INTERNATIONAL PUBLIC SECTOR

ACCOUNTING STANDARDS

IPSAS 34—SEPARATE FINANCIAL STATEMENTS

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 IPSAS 34—SEPARATE FINANCIAL STATEMENTS
Acknowledgment
This International Public Sector Accounting Standard (IPSAS) is drawn primarily
from International Accounting Standard (IAS) 27, Separate Financial Statements
published by the International Accounting Standards Board (IASB). Extracts
from IAS 27 are reproduced in this publication of the International Public
Sector Accounting Standards Board (IPSASB) of the International Federation of
Accountants (IFAC) with the permission of the International Financial Reporting
Standards (IFRS) Foundation.
The approved text of the International Financial Reporting Standards (IFRSs) is
that published by the IASB in the English language, and copies may be obtained
directly from IFRS Publications Department, First Floor, 30 Cannon Street, London
EC4M 6XH, United Kingdom.
E-mail: [email protected]
Internet: www.ifrs.org
IFRSs, IASs, Exposure Drafts, and other publications of the IASB are copyright of
the IFRS Foundation.
“IFRS,” “IAS,” “IASB,” “IFRS Foundation,” “International Accounting
Standards,” and “International Financial Reporting Standards” are trademarks of
the IFRS Foundation and should not be used without the approval of the IFRS
Foundation.

1553 IPSAS  34

 IPSAS 34—SEPARATE FINANCIAL STATEMENTS
History of IPSAS
This version includes amendments resulting from IPSASs issued up to
January 31, 2018.
IPSAS 34, Separate Financial Statements was issued in January 2015.
Since then, IPSAS 34 has been amended by the following IPSASs:
•• The Applicability of IPSASs (issued April 2016)

Table of Amended Paragraphs in IPSAS 34

Paragraph Affected How Affected Affected By
4 Deleted The Applicability of
IPSASs April 2016
5 Deleted The Applicability of
IPSASs April 2016
32A New The Applicability of
IPSASs
April 2016

IPSAS 34 1554
 January 2015

IPSAS 34—SEPARATE FINANCIAL STATEMENTS

CONTENTS
Paragraph
Objective....................................................................................................1
Scope..........................................................................................................2–5
Definitions..................................................................................................6–10
Preparation of Separate Financial Statements............................................11–18
Disclosure..................................................................................................19–23
Transitional Provisions..............................................................................24–31
Effective Date............................................................................................32–33
Withdrawal and Replacement of IPSAS 6 (December 2006)....................34
Basis for Conclusions
Comparison with IAS 27 (Amended in 2011)

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 SEPARATE FINANCIAL STATEMENTS

International Public Sector Accounting Standard 34, Separate Financial Statements,

is set out in paragraphs 1–34. All the paragraphs have equal authority. IPSAS 34
should be read in the context of its objective, the Basis for Conclusions, the
Preface to International Public Sector Accounting Standards, and the Conceptual
Framework for General Purpose Financial Reporting by Public Sector Entities.
IPSAS 3, Accounting Policies, Changes in Accounting Estimates and Errors,
provides a basis for selecting and applying accounting policies in the absence of
explicit guidance.

IPSAS 34 1556
 SEPARATE FINANCIAL STATEMENTS

Objective
1. The objective of this Standard is to prescribe the accounting and disclosure
requirements for investments in controlled entities, joint ventures and
associates when an entity prepares separate financial statements.

Scope
2. An entity that prepares and presents financial statements under the
accrual basis of accounting shall apply this Standard in accounting for
investments in controlled entities, joint ventures and associates when
it elects, or is required by regulations, to present separate financial
statements.
3. This Standard does not mandate which entities produce separate financial
statements. It applies when an entity prepares separate financial statements
that comply with International Public Sector Accounting Standards (IPSASs).
4. [Deleted]
5. [Deleted]

