IAS 27

IAS 27, titled Separate Financial Statements, is an International Accounting Standard issued by the International Accounting Standards Board (IASB). It prescribes the accounting and disclosure requirements for investments in subsidiaries, joint ventures, and associates when an entity elects, or is required by local regulations, to present separate financial statements.^[1]

Historical Context and Evolution

Originally, IAS 27 covered both consolidated and separate financial statements. However, in 2011, the consolidation requirements were moved to IFRS 10 Consolidated Financial Statements, leaving IAS 27 to focus exclusively on the accounting for investments in the separate records of the parent or investor.^[2]

Definition of Separate Financial Statements

Separate financial statements are those presented by a parent (an investor with a subsidiary) or 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.^[3]

These are distinct from:

• **Consolidated financial statements:** Where the results of the parent and subsidiaries are combined as a single economic entity (governed by IFRS 10).^[4]
• **Individual financial statements:** Prepared by an entity that has no subsidiaries, associates, or joint ventures.

Measurement of Investments

When an entity prepares separate financial statements, it must account for its investments in subsidiaries, joint ventures, and associates using one of the following three methods:^[5]

1. At Cost: The investment is recorded at the initial amount paid, subject to impairment testing under IAS 36.
2. In accordance with IFRS 9: The investment is treated as a financial instrument (e.g., at fair value).
3. Using the Equity Method: As described in IAS 28, where the investment is adjusted for the investor's share of the investee's post-acquisition profits or losses.^[6]

An entity must apply the same accounting for each category of investments (e.g., all subsidiaries must be treated the same).^[7]

Recognition of Dividends

Under IAS 27, an entity recognizes a dividend from a subsidiary, joint venture, or associate in its separate financial statements when its right to receive the dividend is established.^[8] The dividend is recognized in profit or loss.

Disclosure Requirements

When a parent elects not to prepare consolidated financial statements (as permitted by IFRS 10) and instead prepares only separate financial statements, it must disclose:^[9]

• That the statements are separate financial statements.
• A list of significant investments in subsidiaries, joint ventures, and associates.
• The method used to account for those investments.
• The address where the consolidated financial statements (if any) are available.

References

1. IAS 27.1; IAS 27.BC1.
2. IAS 27.BC2; IFRS 10.IN1.
3. IAS 27.4; IAS 27.BC7.
4. IFRS 10.Appendix A.
5. IAS 27.10; IAS 27.BC10.
6. IAS 27.10(c); 2014 Amendments to IAS 27.
7. IAS 27.10.
8. IAS 27.12; IAS 21.BC16.
9. IAS 27.16–17.