IFRS 19: subsidiaries without public accountability

A Nigerian factory is owned by a listed foreign group. Its parent already follows International Financial Reporting Standards (IFRS) in the group accounts. But the factory also has to publish its own accounts, and a full IFRS set carries pages of notes written for stock market investors. Its only real readers are the parent, a bank and the tax office.

IFRS 19 lets such a subsidiary keep the same figures as the group but cut the notes.

This topic covers the purpose of IFRS 19, who can use it, what “public accountability” means, what is reduced, how it differs from the IFRS for SMEs and from full IFRS, the statement of compliance, transition, and the choice of framework. The previous topics covered insurance contracts and other standards. The next topic covers management commentary. The latest Pathfinder diets have no IFRS 19 question, but it is examinable.

Key terms in plain English

Syllabus check

IFRS 19 is examinable under syllabus area C. This topic covers:

• eligibility, public accountability and the reduced disclosure framework;
• the comparison with full IFRS and the IFRS for SMEs, and transition.

CAMA 2020 and subsidiary statements

The Companies and Allied Matters Act 2020 (CAMA 2020) requires statements that follow IFRS and give a true and fair view.

Purpose and benefits

Subsidiaries of IFRS groups often keep two sets of books because their local rules (or the IFRS for SMEs) differ from the full IFRS used by the parent. If they use full IFRS instead, they must give disclosures that are out of proportion to their readers’ needs. IFRS 19 was issued by the International Accounting Standards Board in May 2024 to cut the notes while keeping the group’s recognition and measurement. The benefits are:

• no dual record-keeping and one set of policies across the group;
• lower cost of preparing notes;
• disclosures that are based on the principles used for the IFRS for SMEs, so they focus on what users of private entities need;
• comparability within the group.

Eligibility

IFRS 19 is available only to an entity that meets all three tests at the end of the reporting period. It may use it in its own statements or in its consolidated statements if it is itself a parent.

1. It is a subsidiary (as defined in IFRS 10).
2. It has no public accountability. An entity has public accountability if (a) its debt or equity is traded in a public market (a stock exchange or an over-the-counter market, domestic, foreign, local or regional) or it is in the process of issuing instruments to be traded; or (b) it holds assets in a fiduciary capacity for a broad group of outsiders as one of its main businesses (banks, credit unions, insurance companies, securities brokers and dealers, mutual funds and investment banks often do).
3. Its ultimate or an intermediate parent publishes consolidated statements for public use that comply with IFRS.

Examples: a Nigerian factory owned by a listed UK parent that uses IFRS is eligible if it has no plans to issue public securities. A bank subsidiary and an insurance subsidiary are not eligible, because they hold assets for outsiders. A subsidiary that is preparing a public issue of debt or shares is not eligible.

What is reduced, and what is not

• Recognition, measurement and presentation are unchanged. Only the disclosures change.
• The reduced disclosures follow the principles used for the IFRS for SMEs: liquidity and solvency; short-term cash flows, obligations, commitments and contingencies; measurement uncertainty; disaggregation of amounts; and accounting policy choices.
• Examples: far fewer credit, liquidity and market risk disclosures under IFRS 7 (unless the entity lends to customers as a main business, when key credit risk disclosures stay); a simplified reconciliation of financing liabilities under IAS 7; less fair value hierarchy detail under IFRS 13; and less on impairment testing under IAS 36.
• IAS 33 (earnings per share) and IFRS 8 (operating segments) are not required but may be used.
• ICAN notes that IFRS 19 has no reduced disclosures for IFRS 17, so an eligible entity with insurance contracts gives the full IFRS 17 disclosures.
• The IFRS 19 list is the minimum. If the minimum would not let users understand the entity’s position, performance and cash flows, extra disclosures are needed for fair presentation. This matters when the statements are used in regulatory filings or a significant deal.

IFRS 19, full IFRS and the IFRS for SMEs

Choose IFRS 19 if the entity is an eligible subsidiary that wants the parent’s policies with fewer notes. Choose the IFRS for SMEs if it is not a subsidiary of an IFRS reporter and wants simpler accounting and disclosure overall. Choose full IFRS if it has public accountability, its users need full disclosures, or it is preparing for a listing or significant external finance.

Statement, comparatives, election and transition

• Statement of compliance: explicit and unreserved. It states that the statements follow IFRS Accounting Standards and that the entity has applied IFRS 19 to reduce its disclosures.
• Comparatives: given for all amounts, so the comparative disclosures are also reduced on first application. IFRS 19 is applied retrospectively.
• Voluntary and revocable: the entity may opt in and out in later years. On a change it discloses the change and the reason, and restates comparatives.
• Effective date: annual periods beginning on or after 1 January 2027, early application permitted. So a company with a December year end applies it for 2027, or earlier by choice.
• Catch-up amendments: issued in August 2025. IFRS 19 first covered standards and amendments issued up to February 2021. The amendments add reduced disclosures for those issued from February 2021 to May 2024, so it covers all current standards.
• First-time application steps: check eligibility; list the reduced disclosures for the standards used; prepare the statements with full IFRS recognition and measurement; include the statement; restate comparatives.

