US$ million
Kazzinc Koniambo Katanga
Volcan
31 December 2017
Non-current assets
4,659
1,502
4,333
4,754
Current assets
1,234
314
889
423
Total assets
5,893
1,816
5,222
5,177
Non-current liabilities
763
10,273
3,760
1,789
Current liabilities
378 112
2,593
562
Total liabilities
1,141
10,385
6,353
2,351
Net assets
4,752
(8,569)
(1,131)
2,826
Equity attributable to owners of the Company
3,314
(5,664)
(166)
1,093
Non-controlling interests
1,438
(2,905)
(965) 1
1,733
Non-controlling interests in % 30.3%
51.0%
13.7%
76.7%
2017
Revenue 3,078
–
25
160
Expenses (2,517)
(494)
(1,004)
(160)
Net profit/(loss) for the year
561
(494)
(979) –
Profit attributable to owners of the Company
395
(242)
(575)
–
Profit attributable to non-controlling interests
166
(252)
(404) 1
–
Other comprehensive income attributable to owners of
the Company
–
–
–
–
Other comprehensive income attributable to non-
controlling interests
–
–
–
–
Total comprehensive income/(loss) for the year
561
(494)
(979)
–
Dividends paid to non-controlling interests
(124)
–
–
–
Net cash inflow/(outflow) from operating activities
764
–
(177)
–
Net cash outflow from investing activities
(196)
(241)
(369)
–
Net cash (outflow)/inflow from financing activities
(511)
256
583
–
Total net cash inflow/(outflow)
57
15
37
–
1 Glencore has a 86.3% interest in Katanga Mining Limited, which in turn has a 75% interest in Kamoto Copper
Company (KCC) the entity engaged in copper mining activities. The “non-controlling interests” balance includes
negative $939 million and the “profit attributable to non-controlling interests” balance includes negative
$310 million related to non-controlling interests arising at the KCC level.
Disclosure of interests in other entities 897
IFRS 12 does not address disclosure of non-controlling interests in the primary
statements. IAS 1 requires disclosure of total non-controlling interests within equity
in the statement of financial position, profit or loss and total comprehensive income
for the period attributable to non-controlling interests and a reconciliation of the
opening and closing carrying amount of each component of equity (which would
include non-controlling interests) in the statement of changes in equity.
[IAS 1.54, 81B, 106].
4.3
Disclosure of the nature and extent of significant restrictions
An entity must disclose:
(a) significant restrictions (e.g. statutory, contractual and regulatory restrictions) on its
ability to access or use assets and settle the liabilities of the group, such as:
(i) those that restrict the ability of a parent or its subsidiaries to transfer cash or
other assets to (or from) other entities within the group;
(ii) guarantees or other requirements that may restrict dividends and other capital
distributions being paid, or loans and advances being made or repaid, to (or
from) other entities within the group;
(b) the nature and extent to which protective rights of non-controlling interests
can significantly restrict the entity’s ability to access or use the assets and settle
the liabilities of the group (such as when a parent is obliged to settle liabilities
of a subsidiary before settling its own liabilities, or approval of non-controlling
interests is required either to settle the assets or settle the liabilities of a
subsidiary); and
(c) the carrying amounts in the consolidated financial statements of the assets and
liabilities to which the restrictions apply. [IFRS 12.13].
These requirements were included in IFRS 12 to clarify that information disclosed in
respect of significant restrictions of subsidiaries to transfer funds should include the
nature and extent to which protective rights of non-controlling interests can restrict an
entity’s ability to access and use the assets and settle the liabilities of a subsidiary.
[IFRS 12.BC31].
The Basis for Conclusions clarifies that these disclosures are intended to be limited to
information about the nature and effect of significant restrictions on an entity’s ability
to access and use assets or settle liabilities of the group. They are not intended, in the
IASB’s opinion, to require an entity to disclose, for example, a list of all the protective
rights held by non-controlling interests that are embedded in law and regulation.
[IFRS 12.BC32].
