CA Final · Financial Reporting

Ind AS 27 Separate Financial Statements: formula sheet

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Key formulas

Definition of separate financial statements: Separate FS = statements presented by an entity in which investments in subsidiaries, JVs and associates are accounted for at cost or in accordance with Ind AS 109; The measurement basis is an accounting policy choice, applied to each category of investment.
Objective: Ind AS 27 objective = prescribe accounting and disclosure for investments in subsidiaries, JVs and associates in separate financial statements; The standard does not say who must prepare separate financial statements. Law does.
Consolidated financial statements: Consolidated FS = financial statements of a group presented as those of a single economic entity; Governed by Ind AS 110, not Ind AS 27.
Separate statements vs exemption from consolidation: Parent exempt from consolidation, so it presents separate FS as its only statements, if it meets all four Ind AS 110 conditions (a) to (d); State all conditions, not just one, if asked.
Accounting choice for investments: Cost, or in accordance with Ind AS 109; Apply the same accounting for each category of investment. The equity method is not permitted in Ind AS 27 separate FS, unlike IAS 27. An investment classified as held for sale is accounted for under Ind AS 105.
Paragraph 10 policy choice: Investment in subsidiary / JV / associate = Cost OR Ind AS 109; Choose one for each category of investment and apply it consistently to that whole category. The equity method is not an option in Ind AS 27.
Held for sale override: Held for sale investment (at cost) = Lower of (carrying amount, fair value less costs to sell); Measured under Ind AS 105. Investments already under Ind AS 109 continue to be measured under Ind AS 109.
Dividend income (cost or Ind AS 109): Dividend recognised in profit or loss when the right to receive payment is established; The dividend is income. It does not reduce the carrying amount of the investment.
Dividend income timing: Recognise in P&L when the right to receive the dividend is established; Applies to dividends from subsidiaries, joint ventures and associates in separate FS only when the investments are accounted for at cost or in accordance with Ind AS 109. Under the equity method, the dividend reduces the carrying amount instead. Cash receipt date is not the test.
Dividend presentation: Cost or Ind AS 109: Dr Dividend receivable / Cr Dividend income (P&L). Equity method: Dr Dividend receivable / Cr Investment; P&L recognition applies only when the investment is at cost or per Ind AS 109. Do not credit the investment account in that case; it stays at cost. Under the equity method, the dividend reduces the carrying amount of the investment.
Cost of investment in a new parent reorganisation: Cost = New parent's share of the carrying amount of the equity items in the original parent's separate FS at the reorganisation date; Not the fair value of shares issued. Equity items usually means share capital, reserves and other equity items.
Conditions for the reorganisation rule: (a) New parent obtains control of the original parent by issuing equity instruments in exchange for existing equity instruments of the original parent; (b) assets and liabilities of the new group and the original group are the same immediately before and after; (c) owners of the original parent have the same absolute and relative interests in the net assets of the original group and the new group immediately before and after; All three must be met. If any fails, apply the general cost rules, for example fair value of consideration.
Impairment on dividend: Consider an impairment test of the investment if (a) the dividend exceeds the total comprehensive income of the investee in the period the dividend is declared, or (b) the carrying amount of the investment in the separate FS exceeds the carrying amount in the consolidated FS of the investee's net assets, including associated goodwill; These are indicators of impairment for investments in subsidiaries, JVs and associates. They are indicators, not automatic write-downs.
Permitted measurement in separate FS (Ind AS 27): Investment in subsidiary / JV / associate = Cost OR Ind AS 109 (fair value); Apply the same accounting to each category of investment. The equity method is not an option in separate FS under Ind AS 27.
IAS 27 position (for comparison): Cost OR IFRS 9 OR Equity method; The third option is the difference. Ind AS 27 does not carry it.
Held for sale exception: Investment accounted for at cost and classified as held for sale → Ind AS 105; Investments measured under Ind AS 109 are not re-measured under Ind AS 105 on classification as held for sale. Their Ind AS 109 measurement is unchanged.
Dividend income in separate FS: Recognise in profit or loss when the right to receive the dividend is established; The dividend is not deducted from the cost of the investment.
Disclosures when the consolidation exemption is used: Fact that FS are separate + exemption used + name and principal place of business (and country of incorporation if different) of the entity whose Ind AS consolidated FS are public + address where obtainable + list of significant investments + method; The list gives name, principal place of business, country of incorporation if different, proportion of ownership interest and, if different, proportion of voting rights.
Disclosures for other separate FS: Fact that FS are separate + reasons if not required by law + identify the Ind AS 110 / 111 / 28 statements they relate to + list of significant investments + method; The list and method follow the same detail as in the exemption case.

Common mistakes

Saying Ind AS 27 requires all parents to prepare separate financial statements. Fix: Write that Ind AS 27 applies when separate statements are prepared. The requirement to prepare them comes from law.
Treating separate financial statements as the same as consolidated statements. Fix: Remember that separate statements show the investment as one line, while consolidated statements combine items line by line.
Treating the policy choice as available investment by investment within the same category. Fix: Remember the choice is for each category, so all subsidiaries get one method, all associates one method, and all joint ventures one method.
Applying share of investee's profit to the investment in separate statements when the policy is cost. Fix: At cost, the investment stays at cost less impairment. Only the dividend goes to profit or loss.
Recognising dividend income when cash is received. Fix: Use the date the right to receive is established, such as shareholder approval of a final dividend. Accrue a receivable if cash comes later.
Reducing the carrying amount of the investment for a dividend received from a subsidiary that is held at cost or under Ind AS 109. Fix: In separate FS under the cost method or Ind AS 109, the dividend is income in profit or loss. The investment stays at cost unless impaired. Dividends reduce the carrying amount only if the entity has chosen the equity method as described in Ind AS 28.
Saying equity method is allowed in separate FS under Ind AS 27 because IAS 27 allows it. Fix: Remember the deviation from IAS 27. Equity method belongs to consolidated FS under Ind AS 28 and Ind AS 111, not to separate FS under Ind AS 27.
Giving one disclosure list for all situations. Fix: First classify the preparer: exemption-using parent, investment entity, or other. Then give the matching list.

Exam tips

Write the objective and scope in two lines, then apply them to the facts. This earns the provision marks.
In MCQs, check whether the statements show a single investment line or a line-by-line combination before answering.
When a case mentions an exempt parent, list every exemption condition and tick each against the facts.
Remember the Ind AS 27 and IAS 27 difference: the equity method is not allowed in Ind AS 27 separate statements.
Always add that law decides who must prepare separate statements. Examiners reward this precision.
Write the paragraph 10 choice first: cost or Ind AS 109, for each category.
Never offer the equity method as an option in Ind AS 27 separate statements. It is in IAS 27, not in Ind AS 27.
For case MCQs, check for the words held for sale before choosing the measurement basis.