• a joint operator or a party that participates in a joint arrangement but do not have
joint control obtains control of a joint operation; and
• a change of interests resulting in a party that participates in a joint arrangement but
does not have joint control obtains joint control over the joint operation.
The Interpretations Committee noted that paragraph 2(b) of IFRS 3 explains the
requirements for accounting for an asset acquisition in which the asset or group of
assets do not meet the definition of a business. The Interpretations Committee noted
that paragraph 2(b) of IFRS 3 specifies that a cost-based approach should be used in
accounting for an asset acquisition, and that in a cost-based approach the existing
assets generally are not remeasured (see Chapter 9 at 2.2.2). The Interpretations
874 Chapter
12
Committee also observed that it was not aware of significant diversity in practice
and, therefore, decided not to add this issue to its agenda.16
9 DISCLOSURES
The disclosure requirements regarding joint arrangements accounted for under IFRS 11
are included in IFRS 12 and are discussed in Chapter 13 at 5. IFRS 12 combines the
disclosure requirements for an entity’s interests in subsidiaries, joint arrangements,
associates and structured entities into one comprehensive disclosure standard.
References
1 The flowchart is based on those included in
9 IFRS 11.IE14-IE28, Example 3.
paragraphs B21 and B33 of IFRS 11.
10 IFRS 11.IE29-IE33, Example 4.
2
IFRIC Update, March 2015.
11 IFRS 11.IE34-IE43, Example 5.
3
IFRIC Update, March 2015.
12 IFRS 11.IE44-IE52, Example 6.
4
Staff Paper (March 2014 Interpretations 13 See, for example, IFRS 11.IE8 and IE21.
Committee Meeting), IFRS 11 Joint Arrangements
14 Staff Paper (July 2015 Interpretations Committee
– Consideration of some common joint
Meeting), IFRS
11 Joint Arrangements –
arrangement structures (Agenda reference 5B).
Remeasurement of previously held interests
5
Staff Paper (March 2015 Interpretations
(Agenda reference 6).
Committee Meeting), IFRS 11 Joint Arrangements
15 Sale or Contribution of Assets between an
– Tentative agenda decision comment letter
Investor and its Associate or Joint Venture
analysis (Agenda reference 4).
(amendments to IFRS
10 and IAS
28),
6
IFRIC Update, March 2015.
September 2014.
7 IFRS 11.IE2-IE8, Example 1.
16 IFRIC Update, January 2016.
8 IFRS 11.IE9-IE13, Example 2.
875
Chapter 13
Disclosure of interests
in other entities
1 INTRODUCTION ............................................................................................ 879
1.1
The development of IFRS 12 .............................................................................. 879
2 OBJECTIVE AND SCOPE OF IFRS 12 ............................................................ 880
2.1
Objective ............................................................................................................... 880
2.2 Scope
....................................................................................................................... 881
2.2.1
Definitions .............................................................................................. 881
2.2.1.A
Interests in other entities ............................................... 881
2.2.1.B Structured
entities
..........................................................
883
2.2.1.C Interaction
of
IFRS 12 and IFRS 5 ............................... 885
2.2.2
Interests disclosed under IFRS 12 .................................................... 885
2.2.2.A
Subsidiaries ...................................................................... 886
2.2.2.B Joint
arrangements
..........................................................
886
2.2.2.C Associates
.........................................................................
886
2.2.2.D Unconsolidated
structured
entities
.............................
