IFRS 12 Disclosure of Interest 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.

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 b ii]

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]

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]

In this context, ‘interests in other entities’ are contractual and non-contractual involvement that exposes an entity to variability of returns from the performance of the other entity. These interests may, for example, take the form of equity or debt instruments, but the definition is broad and interests can also comprise other forms of involvement, such as liquidity support, credit enhancement and/or guarantees. However, an interest in another entity does not exist solely as a result of a typical customer-supplier relationship. [IFRS 12 Appendix A – Defined terms]

Interests in another entity are the basis for many of the disclosures in IFRS 12. Understanding the purpose and design of the other entity may assist in identifying such interests. The entity considers the risks that the other entity was designed to create, and the risks that the other entity was designed to pass on to the reporting entity and other parties. [IFRS 12 B7]

In addition, IFRS 12 requires an entity to provide disclosure about its relationships with unconsolidated structured entities that it sponsors even if it does not have an interest in them at the reporting date. [IFRS 12 27–28]

IFRS 12 Disclosure of Interest in Other Entities – Aggregation

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, IFRS 12 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]

Siemens Annual Report 2018 [Page 75] Note 4 Interest in other entities

The examples for each interest in other entities and their disclosure requirements are provided here:

Disclosures material associates Disclosure of Interest in Other Entities
Disclosures material joint ventures Disclosure of Interest in Other Entities
Disclosures material joint operations
Disclosures immaterial associates Disclosure of Interest in Other Entities
Disclosures immaterial joint ventures
Disclosures subsidiaries and NCI Disclosure of Interest in Other Entities
Disclosures unconsolidated structured entities

IFRS 12 Disclosure of Interest in Other Entities

IFRS 12 Disclosure of Interest in Other Entities IFRS 12 Disclosure of Interest in Other Entities IFRS 12 Disclosure of Interest in Other Entities