Entity A, as a first-time adopter of IFRS, is electing to measure its investments in subsidiaries at cost in accordance with IAS 27, "Separate Financial Statements" (not to be confused with IAS 27 "Consolidated and Separate Financial Statements"). According to IAS 27, the choice for the measurement of investments in subsidiaries in the separate financial statements of a first-time adopter of IFRS is at cost, not at the fair value or the value in use of the subsidiaries' net assets.
Therefore, the options for measuring these investments in Entity A's separate opening IFRS statement of financial position do not include:
-
Value in use of the subsidiaries' net assets in accordance with IAS 36 (Impairment of Assets) because IAS 36 is not applicable in this context; and
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Deemed cost equal to the investment's fair value at Entity A's date of transition to IFRS in its separate financial statements, as IAS 27 allows for cost basis, not fair value basis.
The two valid options for Entity A are:
- Cost determined in accordance with IAS 27
- Deemed cost equal to the previous GAAP carrying amount of the investment at Entity A's date of transition to IFRS in its separate financial statements
Hence, the answer to the question would be:
Value in use of the subsidiaries' net assets in accordance with IAS 36.
