associate if the local regulatory requirements prevented the investor from disclosing
such information until the joint venture or associate has released its own financial
statements. The Interpretations Committee noted that it expected the requirement to
prepare summarised financial information about a joint venture or associate in IFRS 12
to lead to the disclosure of summarised information on an individual basis for each joint
venture or associate that is material to the reporting entity. The Interpretations
Committee observed that this reflects the IASB’s intentions as described in the Basis for
Disclosure of interests in other entities 907
Conclusions to IFRS 12. The Interpretations Committee also noted that there is no
provision in IFRS 12 that permits non-disclosure of this information (on the grounds of
confidentially or local regulatory requirements) and that outreach performed indicated
that there was no significant diversity observed in practice on this issue. Consequently,
the Interpretations Committee determined that neither an Interpretation nor an
amendment to a standard was necessary and decided not to add this issue to its agenda.4
Any entity must also disclose:
(a) the nature and extent of any significant restrictions (e.g. resulting from borrowing
arrangements, regulatory requirements or contractual arrangements between
investors with joint control of or significant influence over a joint venture or
associate) on the ability of the joint ventures or associates to transfer funds to the
entity in the form of cash dividends or to repay loans or advances made by the
entity;
(b) when the financial statements of a joint venture or associate used in applying the
equity method are as of a date or for a period that is different from that of the
entity:
(i) the date of the end of the reporting period of the financial statements of that
joint venture or associate; and
(ii) the reason for using a different date or period.
(c) the unrecognised share of losses of a joint venture or associate, both for the
reporting period and cumulatively, if the entity has stopped recognising its share
of losses of the joint venture or associate when applying the equity method.
[IFRS 12.22].
The implication from this wording is that these disclosures in respect of significant
restrictions, reporting dates and unrecognised losses are required separately for each
material joint venture or associate.
A summary of the disclosures required for individually material and, collectively for
immaterial joint ventures and associates is shown in the table below.
Topic Material
joint
Individually
ventures and
immaterial joint
associates
ventures and
associates
Accounting policy
✓
×
Summarised financial information
✓
✓
(in aggregate)
Fair value, if quoted market price is available
✓
×
Restrictions on ability to transfer funds
✓
✓
(in aggregate)
Date of financial statements, if different from entity
✓
✓
(in aggregate)
Unrecognised share of losses
✓
✓
(in aggregate)
908 Chapter
13
5.1.1
Summarised financial information of individually material joint
ventures and associates
The summarised financial information specified by (b)(ii) of 5.1 above for each material
joint venture and associate is as follows:
(a) dividends received;
(b) summarised financial information for the joint venture or associate including, but
not necessarily limited to:
(i) current
assets;
(ii) non-current
assets;
(iii) current liabilities;
(iv) non-current
liabilities;
(v) revenue;
(vi) profit or loss from continuing operations;
(vii) post-tax profit or loss from discontinued operations;
(viii) other comprehensive income; and
(ix) total
comprehensive
income.
[IFRS 12.B12].
Additionally, for material joint ventures (but not associates) the following information
must be disclosed:
(a) cash and cash equivalents included in current assets;
(b) current financial liabilities (excluding trade and other payables and provisions);
(c) non-current financial liabilities (excluding trade and other payables and provisions);
(d) depreciation
and
amortisation;
(e) interest
income;
(f) interest
expense;
and
(g) income tax expense or income. [IFRS 12.B13].
The summarised financial information presented must be the 100 per cent amounts
included in the IFRS financial statements of the joint venture or associate (and not the
entity’s share of those amounts). However, if the entity accounts for the joint venture or
associate using the equity method:
(a) the amounts included in the IFRS financial statements of the joint venture or
associate must be adjusted to reflect adjustments made by the entity when using
the equity method, such as the fair value adjustments made at the time of
acquisition and adjustments for differences in accounting policies; and
(b) the entity must provide a reconciliation of the summarised financial information
presented to the carrying amount of its interest in the joint venture or associate.