Judgements and limits

• Deciding whether holding assets for outsiders is a primary business takes judgement: the nature of the business, whether it is a main or side activity, and how broad the group of outsiders is. A captive finance company that lends its own money does not hold assets in a fiduciary capacity. If it took deposits from the public, the answer could change.
• Deciding whether extra disclosures are needed depends on who the users are and whether the minimum is enough.
• Limits: some users may need more; it is not open to entities with public accountability; statements are less comparable with listed companies; and it needs judgement.
• Practical steps: assess eligibility; assess user needs; list the reduced disclosures; weigh cost and benefit; get approval from the board (and the parent if needed); train staff and update templates; talk to the auditors, the parent and lenders; review each year.

The rules in more depth

Why public accountability decides eligibility

Entities with traded securities or with other people’s money in their care have many outside users who depend on full disclosure. A private subsidiary has few readers, who can ask for more information.

Why recognition and measurement do not change

Consolidation needs the subsidiary’s figures on the group’s policies. If the subsidiary changed its policies, it would need two sets of books again.

Why a bank may still ask for more

Covenants depend on particular figures. If the reduced notes leave out what the bank needs, the subsidiary should add those notes. IFRS 19 allows this and in some cases requires it.

Effect on analysis

Subsidiary statements under IFRS 19 have fewer notes, so ratio analysis is the same but risk disclosures are thinner. Analysts may need to ask for more.

Worked examples

1. Subsidiary: yes. No public accountability: yes (no traded securities, no fiduciary business). Parent publishes IFRS statements for public use: yes. Eligible.
2. Saving.
   40% × 120 = 48 hours a year.
   Compare with one-off costs: assessing eligibility, updating templates, training and talking to the auditors.
3. Other factors: the bank’s needs (check the loan agreement), the parent’s policies (unchanged, so consolidation is easy), any plan to sell the company or issue securities, comparability, and the right to revert.
4. Recommendation: a good candidate, after consulting the bank.

1. A: no traded securities and no fiduciary business. No public accountability, so eligible.
2. B: lending its own money is not holding assets in a fiduciary capacity. No public accountability, so eligible (a judgement; the answer could change if it took deposits).
3. C: an insurer holds premiums and assets for policyholders as its main business. Public accountability, so not eligible.
4. D: its bonds are traded in a public market. Public accountability, so not eligible.
5. A and B must also be subsidiaries and have a parent publishing IFRS statements for public use, which Omega Plc does.

1. 2027 is the first period beginning on or after 1 January 2027, so IFRS 19 applies (early use would also have been allowed). It is applied retrospectively, so the 2026 comparatives are restated to the reduced disclosures even though they were first issued in full.
2. Statement of compliance: the statements follow IFRS Accounting Standards, and Sigma, as an eligible subsidiary without public accountability, has applied IFRS 19 to reduce its disclosures.
3. IFRS 19 sets minimum disclosures. If they would not let the bank understand Sigma’s position, extra disclosures are needed. Sigma can keep or add notes on liquidity, borrowings and going concern, as agreed with the bank.

How to score full marks

• Test all three criteria for each entity and give a result for each.
• Apply public accountability in two parts: traded securities and fiduciary capacity.
• State that it is disclosure-only and that recognition and measurement are full IFRS.
• Discuss users, cost, plans, comparability and the right to revert for a decision question.
• Give the effective date, retrospective application and comparatives.
• Mention extra disclosures for fair presentation.
• Distinguish IFRS 19 from the IFRS for SMEs in a table or two sentences.

Common mistakes in the exam

• Saying that IFRS 19 changes recognition or measurement.
• Treating a parent that does not publish its consolidated statements as meeting the third test.
• Treating a captive lender as holding fiduciary assets without analysis.
• Missing that IAS 33 and IFRS 8 are not required.
• Confusing IFRS 19 with the IFRS for SMEs.
• Forgetting to restate comparatives.
• Saying that IFRS 19 is compulsory.

Quick revision

• Voluntary, disclosure-only. Full IFRS recognition, measurement and presentation.
• Three tests: subsidiary; no public accountability; parent publishes IFRS group statements for public use.
• Public accountability: traded securities (or about to be) or fiduciary assets as a main business.
• IAS 33 and IFRS 8 not required. Extra disclosures if the minimum is not enough.
• Effective 1 January 2027. Retrospective. Can opt in and out.
• CAMA 2020: ss. 377(1), 378, 379 to 381, 374(1), 385, 404(7).

Practice questions

These are original questions written in the style of the Institute of Chartered Accountants of Nigeria (ICAN) exam. Try each one before you open the answer. Full model answers follow the written questions.

Recall check: multiple choice

The real ICAN paper has no multiple-choice section. These questions are for quick recall. The written questions that follow are closer to the exam.

Written questions

Model answers

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