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IAS 27

Separate Financial Statements

IAS 27 prescribes the accounting and disclosure requirements for investments in subsidiaries, joint ventures and associates when an entity elects or is required to prepare separate financial statements, permitting each such investment to be measured at cost, in accordance with IFRS 9, or using the equity method. [S1]

Effective 2013-01-01Related: IFRS 10 · IAS 28 · IFRS 9 · IAS 12

Overview

Separate financial statements are those presented by a parent (or an investor with joint control of, or significant influence over, an investee) in which investments in subsidiaries, joint ventures and associates are accounted for at cost, in accordance with IFRS 9, or using the equity method, rather than being consolidated or proportionately combined. [S1] IAS 27 does not mandate which entities must prepare separate financial statements; that is determined by local law or an entity's own choice, and separate financial statements are prepared in addition to, not instead of, consolidated financial statements where consolidation is required (except for a parent meeting IFRS 10's specific exemption from preparing consolidated statements at all). [S2]

Why it matters

For many Nigerian holding companies and parent entities, the separate financial statements are what a bank, a tax authority, or a local regulator actually looks at first, since Nigerian company law obligations and the companies income tax return are assessed at the individual legal entity level. Choosing the wrong measurement basis for investments in subsidiaries, or conflating separate financial statements with consolidated financial statements, can distort a parent company's own standalone financial position and create confusion with lenders, regulators and tax authorities who are specifically interested in the parent entity alone.

Scope

Applies to the accounting for investments in subsidiaries, joint ventures and associates when an entity elects, or is required by local regulation, to present separate financial statements. It does not mandate which entities produce separate financial statements, and it does not prescribe accounting for entities that do not have any investment in a subsidiary, joint venture or associate; the financial statements of an entity that has no such investments are not 'separate financial statements' in the IAS 27 sense, but simply its own financial statements.

Key definitions

term: Separate financial statements
definition: Financial statements presented by a parent, or an investor with joint control of or significant influence over an investee, in which investments are accounted for at cost, in accordance with IFRS 9, or using the equity method, rather than on the basis of the reported amounts in consolidated financial statements.
term: Consolidated financial statements
definition: The financial statements of a group in which the assets, liabilities, equity, income, expenses and cash flows of the parent and its subsidiaries are presented as those of a single economic entity, per IFRS 10.
term: Cost method
definition: Measuring an investment at its cost (as amended for any impairment), with income recognised only to the extent the investor receives distributions from accumulated profits of the investee arising after the date of acquisition.
term: Equity method (in separate financial statements)
definition: An optional accounting policy choice under IAS 27 for investments in subsidiaries, joint ventures and associates, applying the same equity method mechanics as IAS 28, but chosen at the entity's discretion for separate financial statements rather than being mandated.

Recognition

An investment in a subsidiary, joint venture or associate is recognised in separate financial statements on acquisition, applying the same recognition principles as for any other asset acquired, at cost (for the cost or equity method) or at fair value (for the IFRS 9 option). The same accounting policy must be applied for each category of investment (all subsidiaries, all joint ventures, or all associates), though different policies may be applied to different categories (e.g. subsidiaries at cost, associates using the equity method).

Initial measurement

An investment in a subsidiary, joint venture or associate is initially measured at cost if the cost or equity method is chosen, or at fair value if the IFRS 9 option is elected. Where separate financial statements are prepared for the first time, or a new investment is recognised as part of a common-control reorganisation meeting IAS 27's specific scope for such transactions, particular transition and measurement guidance applies to determine deemed cost.

Subsequent measurement

Under the cost method, the investment remains at cost, subject to impairment testing under IAS 36 if indicators exist, with dividend income recognised in profit or loss when the investor's right to receive payment is established, regardless of whether the dividend is paid out of pre- or post-acquisition profits of the investee (a 2014 IAS 27 amendment removed the prior distinction). Under the IFRS 9 option, the investment is remeasured to fair value at each reporting date, with changes recognised in profit or loss or OCI depending on the classification elected. Under the equity method option, the investment is adjusted each period for the investor's share of the investee's profit or loss and other comprehensive income, following the same mechanics as IAS 28's equity method.

