Ind AS 27 Separate Financial Statements: A Practitioner Guide for FY 2026-27
Ind AS 27 (Separate Financial Statements) is the Indian Accounting Standard that prescribes how an entity must account for investments in subsidiaries, joint ventures, and associates in its separate (standalone) financial statements.
The Ministry of Corporate Affairs notified Ind AS 27 via the Companies (Indian Accounting Standards) Rules, 2015. It became effective on a voluntary basis from 1 April 2015 and mandatory from 1 April 2016 for Phase I companies. Ind AS 27 replaced the investment accounting requirements of AS 13 for standalone financial statements.
For FY 2026-27, Ind AS 27 remains crucial for holding companies and groups presenting both consolidated and standalone results. In India, most holding companies use the cost method under Ind AS 27 to align with dividend distribution rules based on standalone profits as per Section 123 of the Companies Act, 2013.
Ind AS 27 at a Glance
Ind AS 27 sets out how entities must recognise and measure investments in subsidiaries, associates, and joint ventures when preparing separate financial statements. The standard is primarily used by holding companies and business groups reporting both consolidated and standalone results under Indian Accounting Standards.
| Field | Value |
|---|---|
| Standard Number | Ind AS 27 |
| Full Name | Separate Financial Statements |
| Issuing Body | ICAI (Accounting Standards Board) |
| Notified By | MCA, Companies (Indian Accounting Standards) Rules, 2015, dated 16 February 2015 |
| Effective Date | 1 April 2015 (voluntary), 1 April 2016 (mandatory Phase I) |
| Supersedes | AS 13 (Investments) for treatment of subsidiary, associate, JV investments in standalone FS |
| Equivalent Standard | AS 13 ↔ Ind AS 27 ↔ IAS 27 |
| Applies To | All companies required to follow Indian Accounting Standards that present separate (standalone) financial statements with investments in subsidiaries, joint ventures, or associates. Section 129 of Companies Act requires preparation of standalone FS alongside consolidated FS. |
What is Ind AS 27: Separate Financial Statements?
Ind AS 27 defines how an entity must present and account for its investments in subsidiaries, joint ventures, and associates when preparing separate or standalone financial statements. The standard offers a choice between measuring such investments at cost, fair value per Ind AS 109, or using the equity method described in Ind AS 28.
The Institute of Chartered Accountants of India introduced this standard as part of India's convergence with International Financial Reporting Standards (IFRS). It replaces the earlier requirements of Accounting Standard 13 (AS 13), which only permitted cost-based measurement with provisions for diminution in value. The introduction aligns Indian practice with IAS 27 issued by the International Accounting Standards Board.
CFOs, finance teams in holding companies or groups with multiple subsidiaries or associates, statutory auditors reviewing standalone accounts under Schedule III to the Companies Act 2013, all regularly use this standard.
Objective of Ind AS 27
- Prescribe accounting and disclosure requirements for investments in subsidiaries, joint ventures, and associates when an entity prepares separate financial statements.
- Establish that an investor has a choice of measuring such investments at cost, in accordance with Ind AS 109 (Financial Instruments), or using the equity method as described in Ind AS 28 (Para 10).
- Specify presentation and disclosure requirements for separate financial statements.
These objectives ensure that users of standalone financial statements receive relevant information about group relationships and investment values. This supports true and fair presentation as required by Section 129 of the Companies Act 2013.
Who Must Apply Ind AS 27?
Entities covered, applicability table
Ind AS applicability follows the phased roadmap notified by the Ministry of Corporate Affairs:
| Category | Applicability |
|---|---|
| Listed companies | Mandatory if net worth ≥ Rs 500 crore |
| Unlisted companies | Mandatory if net worth ≥ Rs 250 crore |
| Holding/subsidiary/JV/associate entities | If parent/group covered above |
Entities preparing separate (standalone) financial statements that hold investments in subsidiaries, joint ventures or associates must comply with Ind AS 27. Section 129(3) of the Companies Act 2013 requires every company having one or more subsidiaries to prepare both consolidated and standalone accounts.
