IFRS 12, Disclosure of Interests in Other Entities [Completed]

Effective date: Fiscal years beginning on or after January 1, 2013 with early adoption permitted

Transitional provisions:

IFRS 12 is effective for fiscal years beginning on or after January 1, 2013. Earlier application is permitted, provided IFRS 10, IFRS 11 and the related amendments to IAS 27 and 28 are adopted at the same time.

Last updated:

January 2012

Overview

IFRS 12 is a new and comprehensive standard on disclosure requirements for all forms of interests in other entities, including subsidiaries, joint arrangements, associates and unconsolidated structured entities.

Key Features

  • IFRS 12 applies to entities that have an interest in subsidiaries, joint arrangements, associates and unconsolidated structured entities.
  • IFRS 12 establishes disclosure objectives and specifies minimum disclosures that an entity must provide to meet those objectives.
  • An entity should disclose information that helps users of its financial statements evaluate the nature of and risks associated with its interests in other entities and the effects of those interests on its financial statements.
  • The disclosure requirements are extensive and significant effort may be required to accumulate the necessary information.
  • The effective date is for annual periods beginning on or after January 1, 2013. Earlier application is permitted, provided IFRS 10IFRS 11 and the related amendments to IAS 27 and 28 are adopted at the same time (the “package of five”).
  • Entities are permitted to incorporate any of the new disclosures into their financial statements prior to adopting IFRS 12.

Details of Significant Requirements

  • IFRS 12 is a new standard and is intended to integrate the disclosure requirements on interests in other entities, currently included in several standards, and also adds additional requirements in a number of areas.
  • The new Standard includes a requirement that an entity disclose information about significant judgments and assumptions that it has made in determining whether it has control, joint control or significant influence over another entity and the type of joint arrangement when the arrangement has been structured through a separate vehicle.  An entity should also provide these disclosures when changes in facts and circumstances affect the entity’s conclusion during the reporting period.
  • With respect  to subsidiaries, IFRS 12 requires that a parent should disclose information regarding: the composition of the group; non-controlling interests (including summarized financial information about each subsidiary with material non-controlling interests); significant restrictions on the parent’s ability to access or use the assets and settle the liabilities of subsidiaries; the nature of, and changes in, the risks associated with interests in consolidated structured entities; and the effects of changes in its ownership interest that did or did not result in a loss of control during the reporting period.  Disclosure is also required when the financial statements of a subsidiary are as of a date or for a period that is different from that of the consolidated financial statements.
  • With respect to investments in joint arrangements and associates, IFRS 12 requires an entity to disclose information about the nature, extent and financial effects of its interests in joint arrangements and associates, including information about contractual arrangements with the other parties to the joint arrangements or other investors that have interests in the associates. An entity should also disclose the nature of, and changes, in the risks associated with its interests in joint arrangements and associates.
  • With respect to interests in unconsolidated structured entities, IFRS 12 defines a structured entity as “an entity that has been designed so that voting or similar rights are not the dominant factor in deciding who controls the entity”. Examples of structured entities include securitization vehicles, asset-backed financing s and certain investment funds. The new Standard requires extensive disclosures to help users understand the nature and extent of an entity’s interest in  unconsolidated structured entities and the risks associated with those interests, including: the nature, purpose, size and activities of the structured entity; how the structured entity is financed; the carrying amounts of assets and liabilities relating to interests in unconsolidated structured entities and how they compare to the maximum exposure to loss from those interests; and any support provided to an unconsolidated structured entity when there is no contractual obligation to do so (including the reasons for providing such support).
  • With respect to aggregation of information disclosed, IFRS 12 requires granular information in a number of areas (for example, in respect of each material joint arrangement and each subsidiary with non-controlling interests material to the group) and specifies that information relating to interests in subsidiaries, joint ventures, joint operations, associates and unconsolidated structured entities be presented separately, but does permit some aggregation within these classes of entities.

Recent activities

January 2012

On January 25-27, 2012, the IASB considered a request from EFRAG to defer the effective dates of IFRS 10IFRS 11 and IFRS 12. The Board decided to retain the mandatory January 1, 2013 effective date of these new standards.

September 2011

On September 8, 2011, the IASB issued its Effect Analysis of IFRS 10 and IFRS 12. The effect analysis provides detailed insights into the potential impacts of the new requirements using case studies and other quantitative and qualitative material, as appropriate.

May 2011

On May 12, 2011, the IASB issued IFRS 12, Disclosure of Interests in Other EntitiesIFRS 12 is a new and comprehensive standard on disclosure requirements for all forms of interests in other entities, including subsidiaries, joint arrangements, associates and unconsolidated structured entities. A Basis for Conclusions has also been issued by the IASB.

Correction list for hyphenation

These words serve as exceptions. Once entered, they are only hyphenated at the specified hyphenation points. Each word should be on a separate line.