Chapter 8 Separate FS

 
Learning Objectives
`
• Describe the applicability of PAS 27
Separate Financial Statements.
• Describe the measurement bases allowed
under PAS 27.

ACCOUNTING FOR BUSINESS

COMBINATIONS (Advanced
Accounting 2) - (by: MILLAN)
Scope

• PAS 27 does not mandate which entities should produce

separate financial statements.
• An entity shall apply PAS 27 in accounting for
investments in subsidiaries, joint ventures and
associates when it elects, or is required by local
regulations, to present separate financial
statements.

ACCOUNTING FOR BUSINESS

COMBINATIONS (Advanced
Accounting 2) - (by: MILLAN)
Separate financial statements

• Separate financial statements are those presented in

addition to consolidated financial statements or in
addition to financial statements in which investments in
associates or joint ventures are accounted for using the
equity method. Separate financial statements need not
be appended to, or accompany, those statements.

ACCOUNTING FOR BUSINESS

COMBINATIONS (Advanced
Accounting 2) - (by: MILLAN)
Preparation of separate financial statements
Separate financial statements shall be prepared in accordance
with all applicable PFRSs, except as follows:

• Investments in subsidiaries, associates and joint ventures are

accounted for in the separate financial statements either:
1. at cost,
2. in accordance with PFRS 9 Financial Instruments,
3. using the equity method

• The entity shall apply the same accounting for each

category of investments
ACCOUNTING FOR BUSINESS
COMBINATIONS (Advanced
Accounting 2) - (by: MILLAN)
COST METHOD

1. The investment is initially measured at the transaction price plus

transaction costs and subsequently measured at cost. Changes in
FVs subsequent to acquisition date are ignored.
2. Dividends from the investment are recognized in profit or loss.
3. The entity shall not recognize any share from the profit of the
investee.

ACCOUNTING FOR BUSINESS

COMBINATIONS (Advanced
Accounting 2) - (by: MILLAN)
FAIR VALUE METHOD (PFRS 9)

1. The investment is initially measured at the transaction price plus

transaction costs in FVOCI. Transaction costs are expensed
immediately in FVPL.
2. The investment is subsequently measured at fair value. Changes in
FV are recognized in profit or loss for FVPL and other
comprehensive income for FVOCI.
3. Dividends are recognized in profit or loss.
4. The entity shall not recognize any share from the profit of the
investee.
ACCOUNTING FOR BUSINESS
COMBINATIONS (Advanced
Accounting 2) - (by: MILLAN)
EQUITY METHOD

• The investment is initially recognized at cost and subsequently

adjusted for the investor’s share in the changes in the investee’s
equity.
• Dividends are recognized as deduction to the carrying amount of the
investment.

ACCOUNTING FOR BUSINESS

COMBINATIONS (Advanced
Accounting 2) - (by: MILLAN)
RELEVANT PROVISIONS OF THE PFRS FOR SMEs

SEPARATE FINANCIAL STATEMENTS: PFRS for SMEs requires a

parent to present consolidated financial statements but does not
require a parent to present separate financial statements.
ACCOUNTING POLICY ELECTION: Investments in subsidiaries,
associates and jointly controlled entities are accounted for in the
separate FS either at a. cost less impairment b. fair value with changes
in FV recognized in profit or loss c. using the equity method.

ACCOUNTING FOR BUSINESS

COMBINATIONS (Advanced
Accounting 2) - (by: MILLAN)
 END
ACCOUNTING FOR BUSINESS COMBINATIONS (Advanced Accounting 2) - (by:
MILLAN)