[IFRS 12.B14].
Disclosure of interests in other entities 909
In January 2015, the Interpretations Committee discussed the basis on which an
entity should prepare the required summarised financial information for joint
ventures and associates. The Interpretations Committee observed that a reporting
entity that has subsidiaries should present the summarised financial information
required about a joint venture or associate that is material to the reporting entity
based on the consolidated financial statements for the joint venture or associate. If
it does not have subsidiaries, the presentation should be based on the financial
statements of the joint venture or associate in which its own joint ventures or
associates are equity-accounted. The Interpretations Committee noted that these
views are consistent with paragraph 14 of IFRS 12, which requires that the amounts
included in the financial statements of the joint venture or associate must be
adjusted to reflect adjustments made by the reporting entity using the equity method
(see (a) above). Consequently, the Interpretations Committee decided that neither
an interpretation nor an amendment to a standard was necessary and decided not to
add this issue to its agenda.5
The standard does not specify what components should be included in the
reconciliation required by (b) above. As clarified by the Interpretations Committee, the
amounts included in the IFRS financial statements of the joint venture or associate<
br />
should be adjusted to reflect fair value and accounting policy adjustments per (a) above.
The implication is that this should also include the reporting entity’s goodwill
attributable to the joint venture or associate. However, this is only the goodwill
attributable to the reporting entity’s share of the joint venture or associate. The goodwill
attributable to the rest of the joint venture or associate is presumably not known. Care
will therefore be needed in presenting any such goodwill and in adequately explaining
how the summarised IFRS financial information reconciles to the carrying amount of
the reporting entity’s interest in the joint venture or associate. Any pre-existing goodwill
in the books of the joint venture or associate at the time it became a joint venture or
associate of the reporting entity should be eliminated from the amounts in (a) as a fair
value adjustment.
An entity may present the summarised financial information required on the basis of the
joint venture’s or associate’s financial statements if:
(a) the entity measures its interest in the joint venture or associate at fair value in
accordance with IAS 28; and
(b) the joint venture or associate does not prepare IFRS financial statements and
preparation on that basis would be impracticable or cause undue cost. In that case,
the entity must disclose the basis on which the summarised financial information
has been prepared. [IFRS 12.B15].
This implies that the summarised financial information of the joint venture or associate
can be prepared on a non-IFRS basis in those circumstances where both conditions (a)
and (b) are satisfied.
910 Chapter
13
Where a joint venture or associate measured at fair value in accordance with IAS 28
does prepare IFRS financial statements, or where the preparation of IFRS financial
information would not be impracticable or cause undue cost, it would appear that the
summarised financial information disclosed should be the unadjusted IFRS numbers of
the joint venture or associate (as compared to the adjusted basis used where the equity
method is applied).
In principle, the IASB concluded that the disclosure requirements for joint ventures and
associates should be the same for all entities regardless of whether those entities are
venture capital organisations, mutual funds, unit trusts or similar entities which are
permitted by IAS 28 to hold investments in joint ventures and associates at fair value.
[IFRS 12.BC60].
Nevertheless, the minimum line item disclosures required for material associates
are less than those required for material joint ventures on the grounds that, in the
IASB’s opinion, an entity is generally more involved with joint ventures than with
associates because joint control means that an entity has a veto over decisions
relating to the relevant activities of the joint venture. Accordingly, the IASB
considers that the different nature of the relationship between a joint venturer and
its joint ventures from that between an investor and its associates warrants a
different level of detail in the disclosures of summarised financial information.
[IFRS 12.BC50-51].
IFRS 12 requires that an entity should present the summarised financial information for
each material joint venture on a ‘100 per cent’ basis and reconcile that to the carrying
amount of its investment in the joint venture or associate. An alternative would be to
present summarised financial information for each material joint venture on the basis of
the reporting entity’s proportionate interest in the joint venture. However, the IASB
rejected that alternative approach on the grounds that it would be confusing to present
the assets, liabilities and revenue of a joint venture or associate when the entity has
neither rights to, nor obligations for, the assets and liabilities of the joint ventures or
associates. [IFRS 12.BC49].
