AMENDMENTS to IAS 27 Separate Financial Statements

Current IAS 27 Separate Financial Statements requires an entity to account for its investments in Subsidiaries, Joint Ventures and Associates either at COST or in accordance with IFRS 9 Financial Instruments in the entity’s SEPARATE Financial Statements.

Prior to the revision in 2003 of IAS 27 Consolidated and Separate Financial Statements and IAS 28 Investments in Associates, the Equity method was one of the options available to an entity to account for its investments in subsidiaries and associates in the entity’s separate financial statements. In 2003, the Equity method was removed from the options and the IASB decided to require the use of COST or IAS 39 Financial Instruments : Recognition and Measurement for all investments in subsidiaries, jointly controlled entities and associates included in the separate financial statements.

Further, in their responses to the IASB’s 2011 Agenda Consultation, some respondents said that:

1. the laws of some countries require listed companies to present separate financial statements prepared in accordance with local regulations;
2. those local regulations require the use of the equity method to account for investments in subsidiaries, joint ventures and associates; and
3. in most cases, the use of the equity method would be the only difference between the separate financial statements prepared in accordance with IFRSs and those prepared in accordance with local regulations.

Those respondents strongly supported the inclusion of the Equity method as one of the options for measuring investments in subsidiaries, joint ventures and associates in the separate financial statements of an entity.

In May 2012, the IASB decided to consider restoring the option to use the EQUITY method of accounting in separate financial statements.

Later, on 2 December 2013, the IASB published for public comment the Exposure Draft : Equity Method in Separate Financial Statements (Proposed amendments to IAS 27). The proposed amendments to IAS 27 would allow entities to use the Equity method to account for investments in subsidiaries, joint ventures and associates in their separate (parent only) financial statements.

Under the proposals, an entity would be permitted to account for its investments either :

1. at Cost; or
2. in accordance with IFRS 9; or
3. using the Equity method.

And, finally, on 12 August 2014, IASB published Equity Method in Separate Financial Statements (Amendments to IAS 27). The amendments to IAS 27 will allow entities to use the equity method to account for investments in subsidiaries, joint ventures and associates in their separate financial statements.

Subscribers to eIFRS can download the file from : eIFRS webpage

FINAL Version of IFRS 9, Financial Instruments

The IASB published the final version of IFRS 9 Financial Instruments in July 2014. The final version of IFRS 9 brings together the Classification and Measurement, Impairment and Hedge Accounting phases of the IASB’s project to replace IAS 39 Financial Instruments : Recognition and Measurement.

IFRS 9 is built on a logical, single classification and measurement approach for financial assets that reflects the business model in which they are managed and their cash flow characteristics. Built upon this is a forward-looking expected credit loss model that will result in more timely recognition of loan losses and is a single model that is applicable to all financial instruments subject to impairment accounting.

In addition, IFRS 9 addresses the so-called ‘own credit’ issue, whereby banks and others book gains through profit or loss as a result of the value of their own debt falling due to a decrease in credit worthiness when they have elected to measure that debt at fair value.

The Standard also includes an improved hedge accounting model to better link the economics of risk management with its accounting treatment.

As disclosed within the IFRS.org Press Release dated 24 July 2014, the package of improvements introduced by IFRS 9 includes a logical model for classification and measurement, a single, forward-looking ‘expected loss’ impairment model and a substantially-reformed approach to hedge accounting.

The IASB has previously published versions of IFRS 9 that introduced new classification and measurement requirements (in 2009 and 2010) and a new hedge accounting model (in 2013). The July 2014 publication represents the final version of the Standard, replaces earlier versions of IFRS 9 and completes the IASB’s project to replace IAS 39 Financial Instruments : Recognition and Measurement.

The new Standard of IFRS 9 is effective for annual periods beginning on or after 1 January 2018, with early application permitted.

Following is the link to : Project Summary of IFRS 9 Financial Instruments (July 2014)