886
2.2.3
Interests not within the scope of IFRS 12 ........................................ 887
2.2.3.A
Employee benefit plans ................................................. 888
2.2.3.B Separate
financial statements ....................................... 888
2.2.3.C
Interests in joint arrangements that result in
neither joint control nor significant influence
and are not interests in structured entities ................ 888
2.2.3.D
Interests in other entities accounted for in
accordance with IFRS 9 ................................................ 889
3 DISCLOSURE OF SIGNIFICANT ESTIMATES AND JUDGEMENTS ................. 889
4 DISCLOSURE OF INTERESTS IN SUBSIDIARIES ............................................ 892
4.1
Disclosure about the composition of the group ............................................ 892
4.2
Disclosure of interests of non-controlling interests ..................................... 894
876 Chapter
13
4.3
Disclosure of the nature and extent of significant restrictions .................... 897
4.4
Disclosure of the nature of the risks associated with interests in
consolidated structured entities ....................................................................... 899
4.4.1
Terms of contractual arrangements to provide financial
support to consolidated structured entities ................................... 900
4.4.2
Financial or other support to consolidated structured
entities with no contractual obligation ............................................ 900
4.4.3
Financial or other support to unconsolidated structured
entities which resulted in consolidation of those entities ............ 901
4.4.4
Current intentions to provide financial or other support ............ 901
4.5
Disclosure of changes in ownership interests in subsidiaries ..................... 902
4.5.1
Changes that do not result in loss of control ................................. 902
4.5.2
Changes that do result in loss of control ......................................... 903
4.6
Disclosures required by investment entities .................................................. 903
4.6.1
Disclosures about the composition of the group .......................... 903
4.6.2 Disclosures required when investment entity status
changes .................................................................................................. 904
4.6.3 Disclos
ures
required in respect of significant restrictions,
commitments and financial and other support .............................. 904
4.6.4
Valuation methodologies and nature of investing activities ....... 905
5 DISCLOSURE OF INTERESTS IN JOINT ARRANGEMENTS AND
ASSOCIATES .................................................................................................. 905
5.1
Disclosure of the nature, extent and financial effects of interests in
joint arrangements and associates .................................................................... 906
5.1.1
Summarised financial information of individually material
joint ventures and associates ............................................................. 908
5.1.2
Financial information of individually immaterial joint
ventures and associates ....................................................................... 912
5.2
Risks associated with interests in joint ventures and associates ................. 912
5.2.1
Disclosure of commitments relating to joint ventures .................. 913
5.2.2
Disclosure of contingent liabilities relating to joint ventures
and associates ......................................................................................... 914
6 DISCLOSURE OF INTERESTS IN UNCONSOLIDATED STRUCTURED
ENTITIES......................................................................................................... 914
6.1
Disclosure of the nature of interests in unconsolidated structured
entities ..................................................................................................................... 916
6.1.1
Disclosure of the nature, purpose, size, activities and
financing of structured entities .......................................................... 916
6.1.1.A
Nature and purpose ......................................................... 916
6.1.1.B Size
......................................................................................
917
6.1.1.C Activities
............................................................................
918
6.1.1.D Financing
...........................................................................
918
Disclosure of interests in other entities 877
6.1.2
Disclosures of sponsored structured entities for which no
interest is held at the reporting date ................................................. 919
6.2
Disclosure of the nature of risks of unconsolidated structured
entities .................................................................................................................... 922
6.2.1
Disclosures of interests in structured entities and of the
maximum exposure to loss from those interests ........................... 922
6.2.2
Disclosures of actual and intended financial and other
support to structured entities ............................................................ 925
6.3
Additional disclosures regarding the nature of risks from interests
in unconsolidated structured entities .............................................................. 925
6.3.1
Disclosure of support .......................................................................... 926
6.3.2 Disclosure
of losses .............................................................................. 927
6.3.3
Disclosure of types of income received ........................................... 927
6.3.4
Disclosure of ranking and amounts of potential losses ................ 928
6.3.5
Disclosure of liquidity arrangements ............................................... 928
6.3.6
Disclosure of funding difficulties ...................................................... 929
6.3.7
Disclosure of the forms of funding of an unconsolidated
structured entity ................................................................................... 929
List of examples
Example 13.1:
Variability of returns arising from issue of credit default
swap (1) ................................................................................................... 882
Example 13.2:
Variability of returns arising from issue of credit default
swap (2) .................................................................................................. 882
Example 13.3:
Disclosure of significant judgements and assumptions
made in determining the type of joint arrangement ..................... 890
Example 13.4:
Illustrative example of disclosure of a contractual
arrangement that could require parental support to a
consolidated structured entity .......................................................... 900
Example 13.5:
Illustrative example of disclosure of financial or other
support provided to a consolidated structured entity................... 901
Example 13.6:
Illustrative example of disclosure of changes in ownership
interest in subsidiary that does not result in loss of control ....... 902
Example 13.7:
Illustrative example of disclosures for sponsored
structured entities where no interest exists at the
reporting date ........................................................................................ 921
Example 13.8:
Losses incurred from investments in unconsolidated
structured entities.................................................................................. 927
Example 13.9:
Maximum exposure to and ranking of loss exposure by
type of structured entity ..................................................................... 928
878 Chapter
13
879
Chapter 13
Disclosure of interests
in other entities
1 INTRODUCTION
IFRS 12 – Disclosure of Interests in Other Entities – is a disclosure standard. It includes
all of the disclosure requirements related to interests in subsidiaries, joint arrangements,
associates and consolidated and unconsolidated structured entities.
