Separate Financial

9 Statements
Separate financial statements are covered in IAS 27 and are

defined as financial statements in which investments in subsidiaries,

joint ventures and associates and accounted either at cost, in

accordance with IFRS 9 or using the equity method.

When an entity does not have investments in subsidiaries,

joint ventures or associates, it does not prepare separate financial

statements as defined by IAS 27 (IAS 27.7). Such financial

statements are often labelled as ‘individual’ or ‘standalone’ financial

statements. In any case, IAS 27 does not require preparing separate

financial statements. It is the local law that usually requires entities

to do so.
LEARNING OUTCOMES:

After reading this module, the learner should be able to:

1. Describe the applicability of PAS 27

2. Describe the measurements bases allowed under PAS 27

TIME:

The time allotted for this module is 4.5 hours.

LEARNER DESCRIPTION

The participants in this module are Third Year BSA Students

MODULE CONTENTS:

LESSON 9.1: PAS 27 Separate Financial Statements

A. KEY DEFINITIONS

Separate financial statements Financial statements presented by a parent (i.e. an

investor with control of a subsidiary) or an investor
with joint control of; or significant influence over an
investee, in which the investments are accounted
for at cost, at fair value, or using the equity method

Consolidated financial The financial statements of a group in which the

statements assets, liabilities, equity, income, expenses, and
cash flows, of the parent and its subsidiaries are
presented as a single economic entity.

For definitions of: associate; • IFRS 10 Consolidated Financial Statements

control of an investee; group; joint • IFRS 11 Joint Arrangements
control; joint venture; parent; • IAS 28 Investments in Associates and Joint
significant influence; and Venture
subsidiary – please refer to the
following standards:

B. SEPARATE FINANCIAL STATEMENTS

Investment in subsidiaries, joint ventures, and associates are accounted for either:
I. At COST,
Initial Measurement Transaction price plus transaction cost
 Transaction Cost capitalized
Subsequent Measurement Cost
Changes in Fair value Ignored

II. At FAIR VALUE in accordance with IFRS 9, or

FVPL FVOCI
Initial measurement Fair Fair Value plus
Value transaction cost
Transaction Cost Expensed Capitalized
Dividends Income Income
Share in net income/ other
-none- -none-
comprehensive income
Subsequent measurement Fair value Fair value
Unrealized Gain/ Unrealized Loss
P/L OCI
(Change in FV)
Cumulative Unrealized Gain/
-none- Equity
Unrealized Loss

III. Using the EQUITY METHOD (see IAS 28).

Initial Measurement Cost

Share in net income (net loss)/ added/ (deducted)

Share in OCI-Gain/ (OCI-loss)

Subsequent measurement Adjusted for investors hare in changes

in investees equity

Cash dividend Deducted

Amortization of Excess FV Deducted

over CV

The entity is required to apply the same accounting for each category of
investments.

C. INVESTMENTS IN SUBSIDIARIES, JOINT VENTURES, AND ASSOCIATES

CLASSIFIED AS HELD FOR SALE
When investments are classified as held for sale or for distribution to owners (or
included in a disposal group that is classified as held for sale or for distribution to owners),
they are accounted for:
• In accordance with IFRS 5 Non-current Assets Held for Sale and Discontinued
Operations, if previously accounted for at cost
• In accordance with IFRS 9, if previously accounted for in accordance with IFRS 9.
D. INVESTMENTS IN ASSOCIATES OR JOINT VENTURES AT FAIR VALUE
Investments in associates or joint ventures that are measured at fair value in
accordance with IFRS 9 are required to be measured in the same way in the separate
and consolidated financial statements (i.e. at fair value).

E. DIVIDENDS RECEIVED
Dividends received from subsidiaries, joint ventures, and associates are
recognised when the right to receive the dividend is established and accounted for as
follows:
• in profit or loss, if the investment is accounted for at cost or at fair value;
• as a reduction from the carrying amount of the investment, if the investment is
accounted for using the equity method
LESSON 9.2: PFRS FOR SMALL TO MEDIUM SIZED ENTITIES (SMES)

A. SEPARATE FINANCIAL STATEMENTS

Consolidated Financial Statements REQUIRED for parent company
Separate Financial Statements NOT REQUIRED for parent company
Combined Financial Statements Not required to be prepared for two or
more entities under COMMON
CONTROL
The separate FS are a second set of FS presented by an entity in addition to any
of the following:
a. Consolidated FS prepared by a parent company
b. FS prepared by a parent exempted from preparing consolidated FS
c. FS prepped by an entity that is not a parent but is an investor in an associate
or has venturer’s interest in a joint venture

B. ACCOUNTING POLICY ELECTION

COST EQUITY FAIR VALUE
Transaction Cost Capitalized Capitalized Expensed
Decrease in CV of
Dividend Income Income
Investment
Impairment Test ✓ ✓ -none-
CV -
CV, Balance CV – Impairment
Impairment
Sheet Date Loss Fair Value
Loss
UG/ UL (change in Taken to Profit/
-none- -none-
FV) Loss
NOTE: Impairment = Recoverable Value (FV less cost to sell) < CV

The entity shall apply the same accounting policy for all investments in a single
class (subsidiaries, associates or jointly controlled entities), but it can elect different
policies for different classes.

C. COMBINED FINANCIAL STATEMENTS

The PFRS for SMEs does not require combined financial statements to be
prepared. Intercompany sale of SHALL BE ELIMINATED. The financial statements of the
entities included in the combined financial statements shall be prepared as of the same
reporting date unless it is impracticable to do so; and uniform accounting policies
shall be followed for like transactions and other events in similar characteristics.
ONLINE READING MATERIALS:

• Read the complete details of PAS 27 at

https://www.iasplus.com/en/standards/ias/ias27-2011
• Read the complete details of Section 9 of the PFRS for SMEs at
https://www.iasplus.com/en/standards/other/ifrs-for-smes
• Read Chapter 2 and 3 of Advanced Accounting by Antonio Dayag

ONLINE VIDEO LINKS AND MATERIALS:

• Watch the online video lecture of the course instructor uploaded at NEO LMS
and to the class shared Google drive (if applicable).
• Watch a YouTube Video by CA.Chinnsamy Ganesan through this link
https://www.youtube.com/watch?v=P6jR2puK96A

TEST YOUR KNOWLEDGE:

Refer to Ubian LMS for Activity and Quiz

LESSON REFERENCES:
Chinnsamy Ganesan (2020, April 21). Ind AS 27 | Separate Financial Statements |
CA.Chinnsamy Ganesan | Ind AS Knowledge Series Video 15 [Video File).
Retrieved from https://www.youtube.com/watch?v=P6jR2puK96A

Deloitte (2020). IAS 27 — Separate Financial Statements (2011). IASPlus.com. Retrieved

from https://www.iasplus.com/en/standards/ias/ias27-2011

Deloitte (2020). IFRS for Small and Medium-Sized Entities (IFRS for SMEs).
IASPlus.com. Retrieved from https://www.iasplus.com/en/standards/other/ifrs-for-
smes

Millan, Zeus Vernon B. (2020). Accounting for Special Transactions. CHAPTER 8:

Separate Financial Statements. Bandolin Enterprise. #21 Paramount Vill., Sto.
Tomas, Baguio City