1. What IND AS 27 Covers — Separate vs Consolidated Statements
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 are accounted for at cost, per IND AS 109, or using the equity method — rather than being consolidated line by line under IND AS 110, or equity-accounted the "full" way IND AS 28 requires in consolidated statements. Separate financial statements are additional to, not a substitute for, consolidated financial statements when consolidation is required.
2. The Three Measurement Options
| Option | Basis |
|---|---|
| Cost | The investment is carried at historical cost, less any impairment |
| IND AS 109 | The investment is measured at fair value, typically through profit or loss, or through OCI for a qualifying equity-instrument election |
| Equity method | As described in IND AS 28 — the investment balance is adjusted each period for the investor's share of the investee's profit or loss and OCI |
An entity applies the same accounting method for each category of investment (subsidiaries, joint ventures, and associates can each use a different method from one another, but must be internally consistent within each category).
3. Consistency Across the Investment Category
If an entity elects, for example, to measure its investments in subsidiaries at cost, it must apply that same cost basis to all of its subsidiary investments — it cannot measure one subsidiary at cost and another at fair value through IND AS 109 within the same category, though it could validly use a different method entirely for its associates or joint ventures.
4. Dividend Recognition
A dividend from a subsidiary, joint venture or associate is recognised in profit or loss in the investor's separate financial statements when the investor's right to receive the dividend is established — regardless of whether the dividend is paid out of the investee's pre-acquisition or post-acquisition profits. The investor also considers whether receiving the dividend is an indicator that the investment may be impaired (e.g. a dividend that exceeds the investee's total comprehensive income for the relevant period can be a red flag).
5. Why This Standard Matters So Much in India
Unlike some jurisdictions where separate financial statements are prepared only voluntarily, Indian company law (the Companies Act, 2013) independently requires every company — including one that also prepares consolidated financial statements because it has subsidiaries — to prepare its own standalone (separate) financial statements. This gives IND AS 27 direct, everyday relevance for essentially every Indian company with investments in subsidiaries, associates, or joint ventures, not just a niche or optional scenario.
6. Worked Example — Cost Method vs Equity Method in Separate FS
Scenario: Marigold Holdings Ltd acquires 100% of Sundew Textiles Ltd for ₹5,00,00,000. In Year 1, Sundew earns profit of ₹60,00,000 and pays a dividend of ₹20,00,000.
| Item | Cost Method (₹) | Equity Method (₹) |
|---|---|---|
| Investment — opening balance | 5,00,00,000 | 5,00,00,000 |
| Add: Share of profit | — (not recognised) | 60,00,000 |
| Less: Dividend received | — (recognised as income instead) | (20,00,000) |
| Investment — closing balance | 5,00,00,000 | 5,40,00,000 |
Under the cost method, Marigold's separate P&L shows ₹20,00,000 of dividend income, and the investment stays at ₹5,00,00,000. Under the equity method, Marigold instead picks up its full ₹60,00,000 share of Sundew's profit through P&L, with the dividend reducing the investment balance (not recognised as separate income) — the two methods produce materially different separate-financial-statement profit and investment carrying amounts, even though the underlying economics are identical.
Explore Finosutra's IND AS tools
Free calculators for lease accounting, security deposits, ECL provisioning and financial statement generation — audit-ready workpapers in minutes.
Explore IND AS Tools →7. IND AS 27 vs Old IGAAP (AS 21) — Key Differences
| Aspect | Old IGAAP (AS 21 and related) | IND AS 27 |
|---|---|---|
| Standalone statement measurement | Investments in subsidiaries generally at cost less impairment, in the parent's own separate books | Explicit choice of three methods: cost, IND AS 109, or equity method |
| Fair value option | Not generally available for investments in subsidiaries | Available via the IND AS 109 measurement option |
| Equity method in separate statements | Not a standard option for standalone financial statements | Explicitly permitted, distinct from the "full" equity method mechanics used in consolidated statements |
| Dividend recognition | Broadly similar principle | Explicit rule — recognised when the right to receive is established, regardless of pre/post-acquisition profit source |
8. Disclosures Required
An entity preparing separate financial statements discloses the fact that the statements are separate financial statements, that the exemption from consolidation (if applicable) has been used, the name and registered office of the entity whose consolidated financial statements are publicly available, a list of significant investments in subsidiaries, joint ventures and associates, and the method used to account for those investments.
9. Common Mistakes CAs Make
Error 1 — Assuming separate financial statements can substitute for required consolidated financial statements. Where consolidation is required, separate financial statements are additional to, never a replacement for, the consolidated statements.
Error 2 — Mixing measurement methods within the same investment category. If cost is chosen for subsidiaries, it must apply to all subsidiary investments consistently — switching between methods within one category is not permitted.
Error 3 — Not recognising a dividend as income under the cost method because it comes from pre-acquisition profits. Under IND AS 27's separate financial statements, the dividend is recognised in profit or loss regardless of its source within the investee — this is a genuine departure from some older approaches that treated pre-acquisition dividends as a return of capital.
Error 4 — Confusing the equity method as applied here with the version used in consolidated financial statements. While both reference IND AS 28's mechanics, the equity method in separate financial statements is a distinct single-line adjustment within an unconsolidated set of statements, not a step in building consolidated numbers.
10. FAQs
What are separate financial statements under IND AS 27?
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 IND AS 109, or using the equity method, rather than being consolidated line by line. They are additional to, not a replacement for, consolidated financial statements when a parent is required to prepare consolidated statements.
What are the three permitted measurement options for investments in separate financial statements?
An entity accounts for investments in subsidiaries, joint ventures and associates in its separate financial statements either at cost, in accordance with IND AS 109 (typically at fair value through profit or loss, or through OCI for certain equity instruments), or using the equity method as described in IND AS 28. The same method must be applied for each category of investment, though different categories can use different methods.
How is a dividend from a subsidiary recognised in the parent's separate financial statements?
A dividend from a subsidiary, joint venture or associate is recognised in profit or loss in the investor's separate financial statements when the investor's right to receive the dividend is established, regardless of whether the dividend is paid out of the investee's pre-acquisition or post-acquisition profits. The investor also considers whether the dividend indicates that the investment may be impaired.
Is it mandatory for every company to prepare separate financial statements?
No. IND AS 27 doesn't mandate that every entity prepare separate financial statements — it prescribes the accounting when an entity elects to, or is required by local law to, present them. In India, the Companies Act, 2013 requires a company that has one or more subsidiaries to prepare consolidated financial statements, and the company's own standalone (separate) financial statements are also required as a matter of Indian company law, giving IND AS 27 significant everyday relevance.
Why doesn't the equity method in separate financial statements produce the same result as consolidation?
The equity method under IND AS 27 in separate financial statements adjusts the single-line investment balance for the investor's share of the investee's profit or loss and OCI, without combining the underlying assets, liabilities, income and expenses line by line, and without eliminating intragroup transactions in the same comprehensive way full consolidation under IND AS 110 does. The parent's total equity typically ends up the same either way, but the individual line items on the face of the statements differ substantially.
Is IND AS 27 the same as IAS 27?
IND AS 27 is India's converged version of IAS 27 and follows the same three measurement options and dividend recognition principle. A key India-specific point is that the Companies Act, 2013 and SEBI regulations independently require separate (standalone) financial statements for Indian companies, giving IND AS 27 a broader everyday application in India than in some other jurisdictions where separate financial statements are prepared only voluntarily.