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European Discussion Paper on separate financial statements

  • EFRAG (European Financial Reporting Advisory Group) (dk green) Image

01 Sep 2014

In a joint effort as part of EFRAG's proactive agenda, the European Financial Reporting Advisory Group (EFRAG), the Spanish Instituto de Contabilidad y Auditoría de Cuentas (ICAC), the Italian Organismo Italiano di Contabilità (OIC) and the Dutch Raad voor de Jaarverslaggeving (RJ) have published a discussion paper on ‘Separate Financial Statements’.

In June 2002, the European Union adopted the IAS Regulation requiring European companies listed in an EU securities market to prepare their consolidated financial statements in accordance with IFRSs starting with financial statements for financial year 2005 onwards. In addition EU countries were given several options regarding the use of IFRSs in unconsolidated financial statements, therefore, EU member states have the option to permit or require companies to prepare separate financial statements in conformity with IFRS.

As the focus of IFRS is, generally, on the preparation of consolidated financial statements, is some cases it is sometimes unclear how some accounting issues in separate financial statements should be dealt with and a number of practical concerns have arisen in the application of IFRS to the separate financial statements.

The discussion paper published today aims to address these concerns by considering how separate financial statements are used in Europe for economic decision-making and analyses the technical financial reporting issues that arise under IFRS when preparing such financial statements. The paper also proposes solutions to the issues identified and suggestions on how to consider separate financial statements in the future. The following points are identified as being especially important to address:

  • clarification of the objective of separate financial statements,
  • development of guidance on how to account for transaction costs and contingent consideration in separate financial statements,
  • initiation of a comprehensive debate on common control transactions as the method of accounting for such transactions may impair the usefulness of separate financial statements,
  • consideration of the accounting for business combinations under common control in the acquirer's separate financial statements, and
  • strengthening of the disclosures on distributions to equity holders.

Comments on the discussion paper are requested by 31 December 2014. Please click for the following additional information:

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