By Razan Al-Mahdi
Accountant at 3A CPA LLP
The International Financial Reporting Standards (IFRS) are a set of rules which are used to foster transparency, comparability and reliability in financial reporting and as such, are critical for businesses to implement and keep abreast of any changes or updates which may occur. The body that is responsible for issuing and amending IFRS is called the International Accounting Standards Board (IASB). Standards undergo a rigorous process before they are set, they are continuously scrutinised in an effort to remain relevant and applicable in the ever-changing business world.
In April 2024, IASB introduced IFRS 18 and IFRS 19, these standards aim to improve and address gaps in existing standards. IFRS 18 is Presentation and Disclosure in Financial Statements – a replacement to IAS 1 Presentation of Financial Statements and IFRS 19 is Subsidiaries without Public Accountability: Disclosures – a new standard. Both will be effective from 1st January 2027. In this article, we will be looking at IFRS 19.
IFRS 19 is a voluntary standard introduced with an objective to define the disclosure requirements that a subsidiary may apply as an alternative to those specified in other IFRS Accounting Standards. Importantly, it removes the requirement for disclosures that are not aimed at users of financial statements of companies without public accountability. There is however an eligibility criterion for this standard which must be adhered to.
IFRS 19 will have the following implications for those eligible:
- Simplified Disclosure Requirements
IFRS 19 makes life easier for subsidiaries without public accountability by reducing the amount of detailed reporting they need to do. This means less paperwork when it comes to presenting financial statements, reporting risks and segment information. The goal is to simplify things for smaller businesses while still keeping the financial information transparent. - Focus on What’s Important (material)
One of the key principles of IFRS 19 is that subsidiaries should only report what really matters. Instead of overwhelming users of financial statements with too many details, the standard encourages companies to share the most relevant information that helps decision-making. This ensures the reports are both concise and meaningful. - Flexibility with Exemptions
IFRS 19 offers certain exemptions for smaller subsidiaries. Depending on their size and complexity, companies can opt out of some disclosure requirements. This flexibility allows businesses to focus on what matters most while still maintaining transparency and meeting the core standards of accountability. - Clear Distinction for Public Accountability
A significant aspect of IFRS 19 is the difference it draws between subsidiaries with public accountability (large listed companies) and those without. Subsidiaries that don’t meet the public accountability criteria face fewer reporting requirements, leading to compliance minus the unnecessary complexity.
By simplifying reporting, IFRS 19 helps subsidiaries without public accountability, focus on the most relevant information. In Kenya, this applies to the many businesses which may be operating under larger publicly traded parent companies by reducing the reporting burden and saving costs without compromising on transparency. With less complex disclosures, these businesses can remain competitive, meet local and global standards and allocate resources more efficiently without being overwhelmed by excessive reporting requirements.
By ACCA Razan Al-Mahdi
