Indian Accounting Standard (Ind AS) 27

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Separate Financial Statements

(This Indian Accounting Standard includes paragraphs set in bold type and plain type,

which have equal authority. Paragraphs in bold type indicate the main principles. )

Objective

1 The objective of this Standard is to prescribe the accounting and disclosure

requirements for investments in subsidiaries, joint ventures and associates when

an entity prepares separate financial statements.

Scope

2 This Standard shall be applied in accounting for investments in subsidiaries,

joint ventures and associates when an entity elects, or is required by law, to

present separate financial statements.

3 This Standard does not mandate which entities produce separate financial

statements. It applies when an entity prepares separate financial statements that

comply with Indian Accounting Standards.

Definitions

4 The following terms are used in this Standard with the meanings specified:

Consolidated financial statements are the financial statements of a group in

which the assets, liabilities, equity, income, expenses and cash flows of the

parent and its subsidiaries are presented as those of a single economic

entity.

Separate financial statements are those 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 or in accordance with Ind AS 109, Financial

Instruments.

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5 The following terms are defined in Appendix A of Ind AS 110, Consolidated

Financial Statements, Appendix A of Ind AS 111, Joint Arrangements, and

paragraph 3 of Ind AS 28, Investments in Associates and Joint Ventures:

• associate

• control of an investee

• group

 Investment Entity

• joint control

• joint venture

• joint venturer

• parent

• significant influence

• subsidiary.

6 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, other

than in the circumstances set out in paragraphs 8-8A. Separate financial

statements need not be appended to, or accompany, those statements.

7 Financial statements in which the equity method is applied are not separate

financial statements. These may be termed as ‘consolidated financial statements’.

Similarly, the financial statements of an entity that does not have a subsidiary,

associate or joint venturer’s interest in a joint venture are not separate financial

statements.

8 An entity that is exempted in accordance with paragraph 4(a) of Ind AS 110 from

consolidation or paragraph 17 of Ind AS 28 from applying the equity method

may present separate financial statements as its only financial statements.

8A An investment entity that is required, throughout the current period and all

comparative periods presented, to apply the exception to consolidation for all of

its subsidiaries in accordance with paragraph 31 of Ind AS 110 presents separate

financial statements as its only financial statements.

Preparation of separate financial statements

9 Separate financial statements shall be prepared in accordance with all

applicable Ind AS, except as provided in paragraph 10.

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10 When an entity prepares separate financial statements, it shall account for

investments in subsidiaries, joint ventures and associates either:

(a) at cost, or

(b) in accordance with Ind AS 109.

The entity shall apply the same accounting for each category of

investments. Investments accounted for at cost shall be accounted for in

accordance with Ind AS 105, Non-current Assets Held for Sale and

Discontinued Operations, when they are classified as held for sale (or

included in a disposal group that is classified as held for sale). The

measurement of investments accounted for in accordance with Ind AS 109

is not changed in such circumstances.

11 If an entity elects, in accordance with paragraph 18 of Ind AS 28, to measure its

investments in associates or joint ventures at fair value through profit or loss in

accordance with Ind AS 109, it shall also account for those investments in the

same way in its separate financial statements.

11A If a parent is required, in accordance with paragraph 31 of Ind AS 110, to

measure its investment in a subsidiary at fair value through profit or loss in

accordance with Ind AS 109, it shall also account for its investment in a

subsidiary in the same way in its separate financial statements.

11B When a parent ceases to be an investment entity, or becomes an investment

entity, it shall account for the change from the date when the change in status

occurred, as follows:

(a) when an entity ceases to be an investment entity, the entity shall, in

accordance with paragraph 10, either:

(i) account for an investment in a subsidiary at cost. The fair value of

the subsidiary at the date of the change of status shall be used as the

deemed cost at that date; or

(ii) continue to account for an investment in a subsidiary in accordance

with Ind AS 109.