The recognition and measurement of subsidiaries, joint arrangements and associates are
dealt with in IFRS 10 – Consolidated Financial Statements, IFRS 11 – Joint
Arrangements, IAS 27 – Separate Financial Statements – and IAS 28 – Investments in
Associates and Joint Ventures.
IFRS 12 was issued in May 2011. It was mandatory for accounting periods beginning on or
after 1 January 2013. However, depending on an entity’s regulator and jurisdiction, the
date at which an entity applies IFRS 12 may have varied from the date prescribed by the
IASB. Under EU-adopted IFRS, for example, IFRS 12 was mandatory for accounting
periods beginning on or after 1 January 2014 but could have been adopted early.
1.1
The development of IFRS 12
IFRS 12 was conceived by the IASB during consideration of the responses to ED 9 – Joint
Arrangements – and ED 10 – Consolidated Financial Stateme
nts. The IASB observed that
the disclosure requirements of the previous versions of IAS 27 – Consolidated and Separate
Financial Statements – and IAS 28 – Investments in Associates – together with IAS 31 –
Interests in Joint Ventures – overlapped in many areas. In addition, many respondents to
ED 10 commented that its proposed disclosure requirements for interests in unconsolidated
structured entities should not be located in a consolidation standard. [IFRS 12.BC7].
Consequently, the IASB decided to combine the disclosure requirements for
subsidiaries, joint ventures and associates within a comprehensive disclosure standard
that would address a reporting entity’s involvement with other entities when such
involvement was not within the scope of IFRS 9 – Financial Instruments. The disclosure
standard would also include the disclosure requirements for joint operations and
information that enables users of financial statements to evaluate the nature of, and risks
associated with, structured entities that a reporting entity does not control.1
880 Chapter
13
The effect of this is that IFRS 12 disclosure requirements replace those contained in the
previous versions of IAS 27 and IAS 28 and IAS 31 except for the disclosure requirements
that apply only when preparing separate financial statements, which remain in IAS 27.
IFRS 12 also contains all disclosures that relate to consolidated financial statements
(IFRS 10) and joint operations (IFRS 11). In addition, IFRS 12 includes disclosures related
to unconsolidated structured entities (originally proposed to be within IFRS 10).
The IASB has stated that they have heard overwhelming support for the disclosure
requirements of IFRS 12 and feel confident that they represent an improvement in the
quality of financial reporting.2
2
OBJECTIVE AND SCOPE OF IFRS 12
2.1 Objective
The stated objective of IFRS 12 is ‘to require an entity to disclose information that
enables users of its financial statements to evaluate:
(a) the nature of, and risks associated with, its interest in other entities; and
(b) the effects of those interests on its financial position, financial performance and
cash flows’. [IFRS 12.1].
To meet the objective of the standard, an entity must disclose:
(a) the significant judgements and assumptions it has made in determining:
International GAAP® 2019: Generally Accepted Accounting Practice under International Financial Reporting Standards Page 173