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PFRS 12 Disclosures of Interest in Other Entities
PFRS 12 Disclosures of Interest in Other Entities
Reporting Standard 12
Disclosure of Interests in
Other Entities
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IFRS 12 Disclosure of Interests in Other Entities is issued by the International
Accounting Standards Board (IASB), 30 Cannon Street, London EC4M 6XH, United
Kingdom.
Tel: +44 (0)20 7246 6410
Fax: +44 (0)20 7246 6411
Email: [email protected]
Web: www.ifrs.org
The IASB, the IFRS Foundation, the authors and the publishers do not accept
responsibility for loss caused to any person who acts or refrains from acting in
reliance on the material in this publication, whether such loss is caused by
negligence or otherwise.
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IFRS 12 and its accompanying documents are published in two parts.
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ISBN for this part: 978-1-907877-19-3
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ISBN for complete publication (two parts): 978-1-907877-18-6
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International Financial Reporting Standards (including International Accounting
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Standards and SIC and IFRIC Interpretations), Exposure Drafts, and other IASB
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published by the IASB in the English language. Copies may be obtained from the
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Tel: +44 (0)20 7332 2730 Fax: +44 (0)20 7332 2749
Email: [email protected] Web: www.ifrs.org
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CONTENTS
paragraphs
INTRODUCTION IN1–IN11
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The nature and extent of significant restrictions 13
Nature of the risks associated with an entity’s interests in consolidated
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structured entities 14–17
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Consequences of changes in a parent’s ownership interest in a
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subsidiary that do not result in a loss of control 18
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period 19
INTERESTS IN JOINT ARRANGEMENTS AND ASSOCIATES 20–23
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associates 23
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IFRS 12 DISCLOSURE OF INTERESTS IN OTHER ENTITIES
Introduction
IN1 IFRS 12 Disclosure of Interests in Other Entities applies to entities that have an
interest in a subsidiary, a joint arrangement, an associate or an
unconsolidated structured entity.
IN2 The IFRS is effective for annual periods beginning on or after 1 January 2013.
Earlier application is permitted.
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identify the profit or loss and cash flows available to the reporting entity
and determine the value of a current or future investment in the
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reporting entity.
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IN4 They highlighted the need for better information about the subsidiaries
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that are consolidated, as well as an entity’s interests in joint
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arrangements and associates that are not consolidated but with which
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IN5 The global financial crisis that started in 2007 also highlighted a lack of
transparency about the risks to which a reporting entity was exposed
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from its involvement with structured entities, including those that it had
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sponsored.
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IN6 In response to input received from users and others, including the G20
leaders and the Financial Stability Board, the Board decided to address in
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in other entities when the reporting entity has a special relationship with
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IN7 The Board identified an opportunity to integrate and make consistent the
disclosure requirements for subsidiaries, joint arrangements, associates
and unconsolidated structured entities and present those requirements
in a single IFRS. The Board observed that the disclosure requirements of
IAS 27 Consolidated and Separate Financial Statements, IAS 28 Investments in
Associates and IAS 31 Interests in Joint Ventures overlapped in many areas.
In addition, many commented that the disclosure requirements for
interests in unconsolidated structured entities should not be located in a
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IN8 The IFRS requires an entity to disclose information that enables users of
financial statements to evaluate:
(a) the nature of, and risks associated with, its interests in other
entities; and
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performance and cash flows.
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General requirements
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IN9 The IFRS establishes disclosure objectives according to which an entity
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discloses information that enables users of its financial statements
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(a) to understand:
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interest; and
:
(b) to evaluate:
(ii) the nature of, and changes in, the risks associated with its
interests in consolidated structured entities;
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IFRS 12 DISCLOSURE OF INTERESTS IN OTHER ENTITIES
(iv) the nature, extent and financial effects of its interests in joint
arrangements and associates, and the nature of the risks
associated with those interests;
IN10 The IFRS specifies minimum disclosures that an entity must provide.
If the minimum disclosures required by the IFRS are not sufficient to
meet the disclosure objective, an entity discloses whatever additional
information is necessary to meet that objective.
IN11 The IFRS requires an entity to consider the level of detail necessary to
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satisfy the disclosure objective and how much emphasis to place on each
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of the requirements in the IFRS. An entity shall aggregate or disaggregate
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disclosures so that useful information is not obscured by either the
inclusion of a large amount of insignificant detail or the aggregation of
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items that have different characteristics.