Summarised financial information is not required for material joint operations since
assets and liabilities arising from joint operations are the reporting entity’s own
assets and liabilities and consequently are recognised separately in the entity’s
financial statements. They are accounted for in accordance with the requirements
of applicable IFRSs, and are therefore subject to the disclosure requirements of
those IFRSs. [IFRS 12.BC52]. Since an investment in a joint operation is not considered
to represent an investment in a separate entity, a joint operation also cannot be a
structured entity.
BP disclose summarised financial information for material associates as illustrated below.
Disclosure of interests in other entities 911
Extract 13.6: BP p.l.c. (2017)
Notes on financial statements [extract]
15. Investments in associates [extract]
BP owns 19.75% of the voting shares of Rosneft which are listed on the MICEX stock exchange in Moscow
and its global depository receipts are listed on the London Stock Exchange. The Russian federal government,
through its investment company JSC Rosneftegaz, owned 50.0% plus one share of the voting shares of Rosneft
at 31 December 2017.
[...]
The value of BP’s 19.75% shareholding in Rosneft based on the quoted market share price of $4.99 per share
(2016 $6.50 per share) was $10,444 million at 31 December 2017 (2016 $13,604 million).
The following table provides summarized financial information relating to Rosneft. This information is
presented on a 100% basis and reflects adjustments made by BP to Rosneft’s own results in applying the equity
method of accounting. BP adjusts Rosneft’s results for the accounting required under IFRS relating to BP’s
purchase of its interest in Rosneft and the amortization of the deferred gain relating to the disposal of BP’s
interest in TNK-BP. These adjustments have increased the reported profit for 2017, as shown in the table
below, compared with the equivalent amount in Russian roubles that we expect Rosneft to report in its own
financial statements under IFRS.
$ million
Gross amount
2017
2016 2015
Sales and other operating revenues
103,028
74,380
84,071
Profit before interest and taxation
9,949
7,094
12,253
Finance costs
2,228
1,747 3,696
Profit before taxation
7,721
5,347 8,557
Taxation
1,742
1,797 1,792
Non-controlling interests
1,311
273 30
Profit for the year
4,668
3,277 6,735
Other comprehensive income
2,810
4,203 (4,111)
Total comprehensive income
7,478
7,480 2,624
Non-current assets
158,719
129,403
Current assets
39,737
37,914
Total assets
198,456
167,317
Current liabilities
66,506
46,284
Non-current liabilities
70,704
71,980
T
otal liabilities
137,210
118,264
Net assets
61,246
49,053
Less: non-controlling interests
10,314
7,316
50,932
41,737
The group received dividends, net of withholding tax, of $314 million from Rosneft in 2017 (2016 $332 million and
2015 $271 million).
912 Chapter
13
5.1.2
Financial information of individually immaterial joint ventures and
associates
An entity must disclose, in aggregate, the carrying amount of its interests in all
individually immaterial joint ventures or associates that are accounted for using the
equity method. An entity must also disclose separately the aggregate amount of its share
of those joint ventures’ or associates’:
(a) profit or loss from continuing operations;
(b) post-tax profit or loss from discontinued operations;
(c) other comprehensive income; and
(d) total
comprehensive
income.
Separate disclosures are required for joint ventures and associates. [IFRS 12.B16].
IFRS 12 does not specifically require a reporting entity’s share of (a) to (d) to be disclosed
for material joint ventures or associates.
IFRS 12 clarifies that this financial information is not required when a joint venture or
associate is held for sale in accordance with IFRS 5. [IFRS 12.B17].
Glencore plc disclose the following information about individual immaterial associates:
International GAAP® 2019: Generally Accepted Accounting Practice under International Financial Reporting Standards Page 179