Scope exclusions
Ind AS 110, Consolidated Financial Statements
Ind AS 28, Equity method as applied in consolidated FS
When the standard does not apply
Consolidated financial statements are governed by Ind AS 110 rather than by this standard. The application of equity method within consolidated accounts falls under Ind AS 28 rather than under this standard.
Key Definitions under Ind AS 27
| Term | Definition |
|---|---|
| Separate financial statements | Standalone accounts where investments in group entities are measured at cost/Ind AS 109/equity method per category. |
| Standalone financial statements | Indian term, generally synonymous with separate financial statements as per this standard. |
| Cost | Amount paid or fair value given at acquisition date. |
| Investment entity | Entity meeting criteria in Ind AS 110, measures all investments at fair value through P&L. |
| Dividend | Distribution received from investee; recognised as income when right to receive is established. |
Recognition and Measurement under Ind AS 27
When to recognise
Under Ind AS 27, an entity recognises an investment in a subsidiary, associate or joint venture within its separate financial statements when it obtains control (subsidiary), joint control (joint venture), or significant influence (associate). Recognition occurs from the date these powers are acquired.
Initial measurement
At initial recognition:
An entity must choose one measurement basis per category, subsidiaries as one group; associates as another; joint ventures as a third group:
(a) At cost
(b) In accordance with Ind AS 109, usually fair value through profit or loss or through other comprehensive income
(c) Using equity method as described in Para 10(c), referencing principles from Ind AS 28
The chosen policy must be applied consistently within each category but may differ across categories.
**Formula:**
Investment carrying amount at initial recognition = Purchase price paid + directly attributable acquisition costs
For example:
If Sundaram Infotech Pvt Ltd acquires a subsidiary for Rs 100 crore plus Rs 2 crore legal fees directly linked to acquisition:
Initial carrying amount = Rs 102 crore if cost model elected.
Subsequent measurement
Cost model:
After initial recognition at cost:
Investments are carried at cost less impairment losses identified under Para 12 read with Ind AS 36. Dividends received are recognised as income when right to receive is established; they do not reduce carrying amount unless they represent a return of investment rather than profit distribution.
Fair value model:
If measured per Ind AS 109:
Investments are remeasured at fair value each reporting date.
Changes flow through profit/loss (FVTPL) unless irrevocable election is made for FVTOCI.
Impairment testing follows rules within Ind AS 109 rather than those from cost model.
Equity method:
If elected:
Carrying amount adjusts each period for investor’s share in investee’s profits/losses after acquisition.
Dividends received reduce carrying amount.
This narrows differences between standalone FS profit and CFS profit attributable to such investments.
Application must follow principles from Paras A14-A17A of Appendix A to Para10(c).
Investment entities:
Entities qualifying as investment entities per criteria set out in Para B85C-B85E of Appendix B to Ind As110 must measure all such investments at FVTPL only, no option exists here.
Three-Way Measurement Choice for Standalone FS
Ind AS 26 introduces flexibility absent under previous standards:
An entity may elect one among three methods, cost; fair value per Ind AS 109; equity method, for each category.
Most Indian corporates select cost due to simplicity and alignment with dividend computation rules.
Election for fair value is rare except where regulatory capital volatility is not a concern.
Equity method election brings accrued profits into standalone results, a feature sometimes used by conglomerates wishing closer alignment between CFS and SFS performance metrics.
Once chosen for a category (e.g., all subsidiaries), policy cannot be changed without meeting change-in-accounting-policy requirements under Ind AS 8.
Worked Examples on Ind AS 27
Example 1: Cost method - subsidiary investment
Maharashtra Holdings acquired all shares in Maharashtra Cement on 1 April 2025 paying Rs 200 crore.
In its standalone FS it selects cost model.
#### Computation Table
| Item | Amount | Description |
|---|---|---|
| Initial recognition | Rs 200 cr | Cost paid |
| Dividend received | Rs 30 cr | Recognised when right established |
| Carrying amount post-dividend | Rs 200 cr | No reduction unless impairment triggered |
#### Journal entries
On acquisition:
Dr Investment in Subsidiary Rs 200 crore
Cr Bank Rs 200 crore
On dividend receipt:
Dr Bank/Receivable Rs 30 crore
Cr Dividend Income (P&L) Rs 30 crore
Annual impairment assessment follows principles from Ind AS 36 Impairment of Assets.
