Are the separate financial accounts also relevant? Assessing those accounts reported by listed European entities

Maria Carolina Ribeiro, Fábio Albuquerque and Paula Gomes Dos Santos

Cogent Business & Management, 2024, vol. 11, issue 1, 2371548

Abstract: The International Accounting Standard (IAS) 27 should be used in the preparation of separate financial statements (SFS) for entities with securities traded on regulated markets within the European Union (EU) that adopt International Financial Reporting Standards (IFRS). This research aims to assess the value relevance of SFS. Additionally, it also analyses the value relevance of the interests under IAS 27 reported therein. It uses documental analysis as a technique and researches archival as a method, with entities from the major indices of EU countries as a research sample. Linear regression models are used for data analysis. The findings indicate that both the SFS and those interests influence the entities’ share prices. As far as the authors’ knowledge, this research solves a gap in the literature by assessing the value relevance of interests reported in the SFS and the SFS itself, which have not been reaching the same attention by researchers compared to studies with similar purposes but focusing on the consolidated financial statements. As a contribution, this study can benefit standard-setter bodies and local regulators in understanding the usefulness of SFS for stakeholders’ decision-making by stressing the relevance of those accounts, and the material items reported therein.The relevance of separate financial statements has already been subject to some investigation, but there is no consensus on those results. This research contributes to the discussion about this, and a significant item reported therein, namely the interests in subsidiaries, associates, and joint ventures. Thus, this research is useful to standard-setter bodies, local regulators, auditors, and local regulators since the findings enable the identification of the relevance of this information, highlighting that the profusion of accounting choices in those accounts may not produce the benefits from the financial information usefulness to investors and other stakeholders.

Date: 2024
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DOI: 10.1080/23311975.2024.2371548

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