Presentation

Separate financial statements are presented in addition to consolidated financial statements (or financial statements in which investments in associates or joint ventures are equity accounted under IAS 28), and must disclose that fact, together with the name and principal place of business of the entity (or entities) whose consolidated financial statements have been produced for public use, and a list of significant investments in subsidiaries, joint ventures and associates including their name, principal place of business, proportion of ownership interest, and, if different, proportion of voting rights held.

Disclosure checklist

The fact that the financial statements are separate financial statements, that the exemption from consolidation has been used (if applicable), the name and registered office of the entity whose consolidated financial statements comply with IFRS and are available for public use, and the accounting method used for investments in subsidiaries, joint ventures and associates.
A list of significant investments in subsidiaries, joint ventures and associates, including the name, principal place of business (and country of incorporation if different), proportion of ownership interest, and proportion of voting rights held if different from the ownership interest.
A description of the method used to account for each of the investments listed.
For an investment entity that does not consolidate its subsidiaries, disclosure of that fact and the required investment entity disclosures.

Practical treatment

The practical starting point is confirming whether the entity's own financial statements are genuinely 'separate financial statements' in the IAS 27 sense (i.e. the entity has one or more investments in subsidiaries, joint ventures or associates) or are simply its ordinary financial statements because it has no such investments. Where separate financial statements are prepared, the accounting policy choice (cost, IFRS 9, or equity method) should be made deliberately and documented, since it is applied consistently to each category of investment and a change is a change in accounting policy under IAS 8, not a free annual choice. See nigeria_notes for how this interacts with Nigerian statutory filing practice.

Common mistakes

Confusing separate financial statements with consolidated financial statements, or presenting only one when both are required.
Applying inconsistent measurement bases within the same category of investment (e.g. some subsidiaries at cost, others at fair value) without a substantive policy basis for the distinction.
Continuing to distinguish pre- and post-acquisition dividends from subsidiaries when recognising dividend income under the cost method, a distinction removed by the 2014 IAS 27 amendment; dividend income is now recognised in profit or loss when the right to receive payment is established, regardless of the source of the distributed profits.
Treating a change in measurement policy for investments in separate financial statements as a routine choice rather than a change in accounting policy requiring retrospective application and IAS 8 disclosure.
Omitting the required list of significant investments (name, place of business, ownership and voting proportions) from the separate financial statements notes.

Links with other standards

code: IFRS 10
relationship: IFRS 10 governs when consolidated financial statements are required and the specific conditions under which a parent is exempt from preparing them; IAS 27 governs the parent's own separate financial statements prepared in addition to (or, if exempt, instead of) consolidated statements.
code: IAS 28
relationship: IAS 28's equity method mechanics are the same mechanics an entity applies if it elects the equity method option for investments in subsidiaries, joint ventures or associates in its separate financial statements under IAS 27.
code: IFRS 9
relationship: Where an entity elects to measure an investment in a subsidiary, joint venture or associate at fair value in its separate financial statements, IFRS 9's classification and measurement requirements apply.
code: IAS 12
relationship: Because separate financial statements often form the basis of an entity's individual tax return in Nigeria, the accounting policy chosen under IAS 27 interacts with the current and deferred tax computation prepared under IAS 12 for that same legal entity.

CFO checklist

Confirm whether the entity's financial statements are genuinely 'separate financial statements' under IAS 27 (i.e. it holds investments in subsidiaries, joint ventures or associates) or simply its own standalone financial statements.
Document the accounting policy choice (cost, IFRS 9, or equity method) made for each category of investment, and apply it consistently.
Confirm dividend income from subsidiaries is recognised when the right to receive payment is established, without distinguishing pre- and post-acquisition profits.
Maintain the required list of significant investments (name, place of business, ownership/voting proportions) for note disclosure.
Coordinate separate financial statement preparation with CAMA 2020 statutory filing and CAC annual return timelines for each Nigerian entity in the group.
Confirm any change in measurement policy for investments is treated, disclosed and applied as an IAS 8 accounting policy change.

