Financial Reporting · Ind AS 27 Separate Financial Statements

Ind AS 27 Objective, Scope and Definitions

Updated 5 October 2026 · Fact-checked

Ind AS 27 sets the accounting and disclosure rules for separate financial statements, which an entity presents in addition to, or instead of, consolidated statements. To solve questions, identify who is preparing the statements, whether consolidation applies, and then pick the investment measurement basis: cost or Ind AS 109. The equity method is not allowed.

Understand Ind AS 27 Objective, Scope and Definitions

Separate financial statements are the statements an entity presents in which it accounts for its investments in subsidiaries, joint ventures and associates either at cost or in accordance with Ind AS 109. They show the investor's own position, not the group's.

Under Ind AS 27 as notified in India, the equity method is not permitted in separate financial statements. IAS 27 allows it as a third option. This is a known difference between Ind AS 27 and IAS 27.

The objective of Ind AS 27 is to prescribe the accounting and disclosure requirements for investments in subsidiaries, joint ventures and associates when an entity chooses, or is required by law, to present separate financial statements. Ind AS 27 does not decide who must prepare them. That comes from the Companies Act, 2013 and other law.

Consolidated financial statements present the assets, liabilities, equity, income, expenses and cash flows of the parent and its subsidiaries as if they were a single economic entity. The line-by-line combination and eliminations are covered in Ind AS 110. In separate statements, the subsidiary appears only as a single investment line, and dividends from it are income.

The standard applies when an entity prepares separate financial statements. It does not mandate which entities must. Separate statements can be prepared by a parent that also presents consolidated statements, or by an investor in an associate or joint venture that has no subsidiaries. A parent that is exempt from consolidation can present separate statements as its only statements. Under Ind AS 110, a parent is exempt when all of these conditions are met:

(a) it is a wholly owned subsidiary, or a partially owned subsidiary whose other owners, including those not otherwise entitled to vote, have been informed about and do not object to the parent not presenting consolidated financial statements;
(b) its debt or equity instruments are not traded publicly;
(c) it is not filing its financial statements for the purpose of a public issue;
(d) its ultimate or any intermediate parent produces Ind AS consolidated financial statements available for public use.

The key distinction for exams: consolidated statements are for the group as one entity. Separate statements are for the legal entity alone, with investments at cost or under Ind AS 109. Parent's own statements are separate statements. An investor with associates or joint ventures applies Ind AS 28 (equity method) in its consolidated statements, or in its own statements where it has no subsidiaries, subject to the exemptions in Ind AS 28. Statements prepared under Ind AS 28 are not separate financial statements under Ind AS 27, where the equity method is not available. The investor may additionally present separate statements under Ind AS 27 if it chooses to or the law requires it.

Key rules to remember

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.

How to solve Ind AS 27 Objective, Scope and Definitions questions

Use this sequence for any scope or definition question on Ind AS 27, then add the accounting basis if the case asks for it.

1Read the case and list the entities, their investments and the ownership percentages.
2Classify each investee: subsidiary, associate, joint venture or ordinary financial investment.
3Decide whether the entity prepares consolidated statements, or is exempt from consolidation under Ind AS 110.
4Decide whether the statements in question are separate financial statements as defined: investments shown at cost or under Ind AS 109.
5State the objective and scope of Ind AS 27 in one line, noting that law decides who must prepare the statements.
6Apply the accounting basis (cost or Ind AS 109) for each category of investment and keep it consistent within each category. Do not use the equity method here.
7Check for held for sale classification, which moves the investment to Ind AS 105.
8Conclude in provision, facts, conclusion form.

Quickest way: Three-question scope check

When to use it: Use it in MCQs and short theory questions where you must label statements as consolidated or separate.

Question 1: Is the group shown as one entity, line by line? If yes, consolidated statements under Ind AS 110.
Question 2: Is the investment shown as a single line at cost or under Ind AS 109? If yes, separate financial statements under Ind AS 27.
Question 3: Is the entity exempt from consolidation and presenting only its own statements? If yes, those are its separate statements, and Ind AS 27 applies.

