How to distinguish an entity preparing accounts under IFRS 10 para 27-33 or IAS 27 fair value option

[Leo]

Hi,

When looking at the FS of an entity, whether the entity is preparing FS accounts under exemption of investment entity, which allows the entity to show the investment in one line, at fair value under IFRS 9; or an entity which presents separate FS under IAS 27 para 10 with fair value option, and measures the investment in subs at fair value; both look similar.

In such a case, how can you tell that the entity is preparing accounts under IFRS 10 para 27-33 or IAS 27 fair value option?

1. Is it true that if an entity that prepares IFRS 10 para 27-33, should include all of its investments in investment at fair value, on the other hand, entity preparing IAS 27, only include it's immediate/direct investment in subs?

2. Is it true that an entity that prepares IFRS 10 para 27-33, should only measures its investment in subsidiaries in accordance with IFRS 9, for investment in associates, IAS 28 should be applied and, investment in equity instruments, IFRS 9 should be applied. On the other hand, an entity preparing FS under IAS 27, can only present investment in subs and associates etc. at cost (although expect to still present equity instrument investments at fair value under IFRS 9)?

3. A entity exempt by IFRS 10 para 27-33, are the FS still called consolidated FS or just financial statements?

Thanks

[Leo]

Just re-considering question 1, in a situation where a Topco hold one Midco which holds other subs.

Even if Topco prepares IFRS 10 para 27-33 can still present only Midco, because the fair value of Midco includes all of its subsidiaries. So for Topco, preparing IFRS 10 para 27-33, or preparing IAS 27 para 10 with fair value option, would result in the same numbers. There seems to be no way to tell them apart, Do you agree? Is there a naming convention or some specific disclosure, apart from it's primary statements? Do you agree?

So in essence, is the real difference dwells on the fact that under IAS 27, companies can recognise the investment in subs and associates at cost, however, companies under IFRS 10, even under exemption, cannot. That is really what I can think of. Everything else seems to be equal.

[Marek Muc]

See IAS 27.8A

An investment entity that is required, throughout the current period and all comparative periods presented, to apply the exception to consolidation for all of its subsidiaries in accordance with paragraph 31 of IFRS 10 presents separate financial statements as its only financial statements.

[Leo]

Thanks Marek, I have completely overlooked this, really helpful.

I guess that means that investment in associates and JV can be recognised at cost? Because under IAS 27, that's a possible option.

(Investment in equity instruments in investee under 20% are kept under IFRS 9).

[Marek Muc]

yes

[Leo]

When I say at cost, this means subsequently held at cost also, not by applying Equity method.