Enquiry:

Paragraph 4(a) of IFRS 10 – “Consolidated Financial Statements” – allows that an entity with subsidiaries need not present consolidated financial statements, if a number of detailed conditions are met. The aforesaid paragraph of IFRS 10 is as follows:

“a parent need not present consolidated financial statements if it meets all the following conditions:

i. it is a wholly-owned subsidiary or is a partially-owned subsidiary of another entity and all its other owners, including those not otherwise entitled to vote, have been informed about, and do not object to, the parent not presenting consolidated financial statements;

ii. its debt or equity instruments are not traded in a public market (a domestic or foreign stock exchange or an over-the-counter market, including local and regional markets);

iii. it did not file, nor is it in the process of filing, its financial statements with a securities commission or other regulatory organisation for the purpose of issuing any class of instruments in a public market; and

iv. its ultimate or any intermediate parent produces consolidated financial statements that are available for public use and complv with IFRSs.”

How should the requirement that the entity’s parent produces financial statements that “comply with IFRSs” be interpreted? Does it mean that the criteria in IFRS 10.4(a) are only met, if the entity’s parent produces financial statements that comply “as-is” with IFRSs as issued by the lASs? Is the condition (iv) above considered to be met in the local environment when an explicit and unreserved statement of compliance with IFRSs is not made in the financial statements locally?

Opinion:

With reference to your query relating to interpretation of para 4(a)(iv) that qualifying for the exemption, the reporting entity should be compliant of full IFRS; the Committee is of the view that since while adopting IFRS 10 in Pakistan, no modification to the requirement of compliance with IFRS for the consolidated financial statements of the parent was made, therefore the exemption is only available when the parent prepares IFRS compliant financial statements having an explicit and unreserved statement of compliance with IFRSs.

Further the Committee would like to draw your attention to the requirements of Section 237 of the Companies Ordinance 1984 reproduced below:

237. Consolidated financial statements. – (1) There shall be attached to the financial statements of a holding company having a subsidiary or subsidiaries, at the end of the financial year at which the holding company’s financial statements are made out, consolidated financial statements of the group presented as those of a sing le enterprise and such consolidated financial statements shall comply with the disclosure requirement of the Fourth Schedule and an International Accounting Standards notified under sub-section (3) of section 234.

(January 04, 2016)