Definitions
6. The following terms are used in this Standard with the meanings specified:
Consolidated financial statements are the financial statements of an
economic entity in which the assets, liabilities, net assets/equity, revenue,
expenses and cash flows of the controlling entity and its controlled
entities are presented as those of a single economic entity.
Separate financial statements are those presented by an entity, in which
the entity could elect, subject to the requirements in this Standard,
to account for its investments in controlled entities, joint ventures
and associates either at cost, in accordance with IPSAS 29, Financial
Instruments: Recognition and Measurement or using the equity method
as described in IPSAS 36, Investments in Associates and Joint Ventures.
Terms defined in other IPSASs are used in this Standard with the same
meaning as in those Standards, and are reproduced in the Glossary of
Defined Terms published separately. The following terms are defined in
IPSAS 35, Consolidated Financial Statements, IPSAS 36, Investments in
Associates and Joint Ventures or IPSAS 37, Joint Arrangements: associate,
control, controlled entity, controlling entity, economic entity, equity
method, investment entity, joint control, joint operation, joint venture,
joint venturer and significant influence.
7. Separate financial statements are those presented in addition to consolidated
financial statements or in addition to the financial statements of an investor

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 SEPARATE FINANCIAL STATEMENTS

that does not have controlled entities but has investments in associates or
joint ventures in which the investments in associates or joint ventures are
required by IPSAS 36 to be accounted for using the equity method, other than
in the circumstances set out in paragraphs 9–10.
8. The financial statements of an entity that does not have a controlled entity,
associate or joint venturer’s interest in a joint venture are not separate
financial statements.
9. An entity that is exempted in accordance with paragraph 5 of IPSAS 35, from
consolidation or paragraph 23 of IPSAS 36, from applying the equity method
may present separate financial statements as its only financial statements.
10. An investment entity that is required, throughout the current period and
all comparative periods presented, to measure its investment in all its
controlled entities at fair value through surplus or deficit in accordance with
paragraph 56 of IPSAS 35, presents separate financial statements as its only
financial statements.

Preparation of Separate Financial Statements

11. Separate financial statements shall be prepared in accordance with all
applicable IPSASs, except as provided in paragraph 12.
12. When an entity prepares separate financial statements, it shall account
for similar investments in controlled entities, joint ventures and associates
either:
(a) At cost;
(b) In accordance with IPSAS 29; or
(c) Using the equity method as described in IPSAS 36.
13. If an entity elects, in accordance with paragraph 24 of IPSAS 36, to
measure its investments in associates or joint ventures at fair value
through surplus or deficit in accordance with IPSAS  29, it shall also
account for those investments in the same way in its separate financial
statements.
14. If a controlling entity is required, in accordance with paragraph 56 of
IPSAS 35, to measure its investment in a controlled entity at fair value
through surplus or deficit in accordance with IPSAS  29, it shall also
account for that investment in the same way in its separate financial
statements. If a controlling entity that is not itself an investment entity
is required, in accordance with paragraph 58 of IPSAS 35, to measure
the investments of a controlled investment entity at fair value through
surplus or deficit in accordance with IPSAS  29 and consolidate the
other assets and liabilities and revenue and expenses of the controlled

IPSAS 34 1558
 SEPARATE FINANCIAL STATEMENTS

investment entity, it shall also account for that investment in the

controlled investment entity in the same way in its separate financial
statements.
15. When a controlling entity ceases to be an investment entity, or becomes
an investment entity, it shall account for the change from the date when
the change in status occurred, as follows:
(a) When an entity ceases to be an investment entity, the entity shall
account for an investment in a controlled entity in accordance with
paragraph 12. The date of the change of status shall be the deemed
acquisition date. The fair value of the controlled entity at the
deemed acquisition date shall represent the transferred deemed
consideration when accounting for the investment in accordance
with paragraph 12.
(b) When an entity becomes an investment entity, it shall account for
an investment in a controlled entity at fair value through surplus
or deficit in accordance with IPSAS  29. The difference between
the previous carrying amount of the controlled entity and its fair
value at the date of the change of status of the investor shall be
recognized as a gain or loss in surplus or deficit. The cumulative
amount of any gain or loss previously recognized directly in net
assets/equity in respect of those controlled entities shall be treated
as if the investment entity had disposed of those controlled entities
at the date of change in status.
16. Dividends or similar distributions from a controlled entity, a joint
venture or an associate are recognized in the separate financial
statements of an entity when the entity’s right to receive the dividend or
similar distribution is established. The dividend or similar distribution is
recognized in surplus or deficit unless the entity elects to use the equity
method, in which case the dividend or similar distribution is recognized
as a reduction from the carrying amount of the investment.
17. When a controlling entity reorganizes the structure of its economic
entity by establishing a new entity as its controlling entity in a manner
that satisfies the following criteria:
(a) The new controlling entity obtains control of the original
controlling entity either (i) by issuing equity instruments in
exchange for existing equity instruments of the original controlling
entity or (ii) by some other mechanism which results in the new
controlling entity having a controlling ownership interest in the
original controlling entity;

