• forgiveness of debt;
• a transaction carried out on non-market terms resulting in a net outflow of
resources from the reporting entity;
• a transaction not made in the ordinary course of business; or
• implicit or explicit guarantees of a structured entity’s performance.
IFRS 12 does not explain what is meant by ‘other support’ and whether this extends to
such non-financial support as the provision of human resources or management services.
Example 13.5: Illustrative example of disclosure of financial or other support
provided to a consolidated structured entity
During the reporting period the parent provided financial support in the form of assets with a fair value of
€12,000,000 (2018: €0) and a credit rating of ‘AAA’ to its subsidiary, SE 2 Limited, in exchange for assets with an
equivalent fair value. There was no contractual obligation to exchange these assets. The transaction was initiated
because the assets held by SE 2 Limited had a credit rating of less than ‘AA’ and a further ratings downgrade could
potentially trigger calls on loan notes issued by SE 2 Limited. The parent did not suffer a loss on the transaction.
These disclosures are also required in respect of unconsolidated structured entities.
See 6.2.2 and 6.3 below.
4.4.3
Financial or other support to unconsolidated structured entities
which resulted in consolidation of those entities
If, during the reporting period, a parent or any of its subsidiaries has, without having a
contractual obligation to do so, provided financial or other support to a previously
unconsolidated structured entity and that provision of support resulted in the entity
controlling the structured entity, the entity (i.e. the reporting entity) must disclose an
explanation of the relevant factors in making that decision. [IFRS 12.16].
The comments at 4.4.2 above regarding the definition of ‘support’ apply here also.
4.4.4
Current intentions to provide financial or other support
An entity must disclose any current intentions to provide financial or other support to a
consolidated structured entity, including intentions to assist the structured entity in
obtaining financial support. [IFRS 12.17].
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13
IFRS 12 does not define ‘intentions’. The Basis for Conclusions indicates that it means
‘the entity has decided’ to provide financial support (i.e. it has current intentions to do
this). [IFRS 12.BC104]. This implies that a decision to provide support has been approved
at an appropriately senior level at the entity. Judgement will be required by entities in
interpreting this requirement and defining the meaning of ‘intention’ in this context. The
wording in the Basis of Conclusions does not require any such ‘intention’ to have been
communicated to the structured entity that will receive the support or that there has
been established a constructive obligation as defined in IAS 37 – Provisions, Contingent
Liabilities and Contingent Assets.
The comments at 4.4.2 above in respect of the definition of ‘support’ apply here also.
These disclosures are also required in respect of unconsolidated structured entities.
See 6.2.2 below.
4.5
Disclosure of changes in ownership interests in subsidiaries
4.5.1
Changes that do not result in loss of control
An entity must present a schedule that shows the effects on the equity attributable to
owners of the parent of any changes in its ownership interests in a subsidiary that do
not result in loss of control. [IFRS 12.18]. This schedule must be presented in addition to
the information required by IAS 1 in the statement of changes in equity.
IAS 1 requires an entity to present, for each component of equity, a reconciliation
between the carrying amount at the beginning and the end of the period, separately
disclosing changes resulting from transactions with owners in their capacity as owners
and changes in ownership interests with subsidiaries that do not result in loss of control.
[IAS 1.106(d)].
Despite this existing disclosure requirement, the IASB decided to require that if a
parent has equity transactions with non-controlling interests, it should disclose in a
separate schedule the effects of those transactions on the equity of the owners of
the parent.
The IASB’s rationale for this duplication is that many respondents to a 2005
exposure draft, which proposed amendments to a previous version of IAS 27,
requested more prominent disclosure of the effects of transactions with non-
controlling interests on the equity of the owners of the parent. In addition, a
schedule showing the effects on the controlling interest’s equity of changes in a
parent’s ownership interests in a subsidiary that do not result in loss of control is
required by US GAAP. [IFRS 12.BC38-39].
IFRS 12 does not prescribe a format for this additional schedule. An example of the type
of disclosure required is illustrated below.
Example 13.6: Illustrative example of disclosure of changes in ownership
interest in subsidiary that does not result in loss of control
On 5 October 2019 the Group disposed of 25% of the ownership interests of Subsidiary Limited. Following
the disposal, the Group still controls Subsidiary Limited and retains 70% of the ownership interests.