(b) when an entity becomes an investment entity, it shall account for an

investment in a subsidiary at fair value through profit or loss in accordance

with Ind AS 109. The difference between the previous carrying amount of

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the subsidiary and its fair value at the date of the change of status of the

investor shall be recognised as a gain or loss in profit or loss. The

cumulative amount of any fair value adjustment previously recognised in

other comprehensive income in respect of those subsidiaries shall be

treated as if the investment entity had disposed of those subsidiaries at the

date of change in status.

12 An entity shall recognise a dividend from a subsidiary, a joint venture or an

associate in profit or loss in its separate financial statements when its right

to receive the dividend is established.

13 When a parent reorganises the structure of its group by establishing a new entity

as its parent in a manner that satisfies 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 reorganisation; and

absolute and relative interests in the net assets of the original group and

the new group immediately before and after the reorganisation,

and the new parent accounts for its investment in the original parent in

accordance with paragraph 10(a) in its separate financial statements, the new

parent shall measure cost at 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

reorganisation.

14 Similarly, an entity that is not a parent might establish a new entity as its parent in

a manner that satisfies the criteria in paragraph 13. The requirements in paragraph

13 apply equally to such reorganisations. In such cases, references to ‘original

parent’ and ‘original group’ are to the ‘original entity’.

Disclosure

15 An entity shall apply all applicable Ind ASs when providing disclosures in its

separate financial statements, including the requirements in paragraphs 16

and 17.

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16 When a parent, in accordance with paragraph 4(a) of Ind AS 110, elects not

to prepare consolidated financial statements and instead prepares separate

financial statements, it shall disclose in those separate financial statements:

(a) the fact that the financial statements are separate financial

statements; that the exemption from consolidation has been used; the

name and principal place of business (and country of incorporation, if

different) of the entity whose consolidated financial statements that

comply with Ind ASs have been produced for public use; and the

address where those consolidated financial statements are obtainable.

(b) a list of significant investments in subsidiaries, joint ventures and

associates, including:

(i) the name of those investees.

(ii) the principal place of business (and country of incorporation, if

different) of those investees.

(iii) its proportion of the ownership interest (and its proportion of

the voting rights, if different) held in those investees.

under (b).

16A When an investment entity that is a parent prepares, in accordance

with paragraph 8A, separate financial statements as its only financial

statements, it shall disclose that fact. The investment entity shall also

present the disclosures relating to investment entities required by Ind

AS 112, Disclosure of Interests in Other Entities.

17 When a parent (other than a parent covered by paragraphs 16-16A)

or an investor with joint control of, or significant influence over, an

investee prepares separate financial statements, the parent or investor

shall identify the financial statements prepared in accordance with

Ind AS 110, Ind AS 111 or Ind AS 28 to which they relate. The parent

or investor shall also disclose in its separate financial statements:

(a) the fact that the statements are separate financial statements

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(b) a list of significant investments in subsidiaries, joint ventures

and associates, including:

(i) the name of those investees.

(ii) the principal place of business (and country of

incorporation, if different) of those investees.

(iii) its proportion of the ownership interest (and its

proportion of the voting rights, if different) held in

those investees.

listed under (b).

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Appendix 1

Note: This Appendix is not a part of the Indian Accounting Standard. The purpose of

this Appendix is only to bring out the major differences, if any, between Indian

Accounting Standard (Ind AS) 27 and the corresponding International Accounting

Standard (IAS) 27, Separate Financial Statements, issued by the International

Accounting Standards Board.

Comparison with IAS 27, Separate Financial Statements

1. Paragraph 17 (a) of IAS 27 requires to disclose the reason for preparing

separate financial statements if not required by law. As the Companies Act

mandates preparation of separate financial statements, paragraph 17 (a) has

been modified to remove such requirement.

2. IAS 27 allows the entities to use the equity method to account for

investment in subsidiaries, joint ventures and associates in their Separate

Financial Statements (SFS). Such option is not given in Ind AS 27, as the

equity method is not a measurement basis like cost and fair value but is a

manner of consolidation and therefore would lead to inconsistent accounting

conceptually.