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 SEPARATE FINANCIAL STATEMENTS

(b) The assets and liabilities of the new economic entity and the
original economic entity are the same immediately before and
after the reorganization; and
(c) The owners of the original controlling entity before the
reorganization have the same absolute and relative interests in the
net assets of the original economic entity and the new economic
entity immediately before and after the reorganization;
and the new controlling entity accounts for its investment in the original
controlling entity in accordance with paragraph 12(a) in its separate
financial statements, the new controlling entity shall measure cost at
the carrying amount of its share of the net assets/equity items shown in
the separate financial statements of the original controlling entity at the
date of the reorganization.
18. Similarly, an entity that is not a controlling entity might establish a new entity
as its controlling entity in a manner that satisfies the criteria in paragraph 17.
The requirements in paragraph 17 apply equally to such reorganizations. In
such cases, references to “original controlling entity” and “original economic
entity” are to the “original entity”.

Disclosure
19. An entity shall apply all applicable IPSASs when providing disclosures
in its separate financial statements, including the requirements in
paragraphs 20–23.
20. When a controlling entity, in accordance with paragraph 5 of IPSAS 35,
elects not to prepare consolidated financial statements and instead
prepares separate financial statements, it shall disclose in those separate
financial statements:
(a) The fact that the financial statements are separate financial
statements; that the exemption from consolidation has been used;
the name of the entity whose consolidated financial statements
that comply with IPSASs have been produced for public use; and
the address where those consolidated financial statements are
obtainable.
(b) A list of significant investments in controlled entities, joint ventures
and associates, including:
(i) The name of those controlled entities, joint ventures and
associates.
(ii) The jurisdiction in which those controlled entities, joint
ventures and associates operate (if it is different from that
of the controlling entity).

IPSAS 34 1560
 SEPARATE FINANCIAL STATEMENTS

(iii) Its proportion of the ownership interest held in those

entities and a description of how that ownership interest
has been determined.
(c) A description of the method used to account for the controlled
entities, joint ventures and associates listed under (b).
21. When an investment entity that is a controlling entity (other than a
controlling entity covered by paragraph 20) prepares, in accordance
with paragraph  10, separate financial statements as its only financial
statements, it shall disclose that fact. The investment entity shall also
present the disclosures relating to investment entities required by
IPSAS 38, Disclosure of Interests in Other Entities.
22. If a controlling entity that is not itself an investment entity is required, in
accordance with paragraph 56 of IPSAS 35, to measure the investments
of a controlled investment entity at fair value through surplus or deficit in
accordance with IPSAS 29 and consolidate the other assets and liabilities
and revenue and expenses of the controlled investment entity, it shall
disclose that fact. The entity shall also present the disclosures relating
to investment entities required by IPSAS 38, Disclosure of Interests in
Other Entities.
23. When a controlling entity (other than a controlling entity covered by
paragraphs 20–21) or an investor with joint control of, or significant
influence over, an investee prepares separate financial statements, the
controlling entity or investor shall identify the financial statements prepared
in accordance with IPSAS 35, IPSAS 36 or IPSAS 37, to which they relate.
The controlling entity or investor shall also disclose in its separate financial
statements:
(a) The fact that the statements are separate financial statements and
the reasons why those statements are prepared, if not required by
legislation or other authority.
(b) A list of significant controlled entities, joint ventures and associates,
including:
(i) The name of those controlled entities, joint ventures and
associates.
(ii) The jurisdiction in which those controlled entities, joint
ventures and associates operate (if different from that of
the controlling entity).
(iii) Its proportion of the ownership interest held in those
entities and a description of how that ownership interest
has been determined.

