IFRS 12 Disclosure of Interest in Other Entities

IFRS 12 requires disclosure of the significant judgements and assumptions that an entity has made in determining the nature of its interest in another entity or arrangement. It also contains extensive disclosure requirements for subsidiaries, associates, joint ventures and unconsolidated structured entities.

Control – Joint control – Significant influence

This is a discussion on IFRS 10 – IFRS 12 Control, Joint control, Significant influence and the accounting applied. It is added with some other logical IFRS topics: the fair value option and the other investments (no control, no joint control and no significant influence).

ControlControl of an investee Control of an investee

Consolidated subsidiaries – Consolidated structured entities

For an investor to control an investee, the investor must possess all of the following elements:

  • Power over the investee, which is described as having existing rights that give the current ability to direct the activities of the investee that significantly affect the investee’s returns (such activities are referred to as the ‘relevant activities’)
  • Exposure, or rights, to variable returns from
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Control in debt restructuring in Structured entity

Following is a case on the assessment whether certain stakeholders in a transaction/structure have obtained control over a certain entity in the transaction in line with the requirements of IFRS 10 Consolidated financial statements. Only one stakeholder can be in control! [IFRS 10 B16] Or no stakeholder is in control. Or one stakeholder is in control and has to consolidate the investigated entity  in its consolidated financial statements. Here is the case. Control in debt restructuring in Structured entity

THE CASE – Assessing control for a debt restructuring structured entity with limited activities 

Background and purpose Control in debt restructuring in Structured entity

A corporate entity (‘the Corporate’) wishes to raise long-term debt with a non-vanilla … Read more

Consolidated subsidiaries, joint operations and other entities || Investments in joint ventures, associates and structured entities

IFRS 12 provides one comprehensive disclosure standard for equity instruments in Subsidiaries, Joint arrangements (Joint operations and Joint ventures), Associates and Structured entities. Hence, management needs to exercise a certain degree of judgement in determining whether a new investee is controlled and therefore consolidated. For instance, disclosure and internal documentation is required for how voting rights are evaluated and whether it is a principal or an agent etc.

Classifying these equity instruments requires time, effort and the exercise of considerable judgement based on a comprehensive understanding of the business, operations, and legal rights and obligations the investing entity has obtained in the investee. Also these judgements have to be re-assessed during any significant financial close. This is a true … Read more

Disclosures subsidiaries and NCI

IFRS 12 requires disclosures for each of an entity’s subsidiaries that have material non-controlling interests. Such disclosures assist users when estimating future profit or loss and cash flows (for example, by identifying the assets and liabilities that are held by subsidiaries, risk exposures of particular group entities, and those subsidiaries that have significant cash flows). The disclosures are as follows (new disclosures compared to the previous standard are in bold):

  • The subsidiary’s name
  • Its principal place of business (and country of incorporation, if different)
  • The proportion of ownership interests held by non-controlling interests
  • The proportion of voting rights held by noncontrolling interests, if different from the proportion of ownership interests held
  • The profit or loss allocated to
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Disclosures unconsolidated structured entities

The level of disclosure in respect of unconsolidated structured entities will depend on the facts and circumstances of the entity but is likely to be more complex for a bank or other financial institution.

Disclosures will be in table forms specifying the following attributes [IFRS 12 26]:

Type of structured entity

Nature and purpose

Interest held by the reporting entity

Total assets

20×5

Total assets

20×4

Secucitisation vehicles for loans and advances

To generate:

  • funding for the lending activities,
  • earn margin through the sale of notes to investors
  • earn fees for loan serving

These vehicles are financed through the issue of notes to investors through stock exchanges.

Investments in notes issued by the vehicles

Fees for loan servicing

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Disclosures immaterial associates and joint ventures

An entity provides the disclosures separately for individually immaterial associates and individually immaterial joint ventures – they are not combined. [IFRS 12 21 (c) and IFRS 12 B16]

Based on IFRS 12 21, IFRS 12 B16, the disclosures are made like in this example from Volkswagen Group Annual Report 2018:

Note: Disclosures for immaterial joint ventures will be very very similar but CANNOT be combined in one summary of financial information.

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Disclosures material joint operations

Unlike joint ventures, IFRS 12 requires only limited quantitative disclosures for joint operations, including information about significant judgments and assumptions made in determining the classification of a joint arrangement that is structured through a separate entity. [IFRS 12 7 (c) and IFRS 12 21 (a)]

The classification of joint arrangements is discussed here.

Based on IFRS 12 7 (c), IFRS 12 21 (a), the disclosures are made like in this illustrative example:

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Disclosures material joint ventures

The disclosures may be aggregated for interests in similar entities, with the method of aggregation being disclosed (aggregation being consolidation). A quantitative and qualitative analysis, taking into account the different risk and return characteristics of each entity, is made in order to determine the aggregation level. IFRS 12 gives the following examples of aggregation levels: by nature of activities, by industry or by geography. [IFRS 12.4, B2–B6]

However, as a minimum, information is given separately for interests in subsidiaries, joint ventures, joint operations, associates and unconsolidated structured entities. [IFRS 12.B4–B6]

Note a) [IFRS 12 B14(a)]


IFRS 12 indicates that the amounts included in the summarised financial information are those prepared in accordance with Read more

Disclosures material associates

The disclosures may be aggregated for interests in similar entities, with the method of aggregation being disclosed (aggregation being consolidation). A quantitative and qualitative analysis, taking into account the different risk and return characteristics of each entity, is made in order to determine the aggregation level. IFRS 12 gives the following examples of aggregation levels: by nature of activities, by industry or by geography. [IFRS 12.4, B2–B6]

However, as a minimum, information is given separately for interests in subsidiaries, joint ventures, joint operations, associates and unconsolidated structured entities. [IFRS 12.B4–B6]

Note a) [IFRS 12 B14(a)]


IFRS 12 indicates that the amounts included in the summarised financial information are those prepared in accordance with Read more

Disclosure of Interest in Other Entities

IFRS 12 requires disclosure of the significant judgments and assumptions that an entity has made in determining the nature of its interest in another entity or arrangement. It also contains extensive disclosure requirements for subsidiaries, associates, joint ventures and unconsolidated structured entities. [IFRS 12 7]

The objective of IFRS 12 is to require disclosure that helps users of financial statements to evaluate:

  • the nature of, and risks associated with, an entity’s interests in other entities; and
  • the effects of those interests on the entity’s financial position, financial performance and cash flows. [IFRS 12 1]

In this context, ‘interests in other entities’ are contractual and non-contractual involvement that exposes an entity to variability of returns from Read more