The transaction has been accounted for as an equity transaction with non-controlling interests (NCI), resulting
in the following:
Disclosure of interests in other entities 903
€’000
Proceeds from sale of 25% ownership interest
550
Net assets attributable to NCI
500
Increase in equity attributable to parent
50
Represented by:
Decrease in currency revaluation reserve
(250)
Decrease in available for sale reserve
(100)
Increase in retained earnings
400
50
4.5.2
Changes that do result in loss of control
An entity must disclose the gain or loss, if any, resulting from the loss of control of a
subsidiary calculated in accordance with paragraph 25 of IFRS 10, and:
(a) the portion of that gain or loss attributable to measuring any investment in the
retained subsidiary at its fair value at the date that control is lost; and
(b) the line item(s) in profit or loss in which the gain or loss is recognised (if not
presented separately). [IFRS 12.19].
4.6 Disclosures
required
by investment entities
An investment entity that is required by IFRS 10 to apply the exception from
consolidation and instead account for its investment in a subsidiary at fair value through
profit or loss must disclose that fact. [IFRS 12.19A].
If an investment entity has a subsidiary that it consolidates because that subsidiary is not
an investment entity and whose main purpose and activities are providing services to
the investment entity’s investment activities, the disclosure requirements in IFRS 12
apply to the financial statements in which the investment entity consolidates that
subsidiary. [IFRS 12.BC61I].
4.6.1
Disc
losures about the composition of the group
For each unconsolidated subsidiary, an investment entity must disclose:
(a) the subsidiary’s name;
(b) the principal place of business (and country of incorporation if different from the
principal place of business) of the subsidiary; and
(c) the proportion of ownership interest held by the investment entity and, if different,
the proportion of voting rights held. [IFRS 12.19B].
If an investment entity is the parent of another investment entity, the parent must also
provide the disclosures (a) to (c) above for investments that are controlled by its
investment entity subsidiary. The disclosures may be provided by including, in the
financial statements of the parent, the financial statements of the subsidiary that contain
this information. [IFRS 12.19C].
We would expect users to apply judgement where the list of subsidiaries is extensive.
There is no explicit requirement in IFRS 12 to disclose this information in respect of
consolidated subsidiaries (see 4.1 above).
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4.6.2
Disclosures required when investment entity status changes
When an entity becomes, or ceases to be, an investment entity it must disclose:
• the change of investment entity status; and
• the reasons for the change.
In addition, an entity that becomes an investment entity must disclose the effect of the
change of status on the financial statements for the period presented, including:
• the total fair value, as of the date of change of status, of the subsidiaries that cease
to be consolidated;
• the total gain or loss, if any, calculated in accordance with paragraph B101 of
IFRS 10; and
• the line item(s) in profit or loss in which the gain or loss is recognised (if not
presented separately). [IFRS 12.9B].
The accounting effect of becoming or ceasing to become an investment entity is
discussed in Chapter 6 at 10.3.1.
4.6.3
Disclosures required in respect of significant restrictions,
commitments and financial and other support
An investment entity must disclose:
• the nature and extent of any significant restrictions (e.g. resulting from borrowing
arrangements, regulatory requirements or contractual arrangements) on the ability
of an unconsolidated subsidiary to transfer funds to the investment entity in the
form of cash dividends or to repay loans or advances made to the unconsolidated
subsidiary by the investment entity; and
• any current commitments or intentions to provide financial or other support to an
unconsolidated subsidiary, including commitments or intentions to assist the
subsidiary in obtaining financial support. [IFRS 12.19D].
If, during the reporting period, an investment entity or any of its subsidiaries has,
without having a contractual obligation to do so, provided financial or other support
to an unconsolidated subsidiary (e.g. purchasing assets of, or instruments issued by,
the subsidiary or assisting the subsidiary in obtaining financial support), the entity
must disclose:
• the type and amount of support provided to each unconsolidated subsidiary; and
• the reasons for providing the support. [IFRS 12.19E].
In addition, an investment entity must disclose the terms of any contractual
arrangements that require the entity or its unconsolidated subsidiaries to provide
financial support to an unconsolidated, controlled, structured entity, including events
and circumstances that could 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 to provide financial support). [IFRS 12.19F].
