Chapter 10: Disclosure requirements

All applicable IFRSs should be followed by an entity when providing disclosures in its separate financial statements.

There are additional specific disclosure requirements for separate financial statements that:

• are prepared by a parent in addition to its consolidated financial statements, or are prepared by an investor in addition to its ‘economic interest’ financial statements;
• are prepared by a parent that takes the exemption from the requirement to prepare consolidated financial statements (other than investment entity) or are prepared by an investor that takes the exemption from the requirement to prepare ‘economic interest’ financial statements; or
• are prepared as the only financial statements by an investment entity that is a parent; the investment entity should also present the disclosures relating to investment entities required by IFRS 12.

Is there any suggested wording, to satisfy the requirements within IAS 27, for parent companies’ separate financial statements that are exempt from the requirement to prepare consolidated or ‘economic interest’ financial statements? It is likely that many unlisted wholly or partly owned parents will be exempt from the requirement to prepare consolidated financial statements. IAS 27 contains specific disclosure requirements. The example wording set out below could be included in the accounting policies of such parents that are exempt from preparing consolidated financial statements. Intermediate parent entity Accounting policy extract These separate financial statements contain information about IFRS GAAP Limited as an individual company and do not contain consolidated financial information as the parent of a group. The company has taken advantage of the exemption under IFRS 10, ‘Consolidated financial statements’, from the requirement to prepare consolidated financial statements as it and its subsidiaries are included by full consolidation in the consolidated financial statements of its parent, FR GAAP. FR GAAP is incorporated in the UK and its consolidated financial statements are publicly available.

Other than on the grounds of materiality there are no exemptions from the IAS 27 disclosures. But some of the disclosures are only required for significant investments in subsidiaries, associates and joint ventures.

Investments in subsidiaries, associates and joint ventures accounted for in accordance with IFRS 9 and measured at fair value fall within the disclosure requirements of IFRS 7 and IFRS 13.

IFRS 12 disclosures apply where an entity has interests in unconsolidated structured entities, and separate financial statements are its only financial statements. Only the disclosure requirements of IFRS 12 should be applied.

An investor that prepares ‘economic interest’ financial statements has not prepared separate financial statements. The investor must comply with the disclosure requirements of IFRS 12.

Disclosures in separate financial statements – general

When providing disclosures in its separate financial statements, an entity is required to apply all applicable IFRS Standards.

Note, however, that if an entity elects to apply the equity method of accounting to its investments in associates and joint ventures in its separate financial statements, it is not required to comply with the disclosure requirements described of IFRS 12.

In general, IFRS 12 does not apply to separate financial statements, and this principle is not affected by whether the entity elects to use the equity method in those separate financial statements. However, if an entity has interests in unconsolidated structured entities and prepares separate financial statements as its only financial statements, it is required to provide the disclosures required under IFRS 12.

Parent elects not to prepare consolidated financial statements

The following disclosure requirements apply when separate financial statements are prepared for a parent that, in accordance with IFRS 10 is not required to prepare consolidated financial statements and elects not to do so. In these circumstances, the separate financial statements should disclose:

• 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 IFRS Standards have been produced for public use; and
• the address where those consolidated financial statements can be obtained.

In addition, the separate financial statements should disclose:

• a list of significant investments in subsidiaries, joint ventures and associates, including:
  • the name;
  • the principal place of business (and country of incorporation, if different);
  • the proportion of ownership interest held; and
  • if different, the proportion of the voting rights held; and
• a description of the method used to account for such investments.

Investment entities

When an investment entity that is a parent (other than a parent covered by IAS 27) prepares separate financial statements as its only financial statements (in accordance with IAS 27), it is required to:

• disclose that fact; and
• present the disclosures relating to investment entities required by IFRS 12.

Other circumstances

The disclosure requirements below apply to

• a parent, or
• an investor with joint control of, or significant influence over, an investee,

that elects or is required to prepare separate financial statements. Those separate financial statements should disclose:

• the fact that the statements are separate financial statements and the reasons why those statements are prepared if not required by law;
• a list of significant investments in subsidiaries, joint ventures and associates, including:
  • the name of those investees;
  • the principal place of business (and country of incorporation, if different) of those investees;
  • the proportion of ownership interest held; and
  • if different, the proportion of the voting rights held; and
• a description of the method used to account for such investments.

The separate financial statements are also required to identify the financial statements prepared in accordance with IFRS 10, IFRS 11 or IAS 28 (i.e., the ‘main’ financial statements) to which they relate.

Disclosures in the separate financial statements of an entity that is not a parent but has interests in associates or joint ventures If an entity: is an investor with no subsidiaries but with interests in a number of associates and joint ventures; is itself a wholly-owned subsidiary of a parent that produces IFRS financial statements for public use; and meets the conditions under IAS 28 for exemption from the requirement to apply the equity method to its investments in associates and joint ventures, and it elects to use that exemption, the financial statements prepared by the entity meet the definition of separate financial statements in IAS 27 and must provide the disclosures required by IAS 27. The Standard allows no exemption from its disclosure requirements in such circumstances. It should be noted, however, that the requirement to disclose “the financial statements prepared in accordance with IFRS 10, IFRS 11 or IAS 28 to which the separate financial statements relate” will not be relevant in these circumstances because no such statements will have been prepared. It is suggested that an entity in this situation should instead explain that, because the exemption in IAS 28 has been taken, there are no financial statements prepared in accordance with IFRS 11 or IAS 28.