IFRS 19 — Subsidiaries without Public Accountability: Disclosures

Issued 2024 – Effective for periods beginning 1 January 2027

IFRS 19 allows subsidiaries that do not have public accountability (not listed, not financial institutions, not holding assets for a broad group of outsiders) to apply reduced disclosure requirements, while still using full IFRS recognition and measurement.

It is the IFRS equivalent of a “reduced disclosure framework”.

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1. Objective

To reduce the disclosure burden for subsidiaries in groups that use full IFRS, but where the subsidiary itself has no public accountability.

The subsidiary:

• Measures and recognises items using full IFRS

• Presents fewer disclosures using IFRS 19

• Consolidation by parent still follows full IFRS

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2. Which entities qualify?

A subsidiary qualifies if:

✔ It is a subsidiary
✔ It does not have public accountability
✔ Its parent produces consolidated financial statements that comply with full IFRS

Public accountability includes:

• A publicly listed entity

• A financial institution, bank, insurance company

• An entity holding assets in a fiduciary capacity for wide group of outsiders (e.g., mutual fund)

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3. Main Features of IFRS 19

✔ Full IFRS recognition and measurement

• Use IFRS 9, IFRS 15, IFRS 16, IAS 12, etc., exactly as in full IFRS

• Only disclosures are reduced

✔ Reduced disclosure requirements

• Based on IFRS for SMEs, but adapted to full IFRS measurement

✔ Standalone financial statements only

IFRS 19 is applied only in the subsidiary’s own separate financial statements.

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4. Reduced Disclosure Areas (Key Topics)

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5. Examples (very important)

Example 1 — Entity qualifies

Parent: Global Manufacturing Plc (listed in London), prepares full IFRS consolidated FS
Subsidiary: Cambodia Auto Parts Co., Ltd

• Manufactures spare parts

• Not listed

• Not a financial institution

• No fiduciary activities

➡ Subsidiary can use IFRS 19 with reduced disclosures.

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Example 2 — Entity does NOT qualify

Subsidiary: Bright Finance Co.

• Provides loans to the public

• Has public accountability (financial institution)

➡ Cannot apply IFRS 19, must use full IFRS disclosures.

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Example 3 — Reduced disclosure for IFRS 7

Full IFRS requires:

• Detailed analysis of credit risk

• Sensitivity analysis

• Liquidity table by month

• Hedge accounting detail

IFRS 19 only requires:

• Major categories of financial assets

• High-level credit risk description

• Maturity analysis (short format)

Illustration:

Under IFRS 19 disclosure:

“The company’s financial assets consist mainly of trade receivables. Credit risk is limited because customers are long-term contracts with the parent group. Trade receivables of $120,000 are due within 90 days.”

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Example 4 — Reduced disclosure for IFRS 16

Full IFRS disclosure:

• Separate tables for lease liabilities

• Weighted average discount rate

• Interest charge

• Reconciliation of opening and closing balances

IFRS 19 disclosure:

Lease liability = $300,000
Maturity:
• Within 1 year: $80,000
• 1–5 years: $220,000
No other extensive disclosures required.

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Example 5 — Revenue (IFRS 15)

Full IFRS requires:

• Disaggregation by product, geography, customer type

• Contract balances detail

• Performance obligations explanation

IFRS 19 requires only:

Revenue is $1,500,000 from sale of goods.
Revenue is recognized at a point in time when control is transferred to customers.

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6. Transition to IFRS 19

The subsidiary can apply IFRS 19:

• Prospectively, or

• Retrospectively (with some simplifications)

Must disclose:

• That it applied IFRS 19

• Which exemptions were used

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7. Benefits of IFRS 19

✔ Significant reduction of disclosures
✔ Cost-saving for group subsidiaries
✔ Consistency with parent’s recognition and measurement
✔ Simplifies auditing and reporting
✔ Useful for large international groups with many subsidiaries

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8. Quick One-Page Summary (useful for revision)

IFRS 19 allows small subsidiaries in a large IFRS group to:

• measure things using full IFRS

• present reduced disclosures

• avoid heavy reporting requirements

• provided they have no public accountability