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Objective
(a) the nature of, and risks associated with, its interests in other entities;
and
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Meeting the objective
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2 To meet the objective in paragraph 1, an entity shall disclose:
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(a) the significant judgements and assumptions it has made in
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determining the nature of its interest in another entity or
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arrangement, and in determining the type of joint arrangement in
which it has an interest (paragraphs 7–9); and
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IFRS 12 DISCLOSURE OF INTERESTS IN OTHER ENTITIES
Scope
5 This IFRS shall be applied by an entity that has an interest in any of the
following:
(a) subsidiaries
(c) associates
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benefit plans to which IAS 19 Employee Benefits applies.
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(b) an entity’s separate financial statements to which IAS 27 Separate
Financial Statements applies. However, if an entity has interests in
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unconsolidated structured entities and prepares separate financial
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statements as its only financial statements, it shall apply the
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requirements in paragraphs 24–31 when preparing those separate
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financial statements.
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(c) an interest held by an entity that participates in, but does not have
joint control of, a joint arrangement unless that interest results in
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structured entity.
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(c) the type of joint arrangement (ie joint operation or joint venture)
when the arrangement has been structured through a separate
vehicle.
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8 The significant judgements and assumptions disclosed in accordance
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with paragraph 7 include those made by the entity when changes in facts
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and circumstances are such that the conclusion about whether it has
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control, joint control or significant influence changes during the
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reporting period.
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(a) it does not control another entity even though it holds more than
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(b) it controls another entity even though it holds less than half of the
voting rights of the other entity.
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Interests in subsidiaries
(a) to understand:
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IFRS 12 DISCLOSURE OF INTERESTS IN OTHER ENTITIES
(b) to evaluate:
(ii) the nature of, and changes in, the risks associated with its
interests in consolidated structured entities (paragraphs 14–17);
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(iv) the consequences of losing control of a subsidiary during the
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reporting period (paragraph 19).
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11 When the financial statements of a subsidiary used in the preparation of
consolidated financial statements are as of a date or for a period that is
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different from that of the consolidated financial statements
(see paragraphs B92 and B93 of IFRS 10), an entity shall disclose:
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(a) the date of the end of the reporting period of the financial
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transfer cash or other assets to (or from) other entities within
the group.
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(ii) guarantees or other requirements that may restrict dividends
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and other capital distributions being paid, or loans and
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advances being made or repaid, to (or from) other entities
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within the group.
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subsidiary).
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IFRS 12 DISCLOSURE OF INTERESTS IN OTHER ENTITIES
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entity, the entity shall disclose an explanation of the relevant factors in
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reaching that decision.
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17 An entity shall disclose any current intentions to provide financial or
other support to a consolidated structured entity, including intentions to
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assist the structured entity in obtaining financial support.
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18 An entity shall present a schedule that shows the effects on the equity
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(b) the line item(s) in profit or loss in which the gain or loss is
recognised (if not presented separately).
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(a) 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
(paragraphs 21 and 22); and
(b) the nature of, and changes in, the risks associated with its interests
in joint ventures and associates (paragraph 23).
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interests in joint arrangements and associates
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21 An entity shall disclose:
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for each joint arrangement and associate that is material to the
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reporting entity:
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(b) for each joint venture and associate that is material to the
reporting entity:
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IFRS 12 DISCLOSURE OF INTERESTS IN OTHER ENTITIES
(a) the nature and extent of any significant restrictions (eg resulting
from borrowing arrangements, regulatory requirements or
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contractual arrangements between investors with joint control of
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or significant influence over a joint venture or an associate) on the
ability of joint ventures or associates to transfer funds to the entity
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in the form of cash dividends, or to repay loans or advances made
by the entity. o
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(b) when the financial statements of a joint venture or associate used
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(i) the date of the end of the reporting period of the financial
statements of that joint venture or associate; and
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(b) to evaluate the nature of, and changes in, the risks associated with its
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interests in unconsolidated structured entities (paragraphs 29–31).
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25 The information required by paragraph 24(b) includes information about
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an entity’s exposure to risk from involvement that it had with
unconsolidated structured entities in previous periods (eg sponsoring the
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structured entity), even if the entity no longer has any contractual
involvement with the structured entity at the reporting date.
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Nature of interests
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limited to, the nature, purpose, size and activities of the structured entity
and how the structured entity is financed.
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shall disclose:
(b) income from those structured entities during the reporting period,
including a description of the types of income presented; and
(c) the carrying amount (at the time of transfer) of all assets
transferred to those structured entities during the reporting
period.
