IFRS 19 - Reducing subsidiaries’ disclosures

• The requirements in brief  
• Frequently asked questions (FAQs)  
• Effective date and transition  
• Next steps  

Subsidiaries of companies using IFRS Accounting Standards can substantially reduce their disclosures and focus more on users’ needs following the release of IFRS 19 Subsidiaries without Public Accountability: Disclosures, from the International Accounting Standards Board.  

A subsidiary that does not have public accountability¹, and has a parent that produces consolidated accounts² under IFRS Accounting Standards, is permitted to apply IFRS 19.  

If IFRS 19 is applied, subsidiaries that currently apply the IFRS for SMEs Accounting Standard or local GAAP will no longer need to prepare two sets of accounts for group reporting purposes.  

Applicability in the UK 

IFRS 19 is not yet available for use by UK companies. Once endorsed by the UK Endorsement Board ('UKEB'), companies that choose to apply IFRS 19³ will also need to consider the UK Companies Act 2006 disclosure requirements. 

In the UK there is already a different reduced disclosure framework in Financial Reporting Standard 101 Reduced Disclosure Framework (‘FRS 101’).  There are limited measurement differences between FRS 101 and IFRS Accounting Standards (‘IFRS’) that arise from the fact that FRS 101 makes specified changes to UK-adopted International Accounting Standards.  It is not yet clear how the Financial Reporting Council (‘FRC’) will amend FRS 101 to address IFRS 19. 

IFRS for SMEs Accounting Standards is not applicable for UK companies. 

IFRS 19 allows eligible subsidiaries to apply IFRS Accounting Standards with the reduced disclosure requirements of IFRS 19.  

A subsidiary may choose to apply the new standard in its consolidated or separate financial statements provided that, at the reporting date: `

• it does not have public accountability¹; and  
• its parent produces consolidated financial statements² under IFRS Accounting Standards.  

A subsidiary applying IFRS 19 is required to clearly state in its explicit and unreserved statement of compliance with IFRS Accounting Standards that IFRS 19 has been adopted. 

What type of subsidiary is eligible?  

All subsidiaries meeting the above eligibility requirements – for example those in sectors such as technology, energy, consumer staples, real estate, industrials, telecommunications, basic materials, healthcare and utilities, along with certain financial services entities.  

Applicability in the UK 

This will be subject to section 407 of the UK Companies Act 2006 which requires the separate financial statements of UK subsidiary companies within a group, when the UK parent prepares consolidated financial statements, to be prepared on a consistent basis (i.e., all Companies Act accounts (e.g. ‘FRS 101’ or ‘FRS 102’) or IAS accounts (IFRS accounts, including IFRS 19 accounts)), unless there are good reasons not to.

Does the standard contain an example statement of compliance? 

No.  A subsidiary is required to state that it has applied IFRS 19 in its statement of compliance, but the standard does not provide an example disclosure.  We believe the following wording may be appropriate: 

“These [consolidated/separate] financial statements have been prepared in accordance with IFRS Accounting Standards and the reduced disclosure requirements of IFRS 19 Subsidiaries without Public Accountability: Disclosures.” 

Applicability in the UK

Once IFRS 19 is adopted for use in the UK, as UK companies apply UK-adopted international accounting standards, the above compliance statement will be tailored for UK companies as follows: 

“These [consolidated/separate] financial statements have been prepared in accordance with UK-adopted international accounting standards (“UK-adopted IFRS”) and the reduced disclosure requirements of IFRS 19 Subsidiaries without Public Accountability: Disclosures.” 

Can subsidiaries provide more or fewer disclosures than those set out in the standard? 

Yes.  In fact, additional disclosures are required where they are necessary for users to understand the effect of transactions, and other events and conditions, on the subsidiary’s financial position, financial performance and cash flows. 

Conversely, a subsidiary need not provide a specific disclosure included in IFRS 19 if the information resulting from it, is not material.  

Applicability in the UK 

Same as above.  

However, additional disclosure requirements mandated by the UK Companies Act 2006 will need to be provided. 

Is a subsidiary that applies the IFRS 19 committed to doing so in future periods?

No. A subsidiary can choose to revoke its application of IFRS 19 for future periods or may no longer meet the eligibility criteria in a future period.  It may also choose to apply the standard again in subsequent periods.

Applicability in the UK

The above applies for UK companies preparing IAS accounts (i.e., IFRS accounts). 

There are restrictions that apply for companies switching between IAS accounts and Companies Act accounts (‘FRS 101’ or ‘FRS 102’). However, these restrictions do not apply for companies  switching from ‘IFRS applying IFRS 19’ to ‘IFRS not applying IFRS 19’ or vice versa - as these are IAS accounts. 

When a subsidiary first applies IFRS 19, is it a first-time adopter of IFRS Accounting Standards?

It depends. The reporting framework that the subsidiary used in its immediately preceding period will affect whether the subsidiary is a first-time adopter of IFRS Accounting Standards, as illustrated in the table:

*IFRS 19’s disclosure requirements relating to IFRS 1 First-time Adoption of International Financial Reporting Standards would apply in such a case; not those listed in IFRS 1 itself. 

Applicability in the UK

Companies in the UK transitioning from FRS 101 or FRS 102 to IFRS applying IFRS 19 will be a first-time adopter of IFRS Accounting Standards and the requirements of IFRS 1 will apply as set out above.

Can a subsidiary apply IFRS 19 before applying IFRS 18 Presentation and Disclosure in Financial Statements?  

Yes.  IFRS 18 replaces IAS 1 Presentation of Financial Statements for annual reporting periods beginning on or after 1 January 2027.  A subsidiary applying IFRS 19 before IFRS 18 will apply disclosure requirements set out in an appendix to IFRS 19, which are based on IAS 1 rather than IFRS 18. 

Applicability in the UK

Application of IFRS 19 before applying IFRS 18 will depend on the timing of endorsement of these accounting standards by the UKEB.

Eligible subsidiaries can choose to apply the standard for reporting periods beginning on or after 1 January 2027.  Earlier application is permitted.  

Applicability in the UK 

For UK companies, the transition date is subject to its endorsement by the UKEB.

Companies will need to consider applicable local regulations and accordingly plan their transition to IFRS 19. 

Applicability in the UK 

IFRS 19 is not yet available for use by UK companies. Once endorsed by the UKEB, companies that choose to apply IFRS 19³ will also need to consider the additional UK Companies Act 2006 disclosure requirements. 

In the UK, FRS 101, which is largely similar to IFRS Accounting Standards, already offer disclosure exemptions including those not available under IFRS 19 such as the presentation of a cash flow statement.  

The scope of FRS 101 is also wider than IFRS 19 as it applies to "qualifying entities” as defined by FRS 101 that include the parent company of groups and  also the consolidated accounts² of the parent can be prepared under GAAPs other than just IFRS. 

We will have to wait and see if and how the FRC updates FRS 101 to take into account IFRS 19. 

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