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 SEPARATE FINANCIAL STATEMENTS

(c) A description of the method used to account for the controlled

entities, joint ventures and associates listed under (b).

Transitional Provisions
24. At the date of initial application, an investment entity that previously
measured its investment in a controlled entity at cost shall instead
measure that investment at fair value through surplus or deficit as if the
requirements of this Standard had always been effective. The investment
entity shall adjust retrospectively the annual period immediately
preceding the date of initial application and shall adjust accumulated
surplus/deficit at the beginning of the immediately preceding period for
any difference between:
(a) The previous carrying amount of the investment; and
(b) The fair value of the investor’s investment in the controlled entity.
25. At the date of initial application, an investment entity that previously
measured its investment in a controlled entity at fair value directly to net
assets/equity shall continue to measure that investment at fair value. The
cumulative amount of any fair value adjustment previously recognized
in net assets/equity shall be transferred to accumulated surplus/deficit
at the beginning of the annual period immediately preceding the date of
initial application.
26. At the date of initial application, an investment entity shall not make
adjustments to the previous accounting for an interest in a controlled
entity that it had previously elected to measure at fair value through
surplus or deficit in accordance with IPSAS  29, as permitted in
paragraph 12.
27. An investment entity shall use the fair value amounts previously reported
to investors or to management.
28. If measuring the investment in the controlled entity in accordance with
paragraphs 24–27 is impracticable (as defined in IPSAS 3, Accounting
Policies, Changes in Accounting Estimates and Errors), an investment
entity shall apply the requirements of this Standard at the beginning
of the earliest period for which application of paragraphs 24–27 is
practicable, which may be the current period. The investor shall adjust
retrospectively the annual period immediately preceding the date of
initial application, unless the beginning of the earliest period for which
application of this paragraph is practicable is the current period. When
the date that it is practicable for the investment entity to measure the
fair value of the controlled entity is earlier than the beginning of the
immediately preceding period, the investor shall adjust net assets/equity
at the beginning of the immediately preceding period for any difference
between:

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 SEPARATE FINANCIAL STATEMENTS

(a) The previous carrying amount of the investment; and

(b) The fair value of the investor’s investment in the controlled entity.
If the earliest period for which application of this paragraph is
practicable is the current period, the adjustment to net assets/equity
shall be recognized at the beginning of the current period.
29. If an investment entity has disposed of, or lost control of, an investment in
a controlled entity before the date of initial application of this Standard,
the investment entity is not required to make adjustments to the previous
accounting for that investment.
30. At the date of initial application, a controlling entity that is not itself an
investment entity but which is required, in accordance with paragraph 56
of IPSAS 35, to measure the investments of a controlled investment entity
at fair value through surplus or deficit in accordance with IPSAS 29 and
consolidate the other assets and liabilities and revenue and expenses of
the controlled investment entity, shall use the transitional provisions
in paragraphs 24–29 in accounting for its investment in the controlled
investment entity in its separate financial statements.
31. The transitional provisions for changes in the accounting, in an entity’s
separate financial statements, for its interest in a joint operation are set out in
IPSAS 37, Joint Arrangements.

Effective Date
32. An entity shall apply this Standard for annual financial statements
covering periods beginning on or after January 1, 2017. Earlier
application is encouraged. If an entity applies this Standard for a period
beginning before January 1, 2017, it shall disclose that fact and apply
IPSAS 35, IPSAS 36, IPSAS 37, and IPSAS 38 at the same time.
32A. Paragraphs 4 and 5 were deleted by The Applicability of IPSASs, issued in
April 2016. An entity shall apply those amendments for annual financial
statements covering periods beginning on or after January 1, 2018.
Earlier application is encouraged. If an entity applies the amendments
for a period beginning before January 1, 2018, it shall disclose that fact.
33. When an entity adopts the accrual basis IPSASs as defined in IPSAS  33,
First-time Adoption of Accrual Basis International Public Sector Accounting
Standards (IPSASs) for financial reporting purposes subsequent to this
effective date, this Standard applies to the entity’s annual financial statements
covering periods beginning on or after the date of adoption of IPSASs.

