IFRS 19 — Subsidiaries without Public Accountability: Disclosures

On 9 May 2024, the International Accounting Standards Board (IASB) published the new standard IFRS 19 'Subsidiaries without Public Accountability: Disclosures', which allows an eligible subsidiary to make reduced disclosures when applying IFRS Accounting Standards in its financial statements. IFRS 19 is optional for subsidiaries that are eligible and sets out the disclosure requirements for subsidiaries that make a revokable election to apply it. IFRS 19 is effective for reporting periods beginning on or after 1 January 2027 with earlier application permitted.

In this short article, we shall discuss and summarise IFRS 19 including the objective, scope, overall disclosures requirements and transition provisions.

Objective

IFRS 19 Subsidiaries without Public Accountability: Disclosures specifies the disclosure requirements an entity is permitted to apply instead of the disclosure requirements in other IFRS Accounting Standards (IFRS19:1).

An entity electing to electing to apply IFRS 19 applies the requirements in other IFRS Accounting Standards, except for the disclosure requirements for which the entity instead applies the requirements in IFRS 19.

Therefore, unless specified otherwise (see exceptions below ), an entity applying this IFRS 19 need not apply the disclosure requirements in other IFRS Accounting Standards nor apply any statements about, or references to, those disclosures. The exceptions to the above requirements are specified under IFRS 19:4 as follows:

Notwithstanding paragraphs 2–3:

(a) disclosure requirements in other IFRS Accounting Standards that remain applicable to

an entity applying IFRS 19 are specified in this Standard.

(b) if an entity applying IFRS 19 applies IFRS 8 Operating Segments, IFRS 17

Insurance Contracts or IAS 33 Earnings per Share, it shall apply all the disclosure

requirements in those Standards.

(c) a new or amended IFRS Accounting Standard may include disclosure

requirements about an entity’s transition to that Standard. Any relief available to an

entity applying IFSR 19 from disclosure requirements about the entity’s transition

to that new or amended Standard will be set out in the new or amended IFRS

Accounting Standard.

In accordance with IFRS 18, 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.

IFRS 19:6 requires an entity 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.

Scope

An entity may elect to apply IFRS 19 in its consolidated, separate or individual financial statements if, and only if, at the end of the reporting period: (IFRS 19:7)?

(a) it is a subsidiary;?

(b) it does not have public accountability; and?

(c) it 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:

(a) its debt or equity instruments are traded in a public market or it is inthe 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

(b) 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).

Some entities may hold assets in a fiduciary capacity for a broad group of outsiders because they hold and manage financial resources entrusted to them by clients, customers or members not involved in the management of the entity. However, if they do so for reasons incidental to a primary business (as, for example, may be the case for travel or real estate agents, schools, charitable organisations, co-operative enterprises requiring a nominal membership deposit, and sellers that receive payment in advance of delivery of goods or services such as utility companies), that does not make them publicly accountable (IFRS 19:12)

Electing or revoking an election to apply IFRS 19?

An entity that elects to apply IFRS 19 in one reporting period may later revoke that election. An entity may elect to apply IFRS 19 more than once — for example, an entity that applied IFRS 19 in a prior period but not in the immediately preceding period may elect to apply IFRS 19 in the current period.IFRS 19:13)?

An entity that applies IFRS 19 in the current reporting period but not in the immediately preceding period shall 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. The entity shall include comparative information for narrative and descriptive information if it is necessary for an understanding of the current period’s financial statements. (IFRS 19:14).?

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. The entity shall include comparative information for narrative and descriptive information if it is necessary for an understanding of the current period’s financial statements. The fact that this Standard did not require the disclosure of amounts in the preceding period for some items that are disclosed in the current period is not a reason to omit comparative information for these items (IFRS 19:15)

The requirements for changes in accounting policies in IAS 8 Basis of Preparation of Financial Statements do not apply to electing or revoking an election to apply (IFRS 19:16).?

Interaction with IFRS 1 First-time Adoption of International Financial Reporting Standards

An entity that applies IFRS 19 when it prepares its first IFRS financial statements shall apply the disclosure requirements in paragraphs 21–30 of IFRS 19d instead of the disclosure requirements in paragraphs 23–33 of IFRS 1.

Disclosure requirements

Compliance with IFRS Accounting Standards?

An entity whose financial statements comply with IFRS Accounting Standards and the requirements in IFRS 19 is required to make an explicit and unreserved statement of such compliance in the notes. An entity that applies IFRS 19 is required to, as part of that unreserved statement, state that it has applied IFRS 19. An entity applying IFRS 19 is not permitted to describe financial statements as complying with IFRS Accounting Standards unless the entity complies with the requirements in IFRS 19 and all applicable requirements in other IFRS Accounting Standards IFRS

IFRS 19 reduced disclosures

IFRS 19:21 - 30 covers IFRS 1 disclosures, 31 - 34 covers IFRS 2 reduced disclosures,35 - 37 IFRS 3 and so on.

FRS 19 provides reduced disclosure requirements for 30 out of the 34 IFRS Accounting Standards with the disclosure requirements for 3 standards having to be applied in full (IFRS 8, IFRS 17 and IAS 33). Entities applying IAS 26 Accounting and Reporting by Retirement Benefit Plans do not meet the ‘not have public accountability’ criterion and are therefore not eligible to apply IFRS 19.

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