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Financial Reporting · Ind AS 27 Separate Financial Statements

Preparation of Separate Financial Statements (Ind AS 27) for CA Final

Updated 5 October 2026 · Fact-checked

Separate financial statements are those an entity presents in addition to consolidated statements, showing investments in subsidiaries, joint ventures and associates without consolidating them. Ind AS 27 permits only two options: cost, or Ind AS 109. Apply the same choice to each category. The equity method is not allowed. If an investment is held for sale, use Ind AS 105.

Understand Preparation of Separate Financial Statements

Consolidated statements show a group as one entity. Separate financial statements show only the parent's own position. The investor's investments in other entities appear as single line items instead of being combined line by line.

In separate financial statements you must account for investments in subsidiaries, joint ventures and associates in one of two ways: (a) at cost, or (b) in accordance with Ind AS 109. Under Ind AS 27 paragraph 10 this is an accounting policy choice. You apply the same accounting for each category of investment. For example, all subsidiaries at cost and all associates under Ind AS 109 is allowed. Mixing methods within one category is not.

The equity method option exists in IAS 27, but it was not adopted in Ind AS 27. Do not use the equity method in separate financial statements under Ind AS.

If you choose Ind AS 109, the investment is usually measured at fair value, with changes going to profit or loss, or to OCI if you have made the irrevocable election for equity instruments that are not held for trading. If you choose cost, the investment stays at cost, less impairment where Ind AS 36 indicators exist.

The held-for-sale rule overrides the policy choice. When an investment is classified as held for sale (or included in a disposal group held for sale) under Ind AS 105, you account for it under Ind AS 105. That means the lower of carrying amount and fair value less costs to sell. Investments carried at fair value under Ind AS 109 are outside the Ind AS 105 measurement requirements, so they stay at fair value.

Dividends from a subsidiary, joint venture or associate, whether carried at cost or under Ind AS 109, are recognised in profit or loss when the right to receive them is established.

Key rules to remember

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.

How to solve Preparation of Separate Financial Statements questions

Use this order for any question on separate financial statements.

  1. 1Confirm the entity is preparing separate financial statements and identify the investments: subsidiaries, joint ventures, associates.
  2. 2Group the investments by category and find the accounting policy stated for each category: cost or Ind AS 109.
  3. 3Check whether any investment is classified as held for sale under Ind AS 105. If yes, apply Ind AS 105 to that investment unless it is already under Ind AS 109.
  4. 4Measure the carrying amount under the applicable method. At cost, keep the cost. Under Ind AS 109, use fair value.
  5. 5Account for dividends: recognise them in profit or loss when the right to receive them is established.
  6. 6Test for impairment when the investment is at cost (apply Ind AS 36 where indicators exist).
  7. 7Write the conclusion with the journal entry or the amount shown in the separate balance sheet.

Quickest way: Three-question check

When to use it: Use when the question asks only for the carrying amount or the treatment of an investment.

  1. Is it held for sale? If yes and not under Ind AS 109, use the lower of carrying amount and fair value less costs to sell.
  2. If not, what policy is given for the category: cost or Ind AS 109?
  3. Apply that method and treat the dividend as income in profit or loss.

Common mistakes in Preparation of Separate Financial Statements

  • Treating the policy choice as available investment by investment within the same category.

    Students read paragraph 10 as giving a free choice for each investment.

    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.

    Students mix consolidated or equity accounting procedures with separate statement rules.

    Fix: At cost, the investment stays at cost less impairment. Only the dividend goes to profit or loss.

  • Deducting dividends from the cost of the investment under the cost model.

    Students recall the equity accounting rule from Ind AS 28 and apply it everywhere.

    Fix: Under cost and Ind AS 109 the dividend is income when the right to receive it is established. It does not reduce the investment.

  • Applying the lower of carrying amount and fair value less costs to sell to an investment held at fair value under Ind AS 109.

    Students apply Ind AS 105 mechanically to every held-for-sale item.

    Fix: Ind AS 109 investments stay under Ind AS 109 measurement requirements even if held for sale.

  • Forgetting that held-for-sale classification overrides the policy choice.

    Students stop after identifying the policy.

    Fix: Always run the held-for-sale test before measuring.

Worked examples

Example 1

Alpha Ltd presents separate financial statements and has chosen to carry investments in subsidiaries at cost. It holds 100% of Beta Ltd, bought for ₹50,00,000. At year end, Alpha's board commits to a sale, and the criteria in Ind AS 105 for held for sale are met. The carrying amount is ₹50,00,000 and the fair value less costs to sell is ₹46,00,000. Show the treatment.

Show the solution
  1. Policy is cost for subsidiaries, but the investment now meets the held for sale classification.
  2. Held for sale classification overrides the cost policy, and Ind AS 105 applies because the investment is not under Ind AS 109.
  3. Measure at the lower of carrying amount ₹50,00,000 and fair value less costs to sell ₹46,00,000, which is ₹46,00,000.
  4. Impairment loss = ₹50,00,000 − ₹46,00,000 = ₹4,00,000, recognised in profit or loss.
  5. Present the investment separately as held for sale at ₹46,00,000.

Answer: Alpha writes the investment down by ₹4,00,000 to ₹46,00,000 and presents it as an asset held for sale.

Example 2

Gamma Ltd's separate financial statements carry its 30% associate Delta Ltd at cost. Gamma bought the shares for ₹20,00,000. In the year, Delta reported a profit of ₹10,00,000 and declared a total dividend of ₹4,00,000. There is no impairment indicator. Show the treatment in Gamma's separate financial statements.

Show the solution
  1. Policy is cost, so the investment stays at ₹20,00,000.
  2. Delta's profit of ₹10,00,000 is not recognised by Gamma. Share of profit is an equity accounting concept and is not used in separate statements.
  3. Gamma's share of the dividend = 30% × ₹4,00,000 = ₹1,20,000.
  4. Recognise ₹1,20,000 as dividend income in profit or loss when Gamma's right to receive it is established.
  5. Test for impairment under Ind AS 36 only if indicators exist. None exist here, so the carrying amount does not change.

Answer: The investment remains at ₹20,00,000 and Gamma recognises dividend income of ₹1,20,000 in profit or loss.

Exam tips

  • 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.
  • Always state how the dividend is treated: income in profit or loss when the right to receive it is established.
  • When a question asks for the carrying amount, show the working line by line so partial marks are secured.
  • Keep Ind AS 27 separate statements apart from consolidation. Do not eliminate intragroup items here.

Practice questions from Ind AS 27 Separate Financial Statements

Preparation of Separate Financial Statements in other exams

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

Preparation of Separate Financial Statements: frequently asked questions

Can I use different methods for subsidiaries and associates in separate financial statements?

Yes. The accounting must be the same for each category of investment, so subsidiaries can be at cost while associates are under Ind AS 109. Within one category you cannot mix methods.

What happens if a subsidiary investment is classified as held for sale?

You account for it under Ind AS 105 at the lower of carrying amount and fair value less costs to sell. If the investment is already under Ind AS 109, it continues to be measured under Ind AS 109.

How is dividend from a subsidiary shown in separate statements?

Whether the investment is at cost or under Ind AS 109, the dividend is recognised in profit or loss when the right to receive it is established. It does not reduce the carrying amount of the investment.

Is the equity method allowed in separate statements under Ind AS 27?

No. Ind AS 27 allows only cost or Ind AS 109 for investments in subsidiaries, joint ventures and associates. The equity method option exists in IAS 27 but was not adopted in Ind AS 27.