FAQs

q: Do we have to consolidate as well as prepare separate financial statements?
a: In most cases, yes: separate financial statements are prepared in addition to consolidated financial statements, not instead of them, unless the parent meets IFRS 10's specific conditions for exemption from preparing consolidated financial statements at all (for example, being itself a wholly or partially owned subsidiary of another entity that produces IFRS-compliant consolidated financial statements available for public use).
q: Can we measure our investment in one subsidiary at cost and another at fair value?
a: The same accounting policy must be applied to each category of investment (all subsidiaries, all joint ventures, all associates) as a whole, but different policies may be applied across different categories; measuring some subsidiaries at cost and others at fair value within the same category would not be consistent with IAS 27 unless there were a substantive basis for treating them as genuinely different categories.
q: We received a dividend from our subsidiary out of profits earned before we acquired it — do we treat this differently from a post-acquisition dividend?
a: No. Following the 2014 amendment to IAS 27, dividend income from an investment in a subsidiary, joint venture or associate measured at cost is recognised in profit or loss when the investor's right to receive payment is established, regardless of whether the dividend is paid out of pre-acquisition or post-acquisition profits of the investee; the prior distinction has been removed.

Nigeria application notes

Regulatory overlay

IAS 27 applies in full to Nigerian public interest entities under the FRCN Act 2011 mandate. [S3] CAMA 2020 requires every Nigerian company, including a holding company that also prepares group financial statements, to prepare and file its own individual (separate) financial statements and annual returns with the CAC; a Nigerian parent's separate financial statements under IAS 27 are therefore not merely an optional IFRS presentation choice but generally a practical necessity for Nigerian statutory compliance. [S4] Where an investment in a subsidiary is itself acquired or disposed of, the CAC filing and share-transfer mechanics applicable to that transaction (and any sector-regulator consent required) affect the acquisition-date recognition of the investment in the parent's separate financial statements, though not the IAS 27 measurement policy applied to it thereafter. [S5]

Tax interaction (Nigeria)

Nigerian companies income tax is assessed on a separate-legal-entity basis, using each entity's own (separate) financial statements as the practical starting point for the tax computation, at the standard illustrative rate of 30% (or the small-company rate, subject to qualifying conditions) under the Nigeria Tax Act 2025; a parent's separate financial statements under IAS 27, not its consolidated financial statements, are what the Nigerian tax computation is actually built from for that legal entity. [S6][S_TAX1][S_TAX2] Nigerian rates, thresholds, exemptions, incentives and filing rules referenced in this file (including CIT, VAT, CGT, stamp duties, withholding tax categories, and the small-company threshold) should be independently verified against the Nigeria Tax Act 2025, the Nigeria Tax Administration Act 2025, CAC/CAMA requirements, FRCN guidance, and current NRS practice at the reporting or filing date, since thresholds, rates and reliefs are subject to periodic revision and to sector- or entity-specific qualifying conditions. This file does not constitute legal or tax advice. [S_TAX1][S_TAX2]

FX considerations

Where an investment in a foreign subsidiary is held at cost in a Nigerian parent's naira-denominated separate financial statements, the cost is not retranslated (being a non-monetary item), but any dividend receivable from that subsidiary, once the right to receive payment is established, is a monetary asset retranslated at the closing rate under IAS 21 until settlement, so naira volatility can affect the receivable even though the investment's carrying cost does not change.

SME practical note

Nigerian holding company structures set up by SME and family business groups often prepare only consolidated financial statements informally, without a clear, separate set of parent-entity-only statements; Outliers recommends confirming early in any engagement whether CAMA 2020 requires standalone statutory accounts for the parent entity itself, since this is usually the case and is easy to overlook when group reporting is the primary focus of a conversion engagement.

