IFRS 12 Disclosure of Interests in Other Entities

IFRS 12 Unconsolidated structured entities

Interests in unconsolidated structured entities (paragraphs 24–31)

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:

1. restricted activities.
2. a narrow and well-defined objective, such as to effect a tax-efficient lease, carry out research and development activities, provide a source of capital or funding to an entity or provide investment opportunities for investors by passing on risks and rewards associated with the assets of the structured entity to investors.
3. insufficient equity to permit the structured entity to finance its activities without subordinated financial support.
4. financing in the form of multiple contractually linked instruments to investors that create concentrations of credit or other risks (tranches).

B23 Examples of entities that are regarded as structured entities include, but are not limited to:

1. securitisation vehicles.
2. asset-backed financings.
3. some investment funds.

B24 An entity that is controlled by voting rights is not a structured entity simply because, for example, it receives funding from third parties following a restructuring.

Nature of risks from interests in unconsolidated structured entities (paragraphs 29–31)

B25 In addition to the information required by paragraphs 29–31, an entity shall disclose additional information that is necessary to meet the disclosure objective in paragraph 24(b).

B26 Examples of additional information that, depending on the circumstances, might be relevant to an assessment of the risks to which an entity is exposed when it has an interest in an unconsolidated structured entity are:

1. the terms of an arrangement that could require the entity to provide financial support to an unconsolidated structured entity (eg liquidity arrangements or credit rating triggers associated with obligations to purchase assets of the structured entity or provide financial support), including:
   1. a description of events or circumstances that could expose the reporting entity to a loss.
   2. whether there are any terms that would limit the obligation.
   3. whether there are any other parties that provide financial support and, if so, how the reporting entity’s obligation ranks with those of other parties.
2. losses incurred by the entity during the reporting period relating to its interests in unconsolidated structured entities.
3. the types of income the entity received during the reporting period from its interests in unconsolidated structured entities.
4. whether the entity is required to absorb losses of an unconsolidated structured entity before other parties, the maximum limit of such losses for the entity, and (if relevant) the ranking and amounts of potential losses borne by parties whose interests rank lower than the entity’s interest in the unconsolidated structured entity.
5. information about any liquidity arrangements, guarantees or other commitments with third parties that may affect the fair value or risk of the entity’s interests in unconsolidated structured entities.
6. any difficulties an unconsolidated structured entity has experienced in financing its activities during the reporting period.
7. in relation to the funding of an unconsolidated structured entity, the forms of funding (eg commercial paper or medium-term notes) and their weighted-average life. That information might include maturity analyses of the assets and funding of an unconsolidated structured entity if the structured entity has longer-term assets funded by shorter-term funding.

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IFRS 12 Unconsolidated structured entities IFRS 12 Unconsolidated structured entities IFRS 12 Unconsolidated structured entities IFRS 12 Unconsolidated structured entities IFRS 12 Unconsolidated structured entities IFRS 12 Unconsolidated structured entities IFRS 12 Unconsolidated structured entities IFRS 12 Unconsolidated structured entities IFRS 12 Unconsolidated structured entities IFRS 12 Unconsolidated structured entities