Ind AS 27 — Separate Financial Statements

Ind AS 27 prescribes the accounting and disclosure requirements for investments in subsidiaries, joint ventures, and associates when an entity prepares separate financial statements. Separate financial statements are those presented by a parent (or an investor with joint control of, or significant influence over, an investee) in addition to its consolidated financial statements — the entity's own standalone accounts, in which its investments are presented rather than the underlying assets and liabilities of the investees. Note that under Ind AS the numbering differs from AS: consolidation is dealt with by Ind AS 110, and Ind AS 27 deals specifically with separate statements.

Objective and scope

The objective is to prescribe the accounting and disclosure requirements for investments in subsidiaries, joint ventures, and associates when an entity prepares separate financial statements. The standard is applied in accounting for such investments when an entity elects, or is required by law, to present separate financial statements. It does not mandate which entities produce separate financial statements — that is determined by law or by the entity's choice — but it governs how the investments are accounted for when such statements are prepared.

What separate financial statements are

Separate financial statements are those presented by an entity in which the entity could elect (subject to the requirements of the standard) to account for its investments in subsidiaries, joint ventures, and associates either at cost, or in accordance with Ind AS 109 (fair value), or using the equity method. Crucially, separate financial statements are presented in addition to consolidated financial statements (or in addition to the financial statements of an investor that equity-accounts its investees) — they are not a substitute for consolidation. The financial statements of an entity that does not have any subsidiaries, associates, or joint ventures are not separate financial statements in this sense.

Accounting for the investments

When an entity prepares separate financial statements, it accounts for investments in subsidiaries, joint ventures, and associates either:

At cost; or

In accordance with Ind AS 109 (that is, at fair value, in the same way as other financial instruments within the scope of that standard); or

Using the equity method as described in Ind AS 28.

The entity applies the same accounting for each category of investments. This choice — cost, Ind AS 109 fair value, or equity method — is a policy election, and the option to use the equity method in separate financial statements was introduced to align with practice in a number of jurisdictions.

Dividends and other matters

Dividends from a subsidiary, joint venture, or associate are recognised in the separate financial statements when the entity's right to receive the dividend is established. The dividend is recognised in profit or loss unless the entity elects to use the equity method, in which case the dividend is recognised as a reduction from the carrying amount of the investment (consistent with equity accounting). Where an entity accounts for its investments at cost or under Ind AS 109 and there is a reorganisation of the group structure, specific requirements apply to the measurement of the investment in the new parent's separate financial statements.

Disclosure

An entity discloses that the statements are separate financial statements and the reasons why they are prepared if not required by law. It discloses a list of significant investments in subsidiaries, joint ventures, and associates, including the name, principal place of business (and country of incorporation if different), and its proportion of ownership interest (and voting rights, if different); and a description of the method used to account for those investments (cost, Ind AS 109, or equity method). Where the parent has elected not to prepare consolidated financial statements (using an available exemption) and instead prepares separate financial statements, additional disclosures apply.

A full worked example

Ind AS 27 governs how a parent accounts for its investments in its own separate financial statements — as distinct from the consolidated statements. A parent holds an investment in a subsidiary that cost ₹80,00,000. It may choose one of three accounting policies for this investment in its separate statements.

Policy option	How the investment is measured
At cost	Carried at Rs 80,00,000, less any impairment
Per Ind AS 109	At fair value (FVTPL or FVOCI)
Equity method	Adjusted for share of the investee's profits

The dividend question. Suppose the subsidiary declares a dividend and the parent's share is ₹5,00,000. In the separate statements (under the cost or Ind AS 109 policy), the dividend is recognised as income in the P&L when the right to receive it is established.

Account	Debit (₹)	Credit (₹)
Bank / dividend receivable	5,00,000
Dividend income (P&L)		5,00,000

The crucial distinction Ind AS 27 draws is between separate and consolidated statements. In the consolidated statements (Ind AS 110), the subsidiary is fully consolidated and intra-group dividends are eliminated. In the separate statements (Ind AS 27), the investment is shown at cost, fair value, or under the equity method, and the dividend is recognised as income. The same parent thus presents its subsidiary very differently in its two sets of statements. Ind AS 27 corresponds to IAS 27.

How Ind AS 27 relates to the AS framework

The Ind AS and AS frameworks are structured differently here, so there is no exact one-to-one AS equivalent of Ind AS 27. Under the AS framework, an entity's investments in subsidiaries, associates, and joint ventures in its own (standalone) financial statements are accounted for as investments under AS 13 (generally at cost, subject to the other-than-temporary decline rule), while consolidation is dealt with under AS 21, associates (in consolidated statements) under AS 23, and joint ventures under AS 27 (the AS-framework AS 27, on joint ventures — not to be confused with Ind AS 27). Under the Ind AS framework, consolidation sits in Ind AS 110, associates and joint ventures in the consolidated statements in Ind AS 28, and the accounting for these investments in the entity's separate statements sits in Ind AS 27. The key practical point is that Ind AS 27 offers a policy choice (cost, Ind AS 109 fair value, or equity method) for the investments in separate statements, whereas the AS framework generally carries them at cost under AS 13. So the same standard number (27) means very different things in the two frameworks, and the separate-statements accounting is more flexible under Ind AS.

Common pitfalls

Recurring issues include treating separate financial statements as a substitute for consolidation (they are additional to it); applying different accounting to different investments within the same category; recognising dividends other than when the right to receive them is established; and omitting the required list of investments and the description of the accounting method used.

Why this is cleaner on a unified system

Preparing separate financial statements alongside consolidated statements requires maintaining the investment carrying amounts, dividend income, and any equity-method adjustments consistently and reconciling them to the group view — far easier when the entity's records and the group's records share connected, consistent systems. When the underlying data sits in a single source of truth, presenting the investments under the chosen policy and producing the required disclosures is more straightforward than reconciling standalone and consolidated figures held in separate tools.

This article is a detailed educational summary of Ind AS 27 in plain language. It is not a substitute for the full text of the standard. Accounting standards are amended from time to time; always verify the current, authoritative text of Ind AS 27 as notified under the Companies Act before relying on it, and consult a qualified chartered accountant for application to your specific circumstances.