IFRS 12

IFRS 12: Disclosure of Interests in Other Entities

IFRS 12 Disclosure of Interests in Other Entities sets out the disclosure requirements for entities that have an interest in a subsidiary, a joint arrangement, an associate or an unconsolidated structured entity.

Its objective is to require the disclosure of information to enable users of financial statements to evaluate:

• The nature of, and risks associates with, its interests in other entities, and
• The effects of those interests on its financial position, financial performance and cash flows.

To meet this objective, entities are required to make the following disclosures:

• Significant judgements and assumptions made in determining control, joint control or significant influence and type of joint arrangement.

• Information on interests in subsidiaries such that the composition of the group and non-controlling interest is understood and restrictions, risks and changes in ownership can be evaluated.

• Information on interests in associates and joint arrangements such that the nature and extent of the interests, financial effects and associated risks can be evaluated.

• Information on interests in unconsolidated structured entities such that the nature and extent of the interests and associated risks can be evaluated.

Significant judgements and assumptions

An entity should disclose information about significant judgements and assumptions it has made (and changes in those judgements and assumptions) in determining:

• That it controls another entity
• That it has joint control of an arrangement or significant influence over another entity
• The type of joint arrangement (i.e. joint operation or joint venture) when the arrangement has been structured through a separate vehicle.

Interests in subsidiaries

An entity shall disclose information that enables users of its consolidated financial statements to:

• Understand the composition of the group
• Understand the interest that non-controlling interests have in the group’s activities and cash flows evaluate the nature and extent of significant restrictions on its ability to access or use assets, and settle liabilities, of the group
• Evaluate the nature of, and changes in, the risks associated with its interests in consolidated structured entities
• Evaluate the consequences of changes in its ownership interest in a subsidiary that do not result in a loss of control
• Evaluate the consequences of losing control of a subsidiary during the reporting period.

Interests in unconsolidated subsidiaries

In accordance with IFRS 10 Consolidated Financial Statements, an investment entity is required to apply the exception to consolidation and instead account for its investment in a subsidiary at fair value through profit or loss

Where an entity is an investment entity, IFRS 12 requires additional disclosure, including:

• The fact the entity is an investment entity
• Information about significant judgements and assumptions it has made in determining that it is an investment entity, and specifically where the entity does not have one or more of the ‘typical characteristics’ of an investment entity
• Details of subsidiaries that have not been consolidated (name, place of business, ownership interests held)
• Details of the relationship and certain transactions between the investment entity and the subsidiary (e.g. restrictions on transfer of funds, commitments, support arrangements, contractual arrangements)
• Information where an entity becomes, or ceases to be, an investment entity

An entity making these disclosures are not required to provide various other disclosures required by IFRS 12

Interests in joint arrangements and associates

An entity shall disclose information that enables users of its financial statements to evaluate:

• The nature, extent and financial effects of its interests in joint arrangements and associates, including the nature and effects of its contractual relationship with the other investors with joint control of, or significant influence over, joint arrangements and associates
• The nature of, and changes in, the risks associated with its interests in joint ventures and associates.

Interests in unconsolidated structured entities

An entity shall disclose information that enables users of its financial statements to:

• Understand the nature and extent of its interests in unconsolidated structured entities
• Evaluate the nature of, and changes in, the risks associated with its interests in unconsolidated structured entities.

Further Information