IFRS 12 — Disclosure of Interests in Other Entities
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, associates and unconsolidated 'structured entities'. Disclosures are presented as a series of objectives, 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
|April 2002||Project on consolidation added to the IASB's agenda||History of the project|
|November 2004||Project on joint arrangements added to the IASB's agenda||History of the project|
|13 September 2007||ED 9 Joint Arrangements published||Comment deadline 11 January 2008|
|18 December 2008||ED 10 Consolidated Financial Statements published||Comment deadline 20 March 2009|
|January 2010||IASB decision to issue a separate disclosure standard addressing a reporting entity's involvement 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 Entities issued||Effective for annual periods beginning on or after 1 January 2013|
|28 June 2012||Amended by Consolidated Financial Statements, Joint Arrangements and Disclosure of Interests in Other Entities: Transition Guidance (project history)||Effective for annual periods beginning on or after 1 January 2013|
|31 October 2012||Amended by Investment Entities (Amendments to IFRS 10, IFRS 12 and IAS 27) (project history)||Effective for annual periods beginning on or after 1 January 2014|
|18 December 2014||Amended by Investment Entities: Applying the Consolidation Exception (Amendments to IFRS 10, IFRS 12 and IAS 28) (project history)||Effective for annual periods beginning on or after 1 January 2016|
|8 December 2016||Amended by Annual Improvements to IFRS Standards 2014–2016 Cycle (Clarification of the scope of the Standard). Click for more information||Effective for annual periods beginning on or after 1 January 2017|
Amendments under consideration by the IASB
The IASB has signalled an intention to conduct a post-implementation review of IFRS 12, commencing in 2016.
Publications and resources
- IFRS in Focus Newsletter IASB issues new standard on disclosure of interests in other entities summarising the requirements of IFRS 12 (PDF 65k, May 2011)
- 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]
- the nature of, and risks associated with, its interests in other entities
- 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 information 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]
- joint arrangements (joint operations or joint ventures)
- 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 discontinued 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 structured 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.
[IFRS 12:Appendix A]
- Interest in another entity
- Refers to contractual and non-contractual involvement that exposes an entity to variability 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 enhancement 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 relationship.
- 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 administrative tasks only and the relevant activities are directed by means of contractual arrangements.
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 requirements 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]
- 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: [IFRS 12:10]
- 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
[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:
- the fact the entity is an investment entity [IFRS 12:19A]
- 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]
- details of subsidiaries that have not been consolidated (name, place of business, ownership interests held) [IFRS 12:19B]
- 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) [IFRS 12: 19D-19G]
- 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]
- 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: [IFRS 12:24]
- 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.
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: