Background 

When their parent applies IFRS Accounting Standards, subsidiaries apply the recognition and measurement requirements in IFRS Accounting Standards when reporting to their parent for consolidation purposes.

As part of the 2015 agenda consultation, the IASB received feedback that some of these subsidiaries would prefer to prepare their own financial statements by applying IFRS Accounting Standards with reduced disclosure requirements. The IASB acknowledged that the International Financial Reporting Standard for Small and Medium-sized Entities IFRS for SMEs standard) is unattractive for these subsidiaries because its recognition and measurement requirements differ from those in IFRS Accounting Standards. Thereby, a subsidiary applying the IFRS for SMEs standard would be required to maintain additional accounting records.

To address this issue, the IASB decided to initiate a project that would analyse adaptations required to the disclosure requirements of the IFRS for SMEs and possibly develop a reduced disclosure IFRS that would allow eligible subsidiaries to apply, in principle, the recognition and measurement requirements of full IFRSs and the disclosure requirements of the IFRS for SMEs with minimal tailoring of those disclosure requirements. As part of this project, the IASB published an exposure draft (ED) titled Subsidiaries without Public Accountability: Disclosures in July 2021. The ED proposed to eliminate disclosures that are not targeted to the needs of users of financial statements of entities that do not have public accountability.

The IASB has now finalised this project by publishing IFRS 19.

Objective 

IFRS 19 specifies the disclosure requirements an entity is permitted to apply instead of the disclosure requirements in other IFRS Accounting Standards. 

Scope 

An entity is only permitted to apply IFRS 19 when:

• it is a subsidiary
• it does not have public accountability, and
• its ultimate or any intermediate parent produces consolidated financial statements available for public use that comply with IFRS Accounting Standards.

A subsidiary has public accountability if:

• its debt or equity instruments are traded in a public market or it is in the process of issuing such instruments for trading in a public market (a domestic or foreign stock exchange or an over-the-counter market, including local and regional markets), or
• it holds assets in a fiduciary capacity for a broad group of outsiders as one of its primary businesses (for example, banks, credit unions, insurance companies, securities brokers/ dealers, mutual funds and investment banks often meet this second criterion).

Eligible entities can, but are not required to, apply IFRS 19 in its consolidated, separate or individual financial statements. 

The reduced disclosure requirements 

The disclosure requirements in IFRS 19 are a reduced version of the disclosure requirements set out in other IFRS Accounting Standards. 

IFRS 19 is a disclosure-only standard. An eligible subsidiary that applies IFRS 19 is required to apply the requirements in other IFRS Accounting Standards for recognition, measurement and presentation requirements. For disclosure requirements, it applies IFRS 19 instead of the disclosure requirements in other IFRS Accounting Standards, except in specified circumstances.

In accordance with IFRS 18 Presentation and Disclosure in Financial Statements, an entity applying IFRS 19 is not required to provide a specific disclosure required by IFRS 19 if the information resulting from that disclosure would not be material.

An entity is required to consider whether to provide additional disclosures when compliance with the specific requirements in IFRS 19 is insufficient to enable users of financial statements to understand the effect of transactions and other events and conditions on the entity’s financial position and financial performance.

Effective date and transition 

IFRS 19 is effective for reporting periods beginning on or after 1 January 2027. Earlier application is permitted. If an entity chooses to apply IFRS 19 earlier, it is required to disclose that fact. If an entity applies IFRS 19 in the current reporting period but not in the immediately preceding period, it is required to provide comparative information (that is, information for the preceding period) for all amounts reported in the current period’s financial statements, unless IFRS 19 or another IFRS Accounting Standard permits or requires otherwise. 

An entity that elects to apply IFRS 19 for a reporting period earlier than the reporting period in which it first applies IFRS 18 is required to apply a modified set of disclosure requirements set out in an appendix to IFRS 19. 

Catch-up exposure draft 

In developing IFRS 19, the IASB took into account disclosure requirements in IFRS Accounting Standards as at 28 February 2021. Disclosure requirements in standards that have been added or amended subsequent to that date have been included unchanged. Subsidiaries applying IFRS 19 will therefore need to provide all the disclosures required by these new or amended IFRSs. The IASB will publish a ‘catch-up’ exposure draft of proposed amendments to IFRS 19 on disclosure requirements added to, or amended in, IFRS Accounting Standards between 28 February 2021 and May 2024. The catch-up exposure draft is expected to be published in Q3 of 2024.

Additional information 

Website of the IFRS Foundation:

• Press release
• Project summary and feedback statement
• Effects analysis
• Access to the standard (subscription required)
• Access to the basis for conclusions (subscription required)
• Guidance for developing and drafting disclosure requirements in IFRS Accounting Standards

IAS Plus:

• Summary of IFRS 19 Subsidiaries without Public Accountability: Disclosures
• Overview of the project history
• iGAAP in Focus newsletter explaining the requirements