Example 2: Equity method - associate investment
Sundaram Holdings owns a significant stake (30%) in Sundaram Auto Components.
Standalone FS uses equity method consistent with CFS treatment.
Initial investment was Rs 60 crore; share of current year profit is Rs 12 crore; dividends received total Rs 3 crore during FY2025-26.
#### Computation Table
| Item | Amount | Description |
|---|---|---|
| Opening carrying amount | Rs 60 cr | Initial cost |
| Add: share of profit | Rs 12 cr | Recognised via P&L |
| Less: dividend received | Rs 3 cr | Reduces carrying amount |
| Closing carrying amount | Rs 69 cr | Matches equity-accounted figure |
#### Journal entries
Share of profit:
Dr Investment in Associate Rs 12 crore
Cr Share of Profit, Associate (P&L) Rs 12 crore
On dividend receipt:
Dr Bank Rs 3 crore
Cr Investment in Associate Rs 3 crore
This approach aligns standalone profit more closely with group results shown in consolidated accounts.
Disclosure Requirements under Ind AS 27
Schedule III to the Companies Act, 2013 and Ind AS 27 both require detailed disclosures for investments in subsidiaries, joint ventures, and associates in separate financial statements. These disclosures enable users to assess group structure, measurement choices, and the impact of such investments on standalone results.
| Item | Requirement | Para Reference |
|---|---|---|
| List of significant investments | Subsidiaries, JVs, associates with country, principal activities, ownership % | Para 17(b) |
| Description of accounting method used | Cost, Ind AS 109, or equity method - per category | Para 17(c) |
| Reasons for differing financial year-end of subsidiary | Where applicable | Para 17(d) |
| Significant restrictions | On ability of subsidiaries, etc., to transfer funds to parent (e.g., cash remittance barriers) | Cross-ref Ind AS 112 |
| Investment carrying amount | And any impairment recognised | Implicit |
| Dividend income from each category | Where significant | Implicit |
Auditors must verify these disclosures under SA 700 to ensure faithful representation and compliance with both Ind AS 27 and Schedule III.
Common Mistakes & Industry-Specific Considerations
Common errors auditors flag
- Inconsistent application of measurement method across investments within the same category.
- Confusing Ind AS 27 requirements with those of Ind AS 28, separate financial statement treatment differs from consolidated equity method.
- Failing to test for impairment under the cost method when indicators exist.
- Recognising dividend income before the right to receive is established.
- Treating partly-paid shares incorrectly, cost includes only paid-up amount until further payments are made.
- Inadequate disclosure of measurement choice in standalone accounts.
Industry application notes
Holding companies:
Most Indian holding companies use the cost method in standalone financial statements. This approach aligns with Section 123 dividend distribution rules based on profits as per standalone accounts. Auditors frequently observe this policy in large business groups.
Listed companies:
Listed entities publish standalone financial statements alongside consolidated results each quarter as required by SEBI LODR. Standalone profits directly inform dividend distribution decisions and managerial remuneration calculations under the Companies Act.
Groups with regulatory capital:
Banks and NBFCs typically prefer the cost method in separate financial statements. This avoids volatility in regulatory capital computations mandated by the Reserve Bank of India and ensures consistency in reporting capital adequacy.
