IFRS 12

Disclosure of Interests in Other Entities

1Objective and scope

IFRS 12 requires an entity to disclose information that enables users of its financial statements to evaluate the nature of, and risks associated with, its interests in other entities, and the effects of those interests on its financial position, financial performance and cash flows. It brought together, in one place, disclosures previously scattered across separate standards for subsidiaries, joint arrangements and associates.

2Key definitions

Structured entity

An entity designed so that voting or similar rights are not the dominant factor in deciding who controls it - for example, when voting rights relate only to administrative tasks and the relevant activities are directed by contractual arrangements instead.

Interest in another entity

Involvement that exposes an entity to variability of returns from the performance of the other entity - through contractual or non-contractual involvement.

3What must be disclosed

Significant judgements and assumptions made in determining whether the entity has control, joint control, or significant influence over another entity, and in determining the type of joint arrangement
For subsidiaries: the composition of the group, the interests of non-controlling interests, and the nature and extent of any significant restrictions on the entity's ability to access or use group assets or settle group liabilities
For joint arrangements and associates: the nature, extent and financial effects of the interest, including summarised financial information
For unconsolidated structured entities: the nature and extent of interests, including the type of exposure the entity has and how it arose, and the nature of risks associated with the entity's interest

4Presentation and disclosure

IFRS 12 is entirely a disclosure standard - it does not add recognition or measurement requirements; those sit in IFRS 10, IFRS 11, and IAS 28. Its disclosures are read alongside those standards, focused on making the risks and effects of the entity's various interests visible to users, especially where an interest is significant but the entity is not consolidated line by line (e.g. an associate, a joint venture, or an unconsolidated structured entity).

5Examinable focus

What KASNEB tests

Recognition of what triggers enhanced IFRS 12 disclosure (a subsidiary with material non-controlling interest, a significant restriction on accessing group assets, or an unconsolidated structured entity) is tested conceptually, usually as a short written point alongside an IFRS 10 or IFRS 11 group accounts question rather than as a standalone numerical topic.