IFRS 12 — Disclosure of Interests in Other Entities

Overview
IFRS 12 Disclosure of Interests in Other Entities is a consolidated disclosure standard requiring
a wide range of disclosures about an entity's interests in subsidiaries, joint arrangements, asso-
ciates and unconsolidated 'structured entities'. Disclosures are presented as a series of objec-
tives, with detailed guidance on satisfying those objectives.
IFRS 12 was issued in May 2011 and applies to annual periods beginning on or after 1 January
2013.

History of IFRS 12

Date Development Comments

April 2002 Project on consolidation added to the IASB's History of the

agenda project

November 2004 Project on joint arrangements added to the IASB's History of the
agenda project

13 September 2007 ED 9 Joint Arrangements published Comment

deadline 11
January 2008

18 December 2008 ED 10 Consolidated Financial State- Comment

ments published deadline 20 March
2009

January 2010 IASB decision to issue a separate disclosure

standard addressing a reporting entity's involve-
ment with other entities that are not in the scope of
IAS 39/IFRS 9 (including subsidiaries, associates
and joint arrangements and unconsolidated
SPEs/structured entities)

12 May 2011 IFRS 12 Disclosure of Interests in Other Effective for

Entities issued annual periods
beginning on or
after 1 January
2013

28 June 2012 Amended by Consolidated Financial Statements, Effective for

Joint Arrangements and Disclosure of Interests in annual periods
Other Entities: Transition Guidance (project beginning on or
history) after 1 January
2013
 31 October 2012 Amended by Investment Entities (Amendments to Effective for
IFRS 10, IFRS 12 and IAS 27) (project history) annual periods
beginning on or
after 1 January
2014

18 December 2014 Amended by Investment Entities: Applying the Effective for

Consolidation Exception (Amendments to IFRS 10, annual periods
IFRS 12 and IAS 28) (project history) beginning on or
after 1 January
2016

8 December 2016 Amended by Annual Improvements to IFRS Effective for

Standards 2014–2016 Cycle (Clarification of the annual periods
scope of the Standard). Click for more information beginning on or
after 1 January
2017

Amendments under consideration by the IASB

o IFRS 13 — Unit of account

The IASB has signalled an intention to conduct a post-implementation review of IFRS 12, com-
mencing in 2016.

Related Interpretations

o None

Publications and resources

o IFRS in Focus Newsletter IASB issues new standard on disclosure of interests in other
entitiessummarising the requirements of IFRS 12 (PDF 65k, May 2011)
o Effect analysis for IFRS 10 and IFRS 12 (link to IASB website)

Summary of IFRS 12

Objective and scope

The objective of IFRS 12 is to require the disclosure of information that enables users of
financial statements to evaluate: [IFRS 12:1]
o the nature of, and risks associated with, its interests in other entities
o the effects of those interests on its financial position, financial performance and cash flows.
Where the disclosures required by IFRS 12, together with the disclosures required by other
IFRSs, do not meet the above objective, an entity is required to disclose whatever additional in-
formation is necessary to meet the objective. [IFRS 12:3]
 IFRS 12 is required to be applied by an entity that has an interest in any of the following: [IFRS
12:5]
o subsidiaries
o joint arrangements (joint operations or joint ventures)
o associates
o unconsolidated structured entities
Annual Improvements to IFRS Standards 2014–2016 Cycle clarified that the disclosures
required in IFRS 12 (with the exception of B10-B16) also apply to interests held for sale and dis-
continued operations in accordance with IFRS 5. [IFRS 12:5A]
IFRS 12 does not apply to certain employee benefit plans, separate financial statements to
which IAS 27 Separate Financial Statements applies (except in relation to unconsolidated struc-
tured entities and investment entities in some cases), certain interests in joint ventures held by
an entity that does not share in joint control, and the majority of interests in another entity
accounted for in accordance with IFRS 9 Financial Instruments. [IFRS 12:6]
An investment entity that prepares financial statements in which all of its subsidiaries are
measured at fair value through profit or loss presents the disclosures relating to investment
entities required by IFRS 12. [IFRS 12:6]*
* Added by Investment Entities: Applying the Consolidation Exception (Amendments to IFRS 10, IFRS 12 and IAS
28) amendments, effective 1 January 2016.