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 SEPARATE FINANCIAL STATEMENTS

Withdrawal and Replacement of IPSAS 6 (December 2006)

34. This Standard is issued concurrently with IPSAS 35. Together, the two
Standards supersede IPSAS 6, Consolidated and Separate Financial
Statements (December 2006). IPSAS 6 remains applicable until IPSAS 34
and IPSAS 35 are applied or become effective, whichever is earlier.

IPSAS 34 1564
 SEPARATE FINANCIAL STATEMENTS

Basis for Conclusions

This Basis for Conclusions accompanies, but is not part of, IPSAS 34.

Objective
BC1. This Basis for Conclusions summarizes the IPSASB’s considerations in
reaching the conclusions in IPSAS 34. As this Standard is based on IAS 27,
Separate Financial Statements (Amended in 2011, including amendments
up to December 31, 2014), issued by the International Accounting Standards
Board (IASB), the Basis for Conclusions outlines only those areas where
IPSAS 34 departs from the main requirements of IAS 27 (Amended in 2011),
or where the IPSASB considered such departures.

Overview
BC2. In 2012 the IPSASB commenced work on a project to update those IPSASs
that dealt with accounting for interests in controlled entities, associates and
joint ventures. In October 2013 the IPSASB issued Exposure Drafts (EDs)
48 to 52 which were collectively referred to as Interests in Other Entities.
ED 48, Separate Financial Statements, was based on IAS 27 Separate
Financial Statements (Amended in 2011), having regard to the relevant
public sector modifications in IPSAS 6, Consolidated and Separate Financial
Statements. In January 2015 the IPSASB issued five new IPSASs, including
IPSAS 34. These new IPSASs supersede IPSAS 6, IPSAS 7, Investments in
Associates, and IPSAS 8, Interests in Joint Ventures.

Use of the Equity Method in Separate Statements

BC3. IPSAS 6 permitted an entity, in its separate financial statements, to measure
investments in controlled entities, jointly controlled entities and associates:
(a) Using the equity method;
(b) At cost; or
(c) As a financial instrument in accordance with IPSAS 29.
BC4. The IPSASB noted that in 2003 the IASB limited the measurement options
for investments presented in an entity’s separate financial statements by
removing the option to use the equity method. The IPSASB noted that the
reasons given by the IASB for making this change included the following:
(a) The focus in separate financial statements is on the performance of
the assets as investments. Cost and fair value can provide relevant
information for this; and

1565 IPSAS 34 BASIS FOR CONCLUSIONS

 SEPARATE FINANCIAL STATEMENTS

(b) To the extent that the equity method provides information about the
profit and loss of a subsidiary or an associate, that information would
be available in the consolidated financial statements.
BC5. The IPSASB also noted that, at the time it issued ED 48, the IASB had signaled
its intention to reconsider the use of the equity method in separate financial
statements. In deciding to reconsider this issue the IASB acknowledged that
corporate law in some countries requires that the equity method of accounting
be used to measure certain investments when presenting separate financial
statements.
BC6. The IPSASB decided to continue to permit the use of the equity method in
separate financial statements for the following reasons:
(a) The equity method is a well-established method of accounting for
certain investments in the public sector. In many circumstances where
investments are held by public sector entities, the equity method can
provide information that is reliable1 and useful, and possibly at a
lower cost than either the cost method or the fair value method. In the
public sector, investment entities are often used more as “instruments”
to enable service provision, rather than as a holding for investment
purposes, as might generally be the case in the private sector. The
equity method may therefore, in some circumstances, be better suited
to meeting user needs in the public sector, as it allows the financial
statements to portray the fluctuations in the equity of, and performance
by, an investment over time, in a cost effective and easily understood
manner.
(b) Although application of the cost method is often relatively
straightforward, where investments have been held for some time,
using the cost method may result in outdated and less relevant
information, in which case, it would not meet user needs.
(c) In the public sector there is likely to be a higher proportion of
investments for which there are no active markets and in respect of
which fair values are not readily observable. Although the guidance
in IPSAS 29 can be used to derive a value for such investments,
the IPSASB considered that this approach would generally result
in information that did not faithfully represent the underlying
circumstances.

