Several main features of IAS 27 - Consolidated and Separate Financial Statements

The objective of IAS 27 is to enhance the relevance, reliability and comparability of the information that a parent entity provides in its separate financial statements and in its consolidated financial statements for a group of entities under its control.

The Standard specifies :

1. the circumstances in which an entity must consolidate the financial statements of another entity (being a subsidiary);
2. the accounting for changes in the level of ownership interest in a subsidiary;
3. the accounting for the loss of control of a subsidiary; and
4. the information that an entity must disclose to enable users of the financial statements to evaluate the nature of the relationship between the entity and its subsidiaries

Presentation of consolidated financial statements. A parent must consolidate its investments in subsidiaries. There is a limited exception available to some non-public entities. However, that exception does not relieve venture capital organisations, mutual funds, unit trusts and similar entities from consolidating their subsidiaries.

Consolidation procedures. A group must use uniform accounting policies for reporting like transactions and other events in similar circumstances. The consequences of transactions, and balances, between entities within the group must be eliminated.

Non-controlling interests. Non-controlling interests must be presented in the consolidated statement of financial position within equity, separately from the equity of the owners of the parent. Total comprehensive income must be attributed to the owners of the parent and to the non-controlling interests even if the results in the non-controlling interests having a deficit balance.

Changes in the ownership interests. Changes in a parent’s ownership interest in a subsidiary that do not result in the loss of control are accounted for within equity.

When an entity loses control of a subsidiary, it derecognises the assets and liabilities and related equity components of the former subsidiary. Any gain or loss is recognised in profit or loss. Any investment retained in the former subsidiary is measured at its fair value at the date when control is lost.

Separate financial statements. When an entity elects, or is required by local regulations, to present separate financial statements, investments in subsidiaries. jointly controlled entities and associates must be accounted for at cost or in accordance with IAS 39 Financial Instruments : Recognition and Measurement.

Disclosure. An entity must disclose information about the nature of the relationship between the parent entity and its subsidiaries (Hrd) ***