Proactive Project on Separate Financial Statements

The OIC, the Spanish Instituto de Contabilidad y Auditoría de Cuentas (ICAC), the Dutch Raad voor de Jaarverslaggeving (RJ) and the European Financial Reporting Advisory Group (EFRAG), have published today a Discussion Paper on ‘Separate Financial Statements’. The Discussion Paper is the result of a joint project as part of EFRAG’s proactive agenda.

It is widely accepted that financial statements presented by a parent company or an investor, whether prepared under IFRS or local GAAP, provide decision-useful information to users, including information about an entity’s capability to generate cash flows to repay its debt and distribute dividends to its shareholders. They also provide information on intra-group relationships and economic inter-dependencies. More importantly, they serve a critical role in determining compliance with legal requirements in numerous jurisdictions.

Since the option in the 2002 IAS Regulation has enabled companies to prepare their annual accounts in conformity with IFRS, where Member States have selected the option, a number of practical concerns have arisen in the application of IFRS to the separate financial statements.

This Discussion Paper aims to address these concerns by considering how financial statements (other than consolidated financial statements) are used in Europe for economic decision making, and analysing the technical financial reporting issues that arise when preparing such financial statements under IFRS. Finally, the Discussion Paper proposes solutions to the issues identified and suggestions on how to consider separate financial statements in the future.

The Discussion Paper is open for comment until 31 December 2014.

On 15 Aprile 2015 the feedback statement has beenpublished. It summarises the feedback received from 7 respondents and from the outreach activities undertaken, including feedback obtained from the EFRAG User Panel and the IASB’s Capital Markets Advisory Committee.

Most respondents and participants in meetings welcomed the initiative of EFRAG and its partners in issuing the DP as a way of stimulating the discussion on separate financial statements, a topic that historically has received little attention from the IASB. While not all respondents considered that separate financial statements give rise to significant issues, a majority agreed that it would be useful if the IASB reviewed existing requirements, with a view to developing a specific set of general principles for separate financial statements.