The IASB also considers that the restrictions required to be disclosed by IFRS 12 are
those that exist because of legal boundaries within the group, such as restrictions on
transferring cash between group entities. They are not, in the IASB’s opinion, intended
to replicate those in other IFRSs relating to restrictions such as those in IAS 16 –
Property, Plant and Equipment – or IAS 40 – Investment Property. [IFRS 12.BC33].
898 Chapter
13
Deutsche Bank AG make the following disclosures about significant restrictions to
access or use the group’s assets:
Extract 13.5: Deutsche Bank Aktiengesellschaft (2017)
Notes to the Consolidated Financial Statements
Additional Notes [extract]
39 –
Information on Subsidiaries [extract]
Significant restrictions to access or use the Group’s assets [extract]
Statutory, contractual or regulatory requirements as well as protective rights of noncontrolling interests might restrict the ability of the Group to access and transfer assets freely to or from other entities within the Group and to settle liabilities of the Group.
Since the Group did not have any material noncontrolling interests at the balance sheet date, any protective rights
associated with these did not give rise to significant restrictions.
The following restrictions impact the Group’s
ability to use assets:
– The Group has pledged assets to collateralize its obligations under repurchase agreements, securities financing
transactions, collateralized loan obligations and for margining purposes for OTC derivative liabilities.
– The assets of consolidated structured entities are held for the benefit of the parties that have bought the notes
issued by these entities.
– Regulatory and central bank requirements or local corporate laws may restrict the Group’s ability to transfer
assets to or from other entities within the Group in certain jurisdictions.
Restricted assets
Dec. 31, 2017
Dec. 31, 2016
Total
Restricted
Total
Restricted
in є m
assets
assets
assets
assets
Interest-earning deposits with banks
210,481 772
163,292 1,314
1
Financial assets at fair value through profit or loss
636,970 58,210
743,781 51,454
Financial assets available for sale
49,397 9,915
56,228 19,870
Loans
401,699 71,971
408,909 74,172
Other
176,186 13,594
218,336 7,693
1
Total 1,474,732
154,462
1,590,546 154,503
1 Prior period results have been restated due to a refined approach to determine assets pledged.
The table above excludes assets that are not encumbered at an individual entity level but which may be subject to restrictions in terms of their transferability within the Group. Such restrictions may be based on local connected lending requirements or similar regulatory restrictions. In this situation, it is not feasible to identify individual balance sheet items that cannot be transferred. This is also the case for regulatory minimum liquidity requirements. The Group identifies the volume of
liquidity reserves in excess of local stress liquidity outflows. The aggregate amount of such liquidity reserves that are considered restricted for this purpose is €23.5 billion as of December 31, 2017 (as of December 31, 2016: €37.4 billion).
Disclosure of interests in other entities 899
4.4
Disclosure of the nature of the risks associated with interests in
consolidated structured entities
IFRS 12 requires a number of disclosures in respect of financial or other support
provided to consolidated structured entities. Essentially, the standard requires
disclosure of certain intra-group transactions that have been eliminated on
consolidation and details of certain commitments by a group to itself.
For groups with a number of structured entities, these disclosures are likely to require
changes to consolidation reporting packages in order to capture the necessary
information. As these transactions will have either been eliminated on consolidation or
not (yet) occurred at all, it is unlikely that they will all be reflected in existing
consolidation reporting packages. However, some of these transactions are likely to be
disclosable as related party transactions in the individual or separate financial
statements of the subsidiaries involved.
The IASB concluded that it would help users of financial statements in understanding
an entity’s exposure to risks if the entity disclosed the terms of contractual arrangements
that could require it to provide financial support to a consolidated structured entity,
including events or circumstances that could expose the entity to a loss. [IFRS 12.BC34].
It is unclear which ‘entity’ the IASB considers has suffered a ‘loss’ in this context since
a group does not suffer a loss as a result of one subsidiary providing financial support to
another subsidiary as that is an intra-group transaction which is eliminated on
consolidation. Any ‘loss’ suffered by one subsidiary would be offset by the ‘profit’ in the
other subsidiary. However, differing shares held by non-controlling interests in those
subsidiaries could affect the overall profit and comprehensive income attributable to
non-controlling interests and owners of the parent. Presumably, it is the potential for a
‘loss’ to the equity holders of the parent from these transactions (rather than a ‘loss’ to
the group) that the IASB is trying to highlight.
