The Committee received a request for clarification on how entities that are established as new intermediate parents within a group determine the cost of their investments in subsidiaries when they account for these investments in their separate financial statements at cost in accordance with paragraph 38(a) of IAS 27 Consolidated and Separate Financial Statements (amended 2008) or paragraph 10(a) of IAS 27 Separate Financial Statements (revised 2011). The nature of this request serves to address reorganisations of groups that result in the new intermediate parent having more than one subsidiary.

The staff noted that the guidance in paragraphs 38B and 38C of IAS 27 (amended 2008) or paragraphs 13 and 14 of IAS 27 (revised 2011) cannot be applied directly to reorganisations of groups that result in the new intermediate parent having more than one subsidiary because the assets and the liabilities of the new group and the original entity or the original group are not the same immediately before and after the reorganisation.

Multiple Committee members supported the analysis performed by the staff and noted the clarity in current guidance. These Committee members expressed a desire to follow the guidance as written and not provide any interpretation. Other Committee members expressed a desire to consider common control guidance. While these Committee members acknowledged that the particular submission was not indicative of a business combination under common control, as discussed in the above project submissions, they noted that this is a common control transaction. Therefore, these Committee members expressed a preference to highlight consideration to IFRS 3 in addition to the IAS 27 guidance set forth above in providing any agenda decision.

Ultimately, given available and applicable guidance in IAS 27, the Committee decided not to add this issue to its agenda in noting the strict interpretation of IAS 27.