IFRS 12 Disclosure of Interests in Other Entities expands the disclosure requirements for entities that have interests in subsidiaries, joint arrangements, associates and unconsolidated structured entities.
Overview of standard
- The standard introduces expanded and new disclosures for entities that have interests in subsidiaries, joint arrangements, associates and/or unconsolidated structured entities.
- The disclosures aim to provide information to enable users to evaluate the nature of, and risks associated with, an entity’s interests in other entities and the effect of those interests on the entity’s financial position, financial performance and cash flows.
- Examples of some of the new disclosures include :
- summarised financial information for each subsidiary that has a non-controlling interest;
- the terms of any contractual support arrangements in respect of consolidated structured entities; and
- information about the carrying amount of assets and liabilities recognised in the financial statements in respect of unconsolidated structured entities.
In December 2012, IFRS 10, IFRS 11, IFRS 12, IAS 27 (2011) and IAS 28 (2011) were endorsed for use in the EU for financial years starting on or after 1 January 2014. Early adoption is permitted.
The IASB has issued Consolidated Financial Statements, Joint Arrangements and Disclosure of Interests in Other Entities: Transition Guidance (Amendments to IFRS 10, IFRS 11 and IFRS 12). In April 2013, these amendments were endorsed for use in the EU for annual periods starting on or after 1 January 2014 (early adoption permitted). These amendments simplify the transition to these new standards by:
requiring the consolidation conclusion to be tested at the start of the year in which IFRS 10 is adopted;
removing the requirement to disclose the impact of the change in accounting policy for the year in which the standard is adopted; and
requiring disclosures in respect of unconsolidated structured entities to be provided only prospectively.
- The disclosures are more extensive than those required by current standards and may result in substantially more information being shown in the financial statements.
- It may be difficult to determine which interests in structured entities will require disclosure: judgement will be required.
- The new disclosures may require the development of new systems and/or controls to collect and collate the necessary information in respect of interests in structured entities.