In July 2021, the IASB published the Exposure Draft Subsidiaries without Public Accountability: Disclosures that introduced proposals which would allow eligible subsidiaries that are small and medium-sized entities (SMEs) to apply International Financial Reporting Standards (IFRSs) but with reduced disclosure requirements.

In its final comment letter, which has been informed after in-house research, a preparer survey, a user survey and feedback received during stakeholder roundtables and interviews, the UKEB:

• supports the IASB’s efforts to develop an IFRS Standard that would permit eligible subsidiaries to apply recognition and measurement requirements in full IFRS, but with a reduced set of disclosure requirements.  It sees that there will be a number of benefits to the Standard including reduced audit work and the provision of information that is proportionate to the needs of users of such financial statements.  
• indicates that it expects the draft standard to be attractive to UK groups with overseas subsidiaries, where the group prepares consolidated financial statements in accordance with IFRS but that UK groups with only UK registered subsidiaries are likely to continue to apply FRS 101 Reduced Disclosure Framework.
• whilst broadly agreeing with the scope of the proposals, recommends that the IASB extends the scope so that an ultimate parent of a group, that does not itself have public accountability, may also take advantage of the reduced-disclosure framework when preparing its individual financial statements.
• highlights concerns regarding the scope of the proposals which are currently limited to subsidiaries whose ultimate or intermediate parents produce consolidated financial statements in accordance with IFRS.  The UKEB indicates that this will limit the uptake of the draft Standard.
• suggests that the IASB reviews its ‘bottom-up approach’ to reduced disclosure and considers aligning it more closely with the ‘top-down approach’ that the UK experience has demonstrated as being cost effective for preparers and which provides decision-useful information for users. 
• identifies that further reductions in disclosure requirements could be made with respect to IFRS 7 Financial Instruments: Disclosures and IFRS 13 Fair Value Measurement.
• recommends subsidiaries should also be required to disclose in the notes the name of the entity in the group that reports on the IFRS 7 risk management and the IFRS 13 fair value disclosures as it believes that such a cross reference will be helpful to users of the accounts.
• recommends that the IASB considers including a clearer articulation of the users’ information needs (specific consideration of the information needs of non-controlling shareholders and bank credit departments) and how these reduced disclosures address them.  
• does not support the ED proposals that subsidiaries that are not publicly accountable (but may be within scope of the ED) should provide the full IFRS 17 disclosure requirements.  The UKEB recommends that the IASB proposes reduced disclosures for subsidiaries without public accountability as part of the exposure drafts for any new or amended IFRS. 

The final comment letter and the feedback statement are available on the UKEB website.