Common Nigerian pitfalls

Preparing only consolidated financial statements for a Nigerian parent company without also preparing the separate financial statements CAMA 2020 requires for statutory filing.
Confusing the parent's own tax computation (based on its separate financial statements) with the group's consolidated results, which are not directly taxed as a single unit in Nigeria.
Applying inconsistent investment measurement policies across subsidiaries without a documented, substantive basis.
Overlooking the dividend-recognition timing rule (recognised on establishment of the right to receive payment, not on declaration or cash receipt) when accounting for subsidiary dividends in the parent's separate financial statements.

FRC pronouncements

No FRCN pronouncement specific to IAS 27 has been identified; the relevant FRCN context is its overarching mandate to promote IFRS compliance, operating alongside CAMA 2020's own statutory financial statement requirements at the individual entity level. [S3][S4]

Worked examples

Dividend income recognition under the cost method

A Nigerian parent company holds its investment in a wholly owned subsidiary at cost in its separate financial statements. The subsidiary's board declares a dividend of ₦25,000,000 to the parent on 15 March, payable on 30 April. The parent's right to receive the dividend is established on the declaration date.

Facts

Workings

Dividend income is recognised in the parent's separate financial statements profit or loss when its right to receive payment is established — the declaration date (15 March) — not the later payment date, and regardless of whether the dividend is paid from the subsidiary's pre- or post-acquisition profits.

Journal entries

Recognise dividend income and the related receivable on establishment of the right to receive payment.

Account	Dr (₦)	Cr (₦)
Dividend receivable from subsidiary	25,000,000
Dividend income (profit or loss)		25,000,000

Recognise cash receipt on settlement of the dividend receivable.

Account	Dr (₦)	Cr (₦)
Cash	25,000,000
Dividend receivable from subsidiary		25,000,000

Choosing between cost, IFRS 9 and equity method for a subsidiary investment

A Nigerian holding company is preparing separate financial statements for the first time and must select an accounting policy for its investment in a wholly owned trading subsidiary. Management considers three options: carrying the investment at cost, measuring it at fair value under IFRS 9, or applying the equity method.

Facts

Workings

All three options are permitted by IAS 27; the choice is an accounting policy decision, not a measurement requirement dictated by the standard itself.

Cost model: simplest to apply, but does not reflect the subsidiary's post-acquisition performance in the parent's own separate statement of financial position.

IFRS 9 fair value model: reflects current value but requires an ongoing fair value assessment for an unlisted subsidiary, which can be onerous and judgement-heavy.

Equity method: reflects the parent's share of the subsidiary's post-acquisition profits and OCI in the separate financial statements, offering a middle ground, but adds complexity relative to the cost model.

Management documents its choice (for example, the cost model, given the practical difficulty of obtaining a reliable fair value for an unlisted subsidiary) and applies it consistently to this category of investment going forward.

Sources & citations

[S1]IAS 27 Separate Financial Statements — IFRS Foundationaccessed 2026-07-18
[S2]IAS 27 — Separate Financial Statements (standard summary) — IAS Plus, Deloitteaccessed 2026-07-18
[S3]IFRS - Use of IFRS Standards by jurisdiction: Nigeria — IFRS Foundationaccessed 2026-07-18
[S4]Highlights of the provisions relating to financial statements, audit and annual returns in CAMA 2020 — Dentons ACAS-Lawaccessed 2026-07-18
[S5]Navigating Corporate Decisions in Nigerian Companies Limited by Shares Under CAMA 2020 — The Legal Troveaccessed 2026-07-18
[S6]Nigeria - Corporate - Taxes on corporate income — PwC Worldwide Tax Summariesaccessed 2026-07-18
[S_TAX1]Nigeria Tax Act, 2025 has been signed – highlights — EY Globalaccessed 2026-07-18
[S_TAX2]The Nigerian Tax Reform Acts — PwC Nigeriaaccessed 2026-07-18

Last reviewed 2026-07-18 · Reviewer: Rafiu Olawuyi, FCA