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IFRS 12 DISCLOSURE OF INTERESTS IN OTHER ENTITIES
Nature of risks
29 An entity shall disclose in tabular format, unless another format is more
appropriate, a summary of:
(a) the carrying amounts of the assets and liabilities recognised in its
financial statements relating to its interests in unconsolidated
structured entities.
(b) the line items in the statement of financial position in which those
assets and liabilities are recognised.
(c) the amount that best represents the entity’s maximum exposure to
loss from its interests in unconsolidated structured entities,
including how the maximum exposure to loss is determined. If an
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entity cannot quantify its maximum exposure to loss from its
interests in unconsolidated structured entities it shall disclose that
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fact and the reasons.
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(d) a comparison of the carrying amounts of the assets and liabilities
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of the entity that relate to its interests in unconsolidated
structured entities and the entity’s maximum exposure to loss
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Appendix A
Defined terms
This appendix is an integral part of the IFRS.
income from a For the purpose of this IFRS, income from a structured
structured entity entity includes, but is not limited to, recurring and
non-recurring fees, interest, dividends, gains or losses
on the remeasurement or derecognition of interests in
structured entities and gains or losses from the transfer
of assets and liabilities to the structured entity.
interest in another For the purpose of this IFRS, an interest in another
entity
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entity refers to contractual and non-contractual
involvement that exposes an entity to variability of
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returns from the performance of the other entity.
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An interest in another entity can be evidenced by, but is
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not limited to, the holding of equity or debt
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instruments as well as other forms of involvement such
as the provision of funding, liquidity support, credit
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relationship.
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returns.
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.
Paragraphs B22–B24 provide further information about
structured entities.
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IFRS 12 DISCLOSURE OF INTERESTS IN OTHER ENTITIES
The following terms are defined in IAS 27 (as amended in 2011), IAS 28
(as amended in 2011), IFRS 10 and IFRS 11 Joint Arrangements and are used in this
IFRS with the meanings specified in those IFRSs:
• associate
• control of an entity
• equity method
• group
• joint arrangement
• joint control
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• joint operation
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• joint venture
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• non-controlling interest
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• parent
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• protective rights
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• relevant activities
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• separate vehicle
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• significant influence
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• subsidiary.
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Appendix B
Application guidance
This appendix is an integral part of the IFRS. It describes the application of paragraphs 1–31
and has the same authority as the other parts of the IFRS.
Aggregation (paragraph 4)
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B2 An entity shall decide, in the light of its circumstances, how much detail
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it provides to satisfy the information needs of users, how much emphasis
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it places on different aspects of the requirements and how it aggregates
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the information. It is necessary to strike a balance between burdening
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financial statements with excessive detail that may not assist users of
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B3 An entity may aggregate the disclosures required by this IFRS for interests
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objective and the requirement in paragraph B4, and does not obscure the
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(a) subsidiaries;
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IFRS 12 DISCLOSURE OF INTERESTS IN OTHER ENTITIES
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(c) geography (eg country or region).
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Interests in other entities
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B7 An interest in another entity refers to contractual and non-contractual
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and design of the other entity may help the reporting entity when
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include consideration of the risks that the other entity was designed to
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create and the risks the other entity was designed to pass on to the
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variability to the structured entity, rather than absorbing variability of
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returns of the structured entity.
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Summarised financial information for subsidiaries, joint
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ventures and associates (paragraphs 12 and 21)
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B10 For each subsidiary that has non-controlling interests that are material to
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profit or loss and cash flows of the subsidiary that enables users to
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B12 For each joint venture and associate that is material to the reporting
entity, an entity shall disclose:
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IFRS 12 DISCLOSURE OF INTERESTS IN OTHER ENTITIES
(v) revenue.
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(viii) other comprehensive income.
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(ix) total comprehensive income.
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B13 In addition to the summarised financial information required by
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paragraph B12, an entity shall disclose for each joint venture that is
material to the reporting entity the amount of:
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(a) the amounts included in the IFRS financial statements of the joint
venture or associate shall be adjusted to reflect adjustments made
by the entity when using the equity method, such as fair value
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(a) the entity measures its interest in the joint venture or associate at
fair value in accordance with IAS 28 (as amended in 2011); and
(b) the joint venture or associate does not prepare IFRS financial
statements and preparation on that basis would be impracticable
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or cause undue cost.
