defined term in IAS 27. Entities generally account for their investments in associates and/or joint ventures using the equity method, unless exempted. Consolidated financial statementsConsolidated 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. IFRS 10 Consolidated Financial Statements provides two consolidation exceptions:
Separate financial statementsSo, what is separate financial statements? IAS 27 defines separate financial statements as financial statements presented by an entity in which it could elect (subject to the requirements of IAS 27) to account for its investments in subsidiaries, joint ventures and associates either:
IAS 27 clearly states that entities prepare separate financial statements as an addition to:
The financial statements of an entity which does not have a subsidiary, associate or joint venture are not separate financial statements. The next question is then, when do one prepare the separate financial statements? Separate financial statements may be prepared by entities that are:
In this case, an entity may present the separate financial statement as its only financial statements. An investment entity that does not need to consolidate its subsidiaries must prepare separate financial statements. In this case, the separate financial statement is its only financial statements. How does an entity account for its investments in subsidiaries, joint ventures or associates in the separate financial statements?When preparing the separate financial statements, entities will account for their investments in subsidiaries, joint ventures and associates either:
The above choice, however, is not applicable in the following scenario:
When an entity ceases to be an investment entity, the entity must account for its investment in a subsidiary using any of the methods mentioned above. In another case where a non-investment entity becomes an investment entity, it must account for its investment in a subsidiary at fair value through profit or loss in accordance with IFRS 9. Disclosure requirements in IAS 27In addition to the disclosure requirements in this standard, entities should also observe the disclosure requirements in other IFRSs. Disclosure for a parent that only prepares separate financial statementsIAS 27 requires the following disclosures when a parent, elects not to prepare consolidated financial statements and instead prepares separate financial statements:
Disclosure for an investment entity parent that prepares separate financial statementsWhere an investment entity that is a parent prepares separate financial statements as its only financial statements, IAS 27 requires the parent to disclose this fact in the financial statements. In addition, the investment entity must also observe the disclosures relating to investment entities required by IFRS 12 Disclosure of Interests in Other Entities. Disclosure for a parent or investor of an associate or joint venture that prepares separate financial statementsWhere a parent or an investor with joint control of, or significant influence over an investee prepares separate financial statements, the parent or investor must identify the financial statements prepared in accordance with IFRS 10, IFRS 11 Joint Arrangementsand IAS 28 to which they relate. They must also disclose in their separate financial statements, the following information:
ConclusionWe hope that you have a better understanding of separate financial statements and when entities need to prepare them. We will bring you more technical discussion in our upcoming articles. Stay tuned for our upcoming articles by following us on social media. Meantime, enjoy other articles in Financial Accounting section or ask your queries by Joining on Community. It is free and open to join for all, now. What are the disclosure requirements in separate financial statements under Ind AS 27?(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.
Who is required to present separate financial statements?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 ...
What are the required financial statements according to IAS?The standard requires a complete set of financial statements to comprise a statement of financial position, a statement of profit or loss and other comprehensive income, a statement of changes in equity and a statement of cash flows.
What are the requirements of preparing consolidated financial statements?In preparing consolidated financial statements, the financial.. statements of the parent and its subsidiaries should be combined on a line.. by line basis by adding together like items of assets, liabilities, income.. and expenses. ... . financial information about the group as that of a single enterprise, the.. |