If during the reporting period an investment entity or any of its unconsolidated
subsidiaries has, without having a contractual obligation to do so, provided financial
or other support to an unconsolidated, structured entity that the investment entity
Disclosure of interests in other entities 905
did not control, and if that provision of financial support resulted in the investment
entity controlling the structured entity, the investment entity must provide an
explanation of the relevant factors in reaching the decision to provide that support.
[IFRS 12.19G].
These disclosures are similar to those required for consolidated subsidiaries including
consolidated structured entities discussed at 4.3, 4.4.1, 4.4.2 and 4.4.4 above – see the
comments in these sections.
4.6.4
Valuation methodologies and nature of investing activities
IFRS 12 does not require any disclosure of fair value measurements made by investment
entities. The IASB considers that this information is already required by IFRS 7 –
Financial Instruments: Disclosures – and by IFRS 13 – Fair Value Measurement – when
reporting investments at fair value through profit or loss or other comprehensive
income in accordance with IFRS 9. [IFRS 12.BC61C].
5
DISCLOSURE OF INTERESTS IN JOINT ARRANGEMENTS
AND ASSOCIATES
An entity must disclose information that enables users of its financial statements to
evaluate:
(a) the nature, extent and financial effects of its interests in joint arrangements and
associates, including the nature and effects of its contractual relationship with
other investors with joint control of, or significant influence over, joint
arrangements and associates; and
(b) the nature of, and changes in, the risks associated with its interests in joint ventures
and associates. [IFRS 12.20].
These requirements, explained in detail at 5.1 and 5.2 below, apply in full to both
consolidated financial statements and individual financial statements of entities with
joint arrangements and associates.
A reporting entity that prepares separate financial statements, even if it does not prepare
consolidated financial statements, is only required to comply with disclosures (a)(i) and
(iii) and (b)(i) at 5.1 below. [IAS 27.16(b), (c)].
IFRS 12 does not address disclosures of joint ventures and associates in the primary
statements. IAS 1 does not require interests in joint ventures and associates to be
disclosed separately in the statement of financial position. This is probably because
of the different methods of accounting that can be applied under IAS 28, i.e. equity
method or fair value. However, IAS 1 requires separate disclosure of investments
accounted for using the equity method on the face of the statement of financial
position, although it does not require a split of those investments between joint
ventures and associates. [IAS 1.54]. IAS 1 also requires a reporting entity’s post tax
share of the profit or loss of associates and joint ventures accounted for using the
equity method to be disclosed on the face of the statement of comprehensive
income. [IAS 1.82].
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13
5.1
Disclosure of the nature, extent and financial effects of interests
in joint arrangements and associates
An entity must disclose:
(a) for each joint arrangement and associate that is material to the reportin
g entity:
(i) the name of the joint arrangement or associate;
(ii) the nature of the entity’s relationship with the joint venture or associate (by,
for example, describing the nature of the activities of the joint arrangement
or associate and whether they are strategic to the entity’s activities);
(iii) the principal place of business (and country of incorporation, if applicable and
different from the principal place of business) of the joint arrangement or
associate; and
(iv) the proportion of ownership interest held by the entity and, if different, the
proportion of voting rights held (if applicable).
(b) for each joint venture (but not a joint operation) and associate that is material to
the reporting entity:
(i)
whether the investment in the joint venture or associate is measured using the
equity method or at fair value;
(ii) summarised financial information about the joint venture or associate
(see 5.1.1 below); and
(iii) if the joint venture or associate is accounted for using the equity method, the
fair value of the investment in the joint venture or associate, if there is a
quoted market price for the investment.
(c) financial information (see 5.1.2 below) about the entity’s investments in joint
ventures and associates that are not individually material:
(i) in aggregate for all individually immaterial joint ventures and, separately;
(ii) in aggregate for all individually immaterial associates. [IFRS 12.21].
Disclosures (b) and (c) are not required by an investment entity. [IFRS 12.21A].
In January 2015, the Interpretations Committee discussed a request to clarify the
requirement described above to disclose summary financial information about material
joint ventures and associates and its interaction with the aggregation principle of
IFRS 12 (see 2.2.2 above). The issue was whether the summary financial information can
be disclosed in aggregate for all material joint ventures and associates, or whether such
information should be disclosed individually for each material joint venture or associate.
The Interpretations Committee also discussed a request to clarify whether an investor
should be excused from disclosing information related to a listed joint venture or
International GAAP® 2019: Generally Accepted Accounting Practice under International Financial Reporting Standards Page 178