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In that case, the entity shall disclose the basis on which the summarised
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financial information has been prepared.
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B16 An entity shall disclose, in aggregate, the carrying amount of its interests
in all individually immaterial joint ventures or associates that are
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accounted for using the equity method. An entity shall also disclose
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IFRS 12 DISCLOSURE OF INTERESTS IN OTHER ENTITIES
B18 An entity shall disclose total commitments it has made but not
recognised at the reporting date (including its share of commitments
made jointly with other investors with joint control of a joint venture)
relating to its interests in joint ventures. Commitments are those that
may give rise to a future outflow of cash or other resources.
B19 Unrecognised commitments that may give rise to a future outflow of cash
or other resources include:
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(that, for example, require an entity to contribute funds over
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a specific period).
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(ii) capital-intensive projects undertaken by a joint venture.
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unconditional purchase obligations, comprising procurement
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of equipment, inventory or services that an entity is committed
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B20 The requirements and examples in paragraphs B18 and B19 illustrate
some of the types of disclosure required by paragraph 18 of IAS 24 Related
Party Disclosures.
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Structured entities
B21 A structured entity is 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.
B22 A structured entity often has some or all of the following features or
attributes:
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(a) restricted activities.
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(b) a narrow and well-defined objective, such as to effect a tax-efficient
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lease, carry out research and development activities, provide a
source of capital or funding to an entity or provide investment
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opportunities for investors by passing on risks and rewards
associated with the assets of the structured entity to investors.
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(tranches).
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B23 Examples of entities that are regarded as structured entities include, but
are not limited to:
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IFRS 12 DISCLOSURE OF INTERESTS IN OTHER ENTITIES
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obligations to purchase assets of the structured entity or provide
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financial support), including:
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(i) a description of events or circumstances that could expose
the reporting entity to a loss.o
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(ii) whether there are any terms that would limit the obligation.
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(iii) whether there are any other parties that provide financial
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(b) losses incurred by the entity during the reporting period relating
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(c) the types of income the entity received during the reporting period
from its interests in unconsolidated structured entities.
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IFRS 12 DISCLOSURE OF INTERESTS IN OTHER ENTITIES
Appendix C
Effective date and transition
This appendix is an integral part of the IFRS and has the same authority as the other parts of
the IFRS.
C1 An entity shall apply this IFRS for annual periods beginning on or after
1 January 2013. Earlier application is permitted.
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Providing some of the disclosures required by this IFRS does not compel
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the entity to comply with all the requirements of this IFRS or to apply
IFRS 10, IFRS 11, IAS 27 (as amended in 2011) and IAS 28 (as amended
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in 2011) early.
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References to IFRS 9
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C3 If an entity applies this IFRS but does not yet apply IFRS 9, any reference
to IFRS 9 shall be read as a reference to IAS 39 Financial Instruments:
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INTERNATIONAL FINANCIAL REPORTING STANDARD MAY 2011
Appendix D
Amendments to other IFRSs
This appendix sets out amendments to other IFRSs that are a consequence of the Board issuing
IFRS 12. An entity shall apply the amendments for annual periods beginning on or after
1 January 2013. If an entity applies IFRS 12 for an earlier period, it shall apply the
amendments for that earlier period. Amended paragraphs are shown with new text
underlined and deleted text struck through.
D1 Paragraphs 119 and 124 are amended and paragraph 139H is added as
follows.
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119 … An example is disclosure of whether a venturer recognises its
interest in a jointly controlled entity using proportionate
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consolidation or the equity method (see IAS 31 Interests in Joint
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Ventures) an entity applies the fair value or cost model to its
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investment property (see IAS 40 Investment Property). Some IFRSs
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139H IFRSs 10 and 12, issued in May 2011, amended paragraphs 4, 119,
123 and 124. An entity shall apply those amendments when it
applies IFRSs 10 and 12.
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IFRS 12 DISCLOSURE OF INTERESTS IN OTHER ENTITIES
28A IFRS 10, IFRS 11 Joint Arrangements and IFRS 12, issued in
May 2011, amended paragraphs 3, 9, 11(b), 15, 19(b) and (e) and
25. An entity shall apply those amendments when it applies
IFRS 10, IFRS 11 and IFRS 12.
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31 © IFRS Foundation
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Prabhakar Kalavacherla
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Elke König
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Patricia McConnell
Warren J McGregor
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Paul Pacter
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Darrel Scott
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John T Smith
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Tatsumi Yamada
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Wei-Guo Zhang
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