IND AS 27: A Comprehensive Guide to Separate Financial Statements

Ind AS 27, also known as Indian Accounting Standard 27, provides guidelines for the preparation and presentation of separate financial statements (Also known as SFS or standalone financial statements). Consolidated financial statements provide a comprehensive view of the financial position and performance of a group of entities, while SFS concentrates on individual entities. In this article, we will delve into the intricacies of IND AS 27, exploring its purpose, key features, and practical implications for businesses. So, let’s dive in and unravel the mysteries of this essential accounting standard.

Scope and Objective:-

IND AS 27 applies to all entities that are required to prepare financial statements under the Indian Accounting Standards framework, these include parent companies, investors with joint control or significant influence over an investee, and subsidiaries preparing standalone financial statements.

there are some entities that are exempted from preparing consolidated financial statements. Instead, they prepare separate financial statements that provide information about their own financial position, performance, and cash flows.

What are Separate Financial Statements:-

A separate financial statement is a standalone report that presents the financial position, performance, and cash flows of a parent company by excluding its subsidiaries, associates, and joint ventures. These statements are prepared using the same accounting policies as the consolidated financial statements, ensuring consistency and comparability across the board. The main components of these statements are-

• Balance Sheet: This presents the financial position of the entity. The balance sheet includes- assets, liabilities, and equity, as of the reporting date.
• Income Statement: This shows the entity’s financial performance, including revenue, expenses, gains, and losses, for the reporting period.
• Statement of Changes in Equity: This discloses the changes in equity during the reporting period, reflecting transactions with owners and distributions to owners.
• Statement of Cash Flows: This presents the cash inflows and outflows during the reporting period, categorized into operating, investing, and financing activities.

Accounting for Investments:-

The cost method involves recording the investment at its original cost and adjusting for any impairment in value. The equity method requires the proportionate recognition of the investor’s share of the joint venture’s assets, liabilities, revenues, and expenses.

Accounting for Dividends:-

Dividends received from subsidiaries, associates, or joint ventures are recognized as income in the separate financial statements. This income is recorded in the profit and loss account, reducing the carrying amount of the investment.

Benefits of SFS:-

Enhanced Transparency:-

By requiring separate financial statements, IND AS 27 promotes transparency in the financial reporting of parent companies and their subsidiaries, associates, and joint ventures. This lets stakeholders understand the financial health and performance of each entity within the group.

Improved Decision-Making:-

This standard focus on individual entities, so stakeholders can make more informed decisions about their investments. This is particularly beneficial for investors who may be considering investing in a specific subsidiary or associate, rather than the entire group.

Streamlined Reporting:-

By standardizing the accounting policies and presentation requirements for separate financial statements, this standard simplifies the financial reporting process for businesses. This ensures consistency and comparability across different entities, making it easier for stakeholders to analyze and interpret financial information.

Disclosures:-

IND AS 27 mandates specific disclosures in the separate financial statements, including the reasons for preparing such statements, a list of significant subsidiaries, associates, and joint ventures, and the accounting policies used for investments.

• This standard specifies the presentation format for all components of financial statements like- the balance sheet, income statement, statement of changes in equity, and statement of cash flows. This ensures consistency and comparability among entities.
• Entities with significant subsidiaries or associates are required to provide additional disclosures in their financial statements. These disclosures offer users more insights into the nature and extent of the group’s interests in these entities.
• This standard mandates the disclosure of related party transactions to provide transparency and highlight potential conflicts of interest. These disclosures help users evaluate the financial implications of transactions between related parties.

Conclusion:-

This standard plays a crucial role in the financial reporting landscape, ensuring that businesses present their separate financial statements in a transparent, consistent, and comparable manner. After understanding the key features and practical implications of this accounting standard, the entity can do better in financial reporting and provide stakeholders with the information they need to make informed decisions. Whether you’re an accounting professional or a business owner, this comprehensive guide to IND AS 27 will help you navigate the intricacies of separate financial statements.