1
Information that is reliable is free from material error and bias, and can be depended on by users to
faithfully represent that which it purports to represent or could reasonably be expected to represent.
Paragraph BC16 of IPSAS 1 discusses the transitional approach to the explanation of reliability.

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 SEPARATE FINANCIAL STATEMENTS

BC7. A majority of the respondents to ED 48 supported the proposal to permit the
use of the equity method in separate financial statements. A further group
of respondents also supported this proposal, subject to the IASB reinstating
the use of the equity method in separate financial statements. In August
2014 the IASB issued the Equity Method in Separate Financial Statements
(Amendments to IAS 27), which reinstated the equity method as an option in
separate financial statements. The IPSASB noted the support it had received
for this proposal and the reinstatement of the equity method in IAS 27, and
agreed to continue to permit the use of the equity method in separate financial
statements.

Separate Financial Statements of Investment Entities

BC8. In developing IPSAS 35 the IPSASB decided to introduce the concept
of investment entities and to require that a controlling entity that is an
investment entity measure its investments in most controlled entities at fair
value through surplus or deficit in accordance with IPSAS 29. Consequently,
the IPSASB decided to require that an investment entity measure its
investments in controlled entities at fair value through surplus or deficit in its
separate financial statements. The IPSASB also decided that an investment
entity preparing separate financial statements as its only financial statements,
should also make the disclosures required in IPSAS 38 about its interests in
controlled entities.
BC9. The IPSASB also decided to require a controlling entity of an investment
entity that is not itself an investment entity to present consolidated
financial statements in which it (i) measures the investments of a controlled
investment entity at fair value through surplus or deficit in accordance with
IPSAS 29 and (ii) consolidates the other assets and liabilities and revenue
and expenses of the controlled investment entity. Consequently, the IPSASB
decided to require that a non-investment controlling entity should measure its
investment in a controlled investment entity in the same way in its separate
financial statements.

Revision of IPSAS 34 as a result of the IPSASB’s The Applicability of IPSASs,

issued in April 2016
BC10. The IPSASB issued The Applicability of IPSASs in April 2016. This
pronouncement amends references in all IPSASs as follows:
(a) Removes the standard paragraphs about the applicability of IPSASs
to “public sector entities other than GBEs” from the scope section of
each Standard;
(b) Replaces the term “GBE” with the term “commercial public sector
entities”, where appropriate; and

1567 IPSAS 34 BASIS FOR CONCLUSIONS

 SEPARATE FINANCIAL STATEMENTS

(c) Amends paragraph 10 of the Preface to International Public Sector

Accounting Standards by providing a positive description of public
sector entities for which IPSASs are designed.
The reasons for these changes are set out in the Basis for Conclusions to
IPSAS 1.

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 SEPARATE FINANCIAL STATEMENTS

Comparison with IAS 27 (Amended in 2011)

IPSAS 34, Separate Financial Statements, is drawn primarily from IAS 27,
Separate Financial Statements (Amended in 2011, including amendments up
to December 31, 2014). At the time of issuing this Standard, the IPSASB has
not considered the applicability to public sector entities of IFRS 9, Financial
Instruments. References to IFRS 9 in the underlying IASB standard have therefore
been replaced by references to the IPSASs dealing with financial instruments.
The main differences between IPSAS 34 and IAS 27 (Amended in 2011) are as
follows:
•• IPSAS 34 uses different terminology, in certain instances, from IAS 27
(Amended in 2011). The most significant examples are the use of the terms
“net assets/equity,” “economic entity,” “controlling entity,” “controlled
entity”, “revenue”. The equivalent terms in IAS 27 (Amended in 2011) are
“equity,” “group,” “parent,” “subsidiary” and “income.”
•• IPSAS  34 contains specific requirements for a controlling entity that is
not itself an investment entity but which has an investment in a controlled
investment entity. IAS 27 (Amended in 2011) does not specify different
requirements for such controlling entities because it requires that such
investments be consolidated.

1569 IPSAS 34 COMPARISON WITH IAS 27