Key definitions
[IFRS 12:Appendix A]
Interest in another entity
Refers to contractual and non-contractual involvement that exposes an entity to variabil-
ity of returns from the performance of the other entity. An interest in another entity can
be evidenced by, but is not limited to, the holding of equity or debt instruments as well as
other forms of involvement such as the provision of funding, liquidity support, credit en-
hancement and guarantees. It includes the means by which an entity has control or joint
control of, or significant influence over, another entity. An entity does not necessarily
have an interest in another entity solely because of a typical customer supplier relation-
ship.

Structured entity
An entity that has been designed so that voting or similar rights are not the dominant
factor in deciding who controls the entity, such as when any voting rights relate to admin-
istrative tasks only and the relevant activities are directed by means of contractual
arrangements.

Disclosures required
Important note: The summary of disclosures that follows is a high-level summary of the main
requirements of IFRS 12. It does not list every specific disclosure required by the standard, but
instead highlights the broad objectives, categories and nature of the disclosures required. IFRS
12 lists specific examples and additional disclosures which further expand upon the disclosure
objectives, and includes other guidance on the disclosures required. Accordingly, readers
should not consider this to be a comprehensive or complete listing of the disclosure require-
ments of IFRS 12.
 Significant judgements and assumptions
An entity discloses information about significant judgements and assumptions it has made (and
changes in those judgements and assumptions) in determining: [IFRS 12:7]
o that it controls another entity
o that it has joint control of an arrangement or significant influence over another entity
o 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: [IFRS 12:10]
o understand the composition of the group
o understand the interest that non-controlling interests have in the group's activities and cash
flows
o evaluate the nature and extent of significant restrictions on its ability to access or use
assets, and settle liabilities, of the group
o evaluate the nature of, and changes in, the risks associated with its interests in consolidated
structured entities
o evaluate the consequences of changes in its ownership interest in a subsidiary that do not
result in a loss of control
o evaluate the consequences of losing control of a subsidiary during the reporting period.
Interests in unconsolidated subsidiaries
[Note: The investment entity consolidation exemption referred to in this section was introduced by Investment Entities,
issued on 31 October 2012 and effective for annual periods beginning on or after 1 January 2014.]
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. [IFRS 10:31].
Where an entity is an investment entity, IFRS 12 requires additional disclosure, including:
o the fact the entity is an investment entity [IFRS 12:19A]
o 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 [IFRS 12:9A]
o details of subsidiaries that have not been consolidated (name, place of business, ownership
interests held) [IFRS 12:19B]
o details of the relationship and certain transactions between the investment entity and the
subsidiary (e.g. restrictions on transfer of funds, commitments, support arrangements, con-
tractual arrangements) [IFRS 12: 19D-19G]
o information where an entity becomes, or ceases to be, an investment entity [IFRS 12:9B]
An entity making these disclosures are not required to provide various other disclosures
required by IFRS 12 [IFRS 12:21A, IFRS 12:25A].
Interests in joint arrangements and associates
An entity shall disclose information that enables users of its financial statements to evaluate:
[IFRS 12:20]
o 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
o the nature of, and changes in, the risks associated with its interests in joint ventures and as-
sociates.
Interests in unconsolidated structured entities
An entity shall disclose information that enables users of its financial statements to: [IFRS
12:24]
o understand the nature and extent of its interests in unconsolidated structured entities
o evaluate the nature of, and changes in, the risks associated with its interests in unconsoli-
dated structured entities.

Applicability and early adoption

[IFRS 12: Appendix C]
IFRS 12 is applicable to annual reporting periods beginning on or after 1 January 2013. Early
application is permitted.
The disclosure requirements of IFRS 12 need not be applied for any period presented that
begins before the annual period immediately preceding the first annual period for which IFRS 12
is applied [IFRS 12:C2A]
Entities are encouraged to voluntarily provide the information required by IFRS 12 prior to its
adoption. Providing some of the disclosures required by IFRS 12 does not compel an entity to
comply with all of the requirements of the IFRS or to also apply:
o IFRS 10 Consolidated Financial Statements
o IFRS 11 Joint Arrangements
o IAS 27 Separate Financial Statements (2011)
o IAS 28 Investments in Associates and Joint Ventures (2011).