IASB issues IFRS 19 Subsidiaries without Public Accountability: Disclosures
IASB issues IFRS 19 Subsidiaries without Public Accountability: Disclosures
On 9 May 2024, the International Accounting Standards Board (IASB) issued IFRS 19 Subsidiaries without Public Accountability: Disclosures.
When a parent company prepares consolidated financial statements that comply with IFRS Accounting Standards®, its subsidiaries are required to report to the parent using IFRS Accounting Standards. For their own financial statements, subsidiaries are permitted to use IFRS for SMEs® Accounting Standard if they meet the eligibility criteria. However, such subsidiaries may not opt to apply IFRS for SMEs as they are already required to report to their parent entities using IFRS Accounting Standards and IFRS for SMEs Accounting Standard differs significantly from ‘full’ IFRS Accounting Standards. When subsidiaries apply IFRS Accounting Standards for their own financial statements, they are required to provide the disclosures required by IFRS Accounting Standards, which may be disproportionate to the information needs of their users.
This issue was highlighted by stakeholders in their response to the IASB’s Request for Views – 2015 Agenda Consultation. The stakeholders asked the IASB to permit a subsidiary reporting to a parent applying IFRS Accounting Standards in its consolidated financial statements to apply IFRS Accounting Standards with reduced disclosure requirements in its own financial statements. Considering this feedback, the IASB added a project to its research pipeline to provide reduced disclosure requirements for subsidiaries without public accountability. The project has now culminated in the issuance of IFRS 19, which permits eligible subsidiaries to apply reduced disclosure requirements while applying the recognition, measurement and presentation requirements in IFRS Accounting Standards.
An entity is eligible to apply IFRS 19 in its consolidated, separate or individual financial statements if it meets the eligibility criteria at the end of the reporting period.
The eligibility criteria are:
An entity has public accountability if:
The structure of IFRS 19 and approach adopted by the IASB for developing the disclosure requirements
The disclosure requirements in IFRS 19 are organised into subsections relating to each IFRS Accounting Standard. A subsidiary applying IFRS 19 will apply an IFRS Accounting Standard to a transaction, other event or condition and then apply the disclosure requirements set out under the subheading of that IFRS Accounting Standard in IFRS 19.
In developing the disclosures in IFRS 19 relating to each IFRS Accounting Standard, the IASB adopted the following approach:
Comparative information
An entity that applies IFRS 19 in the current reporting period but not in the immediately preceding period is required to provide comparative information 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 applied IFRS 19 in the preceding reporting period, but elects not to (or is no longer eligible to) apply it in the current period and continues applying IFRS Accounting Standards, is required to provide comparative information with respect to the preceding period for all amounts reported in the current period’s financial statements, unless another IFRS Accounting Standard permits or requires otherwise.
Effective date
IFRS 19 is effective for annual reporting periods beginning on or after 1 January 2027 with earlier application permitted.
The IASB’s project page contains all published documents related to IFRS 19.
BDO will issue an International Financial Reporting Bulletin which will provide detailed information on the requirements of IFRS 19. BDO will also issue an update to its IFRS Accounting Standards At a Glance series and other publications in due course.
When a parent company prepares consolidated financial statements that comply with IFRS Accounting Standards®, its subsidiaries are required to report to the parent using IFRS Accounting Standards. For their own financial statements, subsidiaries are permitted to use IFRS for SMEs® Accounting Standard if they meet the eligibility criteria. However, such subsidiaries may not opt to apply IFRS for SMEs as they are already required to report to their parent entities using IFRS Accounting Standards and IFRS for SMEs Accounting Standard differs significantly from ‘full’ IFRS Accounting Standards. When subsidiaries apply IFRS Accounting Standards for their own financial statements, they are required to provide the disclosures required by IFRS Accounting Standards, which may be disproportionate to the information needs of their users.
This issue was highlighted by stakeholders in their response to the IASB’s Request for Views – 2015 Agenda Consultation. The stakeholders asked the IASB to permit a subsidiary reporting to a parent applying IFRS Accounting Standards in its consolidated financial statements to apply IFRS Accounting Standards with reduced disclosure requirements in its own financial statements. Considering this feedback, the IASB added a project to its research pipeline to provide reduced disclosure requirements for subsidiaries without public accountability. The project has now culminated in the issuance of IFRS 19, which permits eligible subsidiaries to apply reduced disclosure requirements while applying the recognition, measurement and presentation requirements in IFRS Accounting Standards.
An entity is eligible to apply IFRS 19 in its consolidated, separate or individual financial statements if it meets the eligibility criteria at the end of the reporting period.
The eligibility criteria are:
- the entity is a subsidiary (as defined in Appendix A of IFRS 10 Consolidated Financial Statements);
- the entity does not have public accountability; and
- the entity has an ultimate or intermediate parent that produces consolidated financial statements available for public use that comply with IFRS Accounting Standards.
An entity 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; or
- it holds assets in a fiduciary capacity for a broad group of outsiders as one of its primary businesses.
The structure of IFRS 19 and approach adopted by the IASB for developing the disclosure requirements
The disclosure requirements in IFRS 19 are organised into subsections relating to each IFRS Accounting Standard. A subsidiary applying IFRS 19 will apply an IFRS Accounting Standard to a transaction, other event or condition and then apply the disclosure requirements set out under the subheading of that IFRS Accounting Standard in IFRS 19.
In developing the disclosures in IFRS 19 relating to each IFRS Accounting Standard, the IASB adopted the following approach:
- If the recognition and measurement requirements were the same in the IFRS for SMEs Accounting Standard and IFRS Accounting Standards, the disclosure requirements in the IFRS for SMEs Accounting Standard are used in IFRS 19, subject to updating the language for consistency with other IFRS Accounting Standards.
- If recognition and measurement requirements in the IFRS for SMEs Accounting Standard differed from those in IFRS Accounting Standards, disclosure requirements in IFRS 19 were developed directly from IFRS Accounting Standards, applying the principles used for developing the disclosure requirements in the IFRS for SMEs Accounting Standard.
Comparative information
An entity that applies IFRS 19 in the current reporting period but not in the immediately preceding period is required to provide comparative information 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 applied IFRS 19 in the preceding reporting period, but elects not to (or is no longer eligible to) apply it in the current period and continues applying IFRS Accounting Standards, is required to provide comparative information with respect to the preceding period for all amounts reported in the current period’s financial statements, unless another IFRS Accounting Standard permits or requires otherwise.
Effective date
IFRS 19 is effective for annual reporting periods beginning on or after 1 January 2027 with earlier application permitted.
The IASB’s project page contains all published documents related to IFRS 19.
BDO will issue an International Financial Reporting Bulletin which will provide detailed information on the requirements of IFRS 19. BDO will also issue an update to its IFRS Accounting Standards At a Glance series and other publications in due course.