IAS 27 Separate Financial Statements addresses the accounting for investments in subsidiaries, joint ventures, and associates when an entity elects, or is required by local regulations, to present separate financial statements in accordance with IFRS.
Separate financial statements are the financial statements of an entity in which the entity may choose, in accordance with the requirements of this standard, to account for investments in subsidiaries, joint ventures, and associates either at cost, in accordance with IFRS 9 Financial Instruments, or using the equity method as described in IAS 28 Investments in Associates and Joint Ventures.
1. Key Issues to Note During Transition
| Content | IFRS | VAS |
| IAS 27 – Separate Financial Statements | ||
| Objective | The accounting method for investments in subsidiaries, joint ventures, and associates in the separate financial statements. | There is no equivalent VAS specifically addressing this issue. The specific provisions are reflected across various other standards. |
| Requirements for Preparing Separate Financial Statements | IAS 27 does not prescribe which types of entities must prepare separate financial statements for the purpose of public disclosure. This standard applies when an entity prepares separate financial statements in accordance with IFRS. Separate financial statements are those presented in addition to consolidated financial statements or in addition to the financial statements of an investor that does not have subsidiaries but has investments in associates or joint ventures, where such investments must be accounted for using the equity method as required by IAS 28, except in cases exempted from consolidation under the standards. The financial statements of an entity that has no subsidiaries, associates, or joint venture interests are not considered separate financial statements. | There is no equivalent VAS specifically addressing this issue. |
| Accounting Method | When an entity prepares separate financial statements, it shall account for investments in subsidiaries, joint ventures, and associates using one of the following: (a) At cost; (b) In accordance with IFRS 9; or (c) Using the equity method as prescribed in IAS 28. The entity must apply the same accounting policy for all investments classified within the same category. | VAS 25 only permits the use of the cost method to recognize investments in subsidiaries, joint ventures, and associates in the parent’s separate financial statements. |
| Recognition of Dividends | Dividends from subsidiaries, joint ventures, or associates are recognized in the entity’s separate financial statements when the entity’s right to receive the dividend is established. Dividends are recognized in profit or loss unless the entity elects to use the equity method, in which case the dividend is recognized as a reduction of the carrying amount of the investment. | VAS 14 also applies the same principle when recognizing dividends from all investments. |
| Group Restructuring
| When a parent reorganizes the structure of the group by establishing a new parent that meets the following criteria: (a) The new parent obtains control of the original parent by issuing equity instruments in exchange for existing equity instruments of the original parent; (b) The assets and liabilities of the new group and the original group are the same immediately before and after the reorganization; and (c) The owners of the original parent before the reorganization have the same absolute and relative interests in the net assets of the original group and the new group immediately before and after the reorganization, and the new parent accounts for its investment in the original parent using the cost method in its separate financial statements, the new parent shall measure the cost of its investment as the carrying amount of its share of the equity items shown in the separate financial statements of the original parent at the date of the reorganization. | There is no equivalent VAS specifically addressing this issue. |
2. Tasks to Be Performed
Select the appropriate accounting method for the investments and apply the chosen accounting method consistently across the investment categories.