For the same reasons, the IASB concluded that an entity should disclose its risk
exposure from non-contractual obligations to provide support to both consolidated
and unconsolidated structured entities. [IFRS 12.BC35]. The question this raises is,
assuming the obligation is not contractual, whether an obligation exists at all that
requires disclosure.
The IASB also noted that US GAAP requires similar disclosures which, in the opinion of
the IASB, ‘have been well received by users of financial statements in the US’.
[IFRS 12.BC36].
The detailed disclosures that are required in respect of interests in consolidated
structured entities are discussed at 4.4.1 to 4.4.4 below.
900 Chapter
13
4.4.1
Terms of contractual arrangements to provide financial support to
consolidated structured entities
An entity must disclose the terms of any contractual arrangements that could require
the parent or its subsidiaries to provide financial support to a consolidated structured
entity, including events or circumstances that expose the reporting entity to a loss (e.g.
liquidity arrangements or credit rating triggers associated with obligations to purchase
assets of the structured entity or provide financial support). [IFRS 12.14].
As discussed at 4.4 above, the IASB’s intent seems to be to address circumstances in
which a ‘loss’ could be suffered by the equity holders of the parent from these
transactions rather than a ‘loss’ suffered by the reporting entity (i.e. the group).
Example 13.4: Illustrative example of disclosure of a contractual arrangement
that could require parental support to a consolidated structured
entity
The parent company has given a contractual commitment to its subsidiary, SE Limited, whereby if the assets
held as collateral by SE Limited for its issued loan notes fall below a credit rating of ‘AAA’ then the parent
will substitute assets of an equivalent fair value with an ‘AAA’ rating. The maximum fair value of assets to
be substituted is €10,000,000. The parent will not suffer a loss on any transaction arising from this
commitment but will receive assets with a lower credit rating from those substituted.
4.4.2
Financial or other support to consolidated structured entities with no
contractual obligation
If, during the reporting period a parent or any of its subsidiaries has, without having any
contractual obligation to do so, provided financial or other support to a consolidated
structured entity (e.g. purchasing assets of or instruments issued by the structured
entity), the entity must disclose:
(a) the type and amount of support provided, including situations in which the parent
or its subsidiaries assisted the structured entity in obtaining financial support; and
(b) the reasons for providing the support. [IFRS 12.15].
The transactions requiring disclosure are intra-group transactions elimin
ated on
consolidation.
‘Support’ is not defined in IFRS. A literal reading of ‘purchasing assets of or
instruments issued’ is that any transfer of consideration to a structured entity in
exchange for an asset is the provision of support requiring disclosure by the
standard. The Basis for Conclusions explains that the IASB did not define ‘support’
because a definition of support would either be so broad that it would be an
ineffective definition or invite structuring so as to avoid the disclosure. The IASB
believes that support is widely understood as a provision of resources to another
entity, either directly or indirectly. In the case of implicit agreements, the support is
provided without having the contractual obligation to do so. However, in order to
address respondents’ concerns about distinguishing the provision of financial
support from any other commercial transaction, the IASB clarified that disclosure is
required when an entity has provided non-contractual support to a consolidated or
unconsolidated structured entity in which it previously had or currently has an
interest. [IFRS 12.BC105-106].
Disclosure of interests in other entities 901
Examples of the type of support that the IASB envisages being disclosed for
unconsolidated structured entities (see 6.3 below) are liquidity arrangements or credit
rating triggers associated with obligations to purchase assets of the structured entity or
provide financial support. These examples imply that the IASB does not intend
transactions in the ordinary course of business to be caught by the requirement to disclose
support provided to consolidated structured entities. By ‘asset purchase’ they are referring
to a ‘forced’ purchase caused by, for example, liquidity or credit rating triggers.
Interpreting financial or other support is therefore likely to involve judgement. One
possible interpretation is that ‘support’ includes:
• any transaction involving the gifting of funds;
• an equity investment;
• a long-term loan;
International GAAP® 2019: Generally Accepted Accounting Practice under International Financial Reporting Standards Page 177
