IAS 27 Separate Financial Statements outlines the specific accounting and disclosure rules that entities must follow when preparing separate financial statements, particularly regarding their investments in subsidiaries, joint ventures, and associates. This applies in scenarios where an entity chooses to present separate financial statements or is mandated to do so by local regulations, such as those under the Companies Act, 2019 (Act 992) in Ghana or directives from the Bank of Ghana for financial institutions.

In practice, in the Ghanaian banking sector, this standard is crucial for banks like GCB Bank or Ecobank Ghana when they report investments in subsidiaries (e.g., non-banking entities or fintech arms) in their standalone financial statements, separate from consolidated group accounts under IFRS 10. For instance, investments can be accounted for at cost, at fair value through profit or loss in accordance with IFRS 9 or using the equity method as per IAS 28. Disclosures must include the method used, fair values where applicable, and any restrictions on dividends from these investments.

This ensures transparency and compliance, helping regulators like the Bank of Ghana assess solvency and risk without the distortion of group consolidations. A real-world example is during the 2017-2019 banking cleanup in Ghana, where separate statements revealed true investment values in failed banks like UT Bank, aiding in liquidation decisions.

In accordance with IAS 27 Separate Financial Statements, the following terms are defined as below. These definitions are integral for Ghanaian banks to properly account for investments in separate financial statements, ensuring compliance with IFRS and local regulations like the Banks and Specialized Deposit-Taking Institutions Act, 2016 (Act 930), which mandates transparent reporting to avoid issues seen in the 2017-2019 banking sector cleanup.

i. Associate: An entity over which the investor has significant influence and that is neither a subsidiary nor an interest in a joint venture. In practice, this applies to investments where banks like Access Bank Ghana hold 20-50% voting power, requiring equity method application in consolidated statements but optional in separate ones.

ii. Joint control: The contractually agreed sharing of control over an economic activity, which exists only when the strategic financial and operating decisions relating to the activity require the unanimous consent of the parties sharing control. This is relevant for Ghanaian banks in joint ventures for infrastructure projects, aligning with BoG’s risk management guidelines to prevent unilateral decisions that could lead to liquidity risks, as experienced in the DDEP impacts from 2022-2024.

iii. Joint venture: A joint arrangement whereby the parties that have joint control of the arrangement have rights to the net assets of the arrangement. For example, a bank partnering with a telecom for mobile money services would treat this as a joint venture, using equity accounting in separate statements to reflect shared net assets without full consolidation.

iv. Equity method: A method of accounting whereby the investment is initially recognised at cost and adjusted thereafter for the post-acquisition change in the investor’s share of net assets of the investee. The profit or loss of the investor includes its share of the profit or loss of the investee. In Ghanaian banking, this is used for associates to reflect true economic interest, supporting BoG’s Capital Requirements Directive for accurate capital computation.

v. Separate financial statements: Those presented by a parent (i.e., an investor with control of a subsidiary) or an investor with joint control of, or significant influence over, an investee, in which the investments are accounted for at cost, in accordance with IFRS 9 Financial Instruments, or using the equity method as described in IAS 28. This allows entities like Stanbic Bank Ghana to present non-consolidated views for regulatory filings or internal analysis, distinct from group statements.

vi. Investment entity: An entity that: (a) obtains funds from one or more investors for the purpose of providing those investor(s) with investment management services; (b) commits to its investor(s) that its business purpose is to invest funds solely for returns from capital appreciation, investment income, or both; and (c) measures and evaluates the performance of substantially all of its investments on a fair value basis. In the Ghanaian context, this applies to investment arms of banks, exempting them from consolidation under IFRS 10, as per BoG’s directives to promote investment diversification post-DDEP recovery.