Ind AS 27 vs AS 13 vs IFRS: Key Differences
The table below compares key aspects of investment accounting in separate financial statements under Indian GAAP (AS 13), Ind AS 27, and IFRS (IAS 27):
| Aspect | AS 13 | Ind AS | IFRS |
|---|---|---|---|
| Measurement choice | AS 13 - cost mandated | Choice of cost, Ind AS 109, or equity method | Same as Ind AS |
| Equity method in standalone | Not permitted | Permitted (Para 10(c)) | Permitted |
| Impairment testing | AS 13 diminution | Ind AS 36 if cost; Ind AS 109 if FV; equity method if elected | Same as Ind AS |
| Dividend recognition | On right to receive | On right to receive (Para 12) | Same |
| Investment entities | Not concept | Mandatory FVTPL | Mandatory FVTPL |
India’s adoption of Ind AS 27 aligns closely with IAS 27 issued by the International Accounting Standards Board. The primary carve-out relates to terminology (“standalone” vs “separate” FS) and expanded disclosure requirements under Schedule III. Measurement flexibility for equity method is a significant change from legacy Indian GAAP.
Latest Amendments to Ind AS 27 (FY 2026-27)
No amendments have been notified to Ind AS 27 for FY 2026-27 as of 2026-05-02. The standard continues to apply in its existing form.
Related Standards You Should Know
- [AS 13](/as-13-accounting-for-investments/), Equivalent investment standard for non-Ind AS companies; mandates cost measurement.
- [Ind AS 110](/ind-as-110-consolidated-financial-statements/), Definition of subsidiary and consolidation requirements.
- [Ind AS 28](/ind-as-28-investments-in-associates/), Equity method principles applied where elected.
- [Ind AS 109](/ind-as-109-financial-instruments/), Fair value measurement where elected for investments.
- [Ind AS 36](/ind-as-36-impairment-of-assets/), Impairment testing for cost-method investments.
Need Help with Ind AS 27 Compliance?
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Frequently Asked Questions (FAQs)
All companies that prepare separate (standalone) financial statements under Indian Accounting Standards and hold investments in subsidiaries, joint ventures, or associates must comply with Ind AS 27. This includes listed companies and unlisted companies meeting the net worth thresholds specified by the Ministry of Corporate Affairs.
Separate financial statements present only the parent’s individual assets, liabilities, income, and expenses, including investments in group entities measured at cost or fair value. Consolidated financial statements combine all group entities line-by-line as required by Ind AS 110.
Under legacy Indian GAAP (AS 13), investments in subsidiaries were always measured at cost less diminution. Under Ind AS 27, an entity can choose cost, fair value per Ind AS 109 or equity method, offering greater flexibility but requiring consistent policy within each investment category.
Yes. Under Para 10 of Ind AS 27, an entity can elect one measurement basis per category, subsidiaries as one group; associates as another; joint ventures as a third group, but must apply it consistently within each category across all periods unless a change is justified per accounting policy rules.
Dividend income from subsidiaries, associates or joint ventures is recognised when the investor’s right to receive payment is established. This rule applies regardless of whether the investment is measured at cost or fair value per Para 12 of the standard.
If an entity uses the cost model for investments in group entities under separate financial statements, it must test these investments for impairment annually or when indicators exist, using principles from Ind AS 36 Impairment of Assets. Fair value model follows impairment guidance from Ind AS 109 instead.
Investment entities are defined per criteria set out in Appendix B to Ind AS 110. Such entities must measure all their investments at fair value through profit or loss (FVTPL). They cannot use cost or equity methods even if preparing separate financial statements.
Yes. Banks and NBFCs usually adopt the cost model for their investments in subsidiaries or associates within separate financial statements. This approach reduces volatility in regulatory capital calculations required by Reserve Bank of India guidelines.
Entities must disclose a list of significant investments (with country/principal activity/ownership percent), accounting policies adopted (cost/fair value/equity), reasons for differing year ends if any, any restrictions on fund transfers from investees, carrying amounts including impairment losses recognised during the period.
Auditors check that all disclosures required by Para 17 of Ind AS 27, including investment lists, accounting methods used per category, impairment recognition details, are presented faithfully and match underlying records. They also ensure alignment with Schedule III presentation rules during statutory audit procedures.
About This Article
Reviewed by CA & CS Team · Patron Accounting LLP
Technical reviewer: CA Sundram Gupta, FCA
Last reviewed: 2026-05-02
Sources: ICAI Compendium of Accounting Standards · MCA Notification (Companies (Indian Accounting Standards) Rules, 2015, dated 16 February 2015) · IFRS Foundation