IAS 27 Separate Financial Statements (detailed review)

Objective

This Standard deals with the accounting treatment of Investment in Subsidiary, Joint Venture & Associate in the Separate Financial Statements of the Investor along with the related disclosure requirements.

Scope

The requirements of this standard are applicable in the Separate Financial Statements of the Investor to account for its Investment in Subsidiary, Joint Venture & Associate.

Definitions

1. Consolidated Financial Statements:

The financial statements which are prepared by combining the assets, liabilities, income, expenses and the cash flows of the Parent and its Subsidiaries, and are presented as the financial statements of a single economic entity are called Consolidated Financial Statements.

2. Separate financial statements:

The financial statements which are prepared and presented by the Parent or an Investor, in which the investment in subsidiary, joint venture & associate are accounted for at Cost or in accordance with IFRS 9, are called Separate Financial Statements.

• Separate financial statements are those which are prepared in addition to consolidated financial statements and the financial statements in which investment in associate or joint venture is accounted for as per Equity Method under IAS 28.

• The financial statements of the entity which has exemption from preparation of consolidated financial statements for its subsidiaries and equity method for its associate holdings as per IFRS 10, are also deemed as separate financial statements

• The financial statements which are prepared by the entity which does not have any investment in subsidiary, joint venture or associate are not separate financial statements.

Preparation of Separate Financial Statements

When an entity prepares Separate Financial Statements, it will account for its investment in subsidiary, joint venture or associate and any other ordinary investment either:

• At Cost or

• As per the IFRS 9 requirements

The entity should also consider the following points:

• Any Dividend Income from investment in subsidiary, joint venture or associate and any other ordinary investment will be recognized in statement of profit or loss of the investor, when it becomes receivable.

• If the investment under Cost model is classified as held for sale, then it will be measured as per the requirements of IFRS 5 Non-current Assets Held for Sale and Discontinued Operations. However, there will be no impact upon the investments which are measured in accordance with IFRS 9 in such circumstances.

Disclosure

This Standard requires an entity to disclose the following:

1. If the entity has used the exemption for the preparation of consolidated financial statements for its subsidiaries and equity method for its associate holdings as per IFRS 10, then the entity should disclose in its separate financial statements:

(a) The name of the group entity which has prepared the consolidated financial statements for the public use, and the place where these are available.

(b) The details of its substantial investments in subsidiary, joint venture or associate which includes:

• The name of the investee business entity

• The location of the investee business entity

• Proportion of its holding in such business entity

• The method used by the entity to account for such holdings.

2. The entity (Parent) which prepares separate financial statements and consolidated financial statements for its subsidiaries should identify the consolidated financial statementsseparately in its separate financial statements. And the separate financial statements should also include the following:

The statement identifying, that these are separate financial statements

• The name of the investee business entity

• The location of the investee business entity

• Proportion of its holding in such business entity

• The method used by the entity to account for such holdings.