Common mistakes in Ind AS 27 Objective, Scope and Definitions

Saying Ind AS 27 requires all parents to prepare separate financial statements.
Students confuse the standard's scope with legal requirements.
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.
Both include investments in subsidiaries and the names sound alike.
Fix: Remember that separate statements show the investment as one line, while consolidated statements combine items line by line.
Confusing an investor's equity-method statements under Ind AS 28 with separate financial statements.
IAS 27 allows the equity method in separate statements, so students carry that option into Ind AS 27.
Fix: Under Ind AS 27, separate statements account for investments only at cost or under Ind AS 109. Equity accounting under Ind AS 28 applies in an investor's consolidated statements, or in its own statements where it has no subsidiaries, subject to the Ind AS 28 exemptions. It is not an Ind AS 27 separate statements option.
Quoting only one condition for exemption from consolidation.
Students memorise a single point.
Fix: List all four Ind AS 110 conditions: (a) wholly owned, or partially owned with other owners, including those not otherwise entitled to vote, informed and not objecting to non-presentation of consolidated statements; (b) instruments not traded publicly; (c) not filing financial statements for a public issue; (d) ultimate or any intermediate parent produces Ind AS consolidated statements for public use.
Applying one measurement basis to all investments without checking categories, or offering the equity method as an option.
Students assume a single policy for the whole portfolio and recall IAS 27's wider choice.
Fix: State that the same accounting (cost or Ind AS 109) applies within each category: subsidiaries, joint ventures and associates. The equity method is not an Ind AS 27 option. Investments held for sale follow Ind AS 105.

Worked examples

Example 1

Alpha Ltd holds 80% of Beta Ltd and 30% of Gamma Ltd, over which it has significant influence. Alpha prepares consolidated statements as required. It also presents its own statements, showing Beta at cost and Gamma at cost. The Board asks which statements are separate financial statements and which standard governs them.

Show the solution

Alpha controls Beta, so Beta is a subsidiary. Gamma is an associate because of significant influence.
Alpha's consolidated statements combine Alpha and Beta line by line, with Gamma under the equity method. These are governed by Ind AS 110 and Ind AS 28.
Alpha's own statements show Beta and Gamma as single investment lines at cost. This meets the definition of separate financial statements.
Ind AS 27 applies to those statements. It prescribes accounting and disclosure for the investments.
Accounting is at cost, which is one of the two permitted bases (cost or Ind AS 109), applied consistently to each category.

Answer: Alpha's own statements, with Beta and Gamma at cost, are separate financial statements governed by Ind AS 27. The consolidated statements are governed by Ind AS 110 and Ind AS 28.

Example 2

Delta Ltd is a wholly owned subsidiary of Omega Ltd, which prepares Ind AS consolidated statements available for public use. Delta has a 70% subsidiary, Eta Ltd. Delta's debt and equity are not traded publicly and Delta is not filing for a public issue. Can Delta skip consolidation, and what does it present?

Show the solution

Delta is a parent because it controls Eta. Consolidation is normally required under Ind AS 110.
Check the exemption conditions. (a) Delta is a wholly owned subsidiary, so this condition is met and there are no other owners to inform. (b) Its instruments are not publicly traded. (c) It is not filing for a public issue.
(d) Its parent, Omega, produces Ind AS consolidated statements available for public use. All four conditions are met.
Delta may therefore skip consolidation and present separate financial statements as its only statements.
Ind AS 27 then applies. Delta accounts for Eta either at cost or under Ind AS 109, applied consistently to that category. The equity method is not permitted.

Answer: Yes. Delta meets all four Ind AS 110 conditions, so it may skip consolidation and present separate financial statements under Ind AS 27, accounting for Eta at cost or under Ind AS 109.

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.

Practice questions from Ind AS 27 Separate Financial Statements

Ind AS 27 Objective, Scope and Definitions in other exams

The same ground in other exams, if you are preparing for more than one or want another angle on it.

CMA FinalSeparate Financial Statements (Ind AS 27) and Equity Method Basics

Ind AS 27 Objective, Scope and Definitions: frequently asked questions

What are separate financial statements under Ind AS 27?

They are statements presented by an entity in which investments in subsidiaries, joint ventures and associates are accounted for at cost or in accordance with Ind AS 109. They show the entity's own position, not the group's.

What is the difference between consolidated and separate financial statements?

Consolidated statements present the parent and its subsidiaries as one economic entity, combining items line by line under Ind AS 110. Separate statements show each investment as a single line and report dividends from investees as income.

Can the equity method be used in separate financial statements under Ind AS 27?

No. Ind AS 27 as notified in India permits only cost or Ind AS 109. IAS 27 also allows the equity method, so this is a difference between the two standards.

Does Ind AS 27 say who must prepare separate financial statements?

No. The standard applies when an entity prepares separate statements. The requirement to prepare them comes from law, such as the Companies Act, 2013.

Can a parent present only separate financial statements?

Yes, if it is exempt from consolidation under Ind AS 110. It must meet all the conditions, including that its ultimate or intermediate parent produces Ind AS consolidated statements for public use.