IFRS 12 requires entities to disclose information that helps users understand:

1. The nature of interests in subsidiaries, joint arrangements, associates, and structured entities

2. The risks associated with these interests

3. The financial effects on the financial statements

It applies to entities with interests in:

• Subsidiaries (IFRS 10)

• Joint arrangements (IFRS 11)

• Associates (IAS 28)

• Unconsolidated structured entities

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1. Objectives of IFRS 12

Entities must disclose information that helps users evaluate:

A. Control and Interests

• How the entity has control, joint control, or significant influence

• Judgements and assumptions used

B. Risks / Exposures

• Commitments

• Guarantees

• Loss-absorbing obligations

• Involvement with structured entities

C. Effects on Financial Statements

• Impact on performance

• Impact on cash flows

• Non-controlling interests (NCI)

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2. Required Disclosures by Type of Interest

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A. Subsidiaries (IFRS 10)

Entities MUST disclose:

1. Composition of the Group

• List of significant subsidiaries

• % ownership and % voting rights

Example:
Parent owns:

• 80% of A Co.

• 60% of B Co.

• 100% of C Co.

These must be listed with ownership percentages.

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2. Non-Controlling Interests (NCI)

Disclose for each subsidiary with material NCI:

• NCI share of profit/loss

• NCI share of net assets

• Dividends paid to NCI

Example (subsidiary B):
Profit: $1,000,000
NCI (40%): $400,000
→ Must be disclosed

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3. Restrictions

Disclose restrictions on:

• Cash transfers

• Dividends

• Asset usage

Example:
Bank regulator prohibits B Co. from paying dividends → disclose.

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4. Loss of Control

Disclose:

• Gain or loss

• Consideration received

• Portion of investment retained

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B. Joint Arrangements (IFRS 11)

Different disclosures for:

• Joint Ventures (JV)

• Joint Operations (JO)

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1. Joint Ventures (Equity Method)

Must disclose:

• Name and nature of the JV

• Ownership percentage

• Summarized financial information of the JV:

  • Assets, liabilities

  • Revenue, profit/loss

  • Cash flows

• Significant restrictions

Example:
A Co. has 50% in Beta JV → Must show Beta JV’s revenue, profit, assets, liabilities.

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2. Joint Operations

Must disclose:

• Nature of JO

• Proportion of assets/liabilities recognized

• Risks and commitments

Example:
A & B jointly operate an oil field.
A recognizes 40% of JO assets & liabilities → must disclose basis for classification.

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C. Associates (IAS 28)

Disclose:

• Name of associate

• Ownership %

• Why significant influence exists

• Summarized financial data

• Fair value (if quoted)

Example:
A owns 25% of Gamma Ltd → must provide Gamma’s summarized balance sheet & P/L.

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D. Unconsolidated Structured Entities

Structured entity = designed so that:

• Voting rights are not key for control

• Risks/returns depend on contractual terms

Examples:

• Securitization vehicles

• Special purpose entities (SPEs)

• Investment funds

Must disclose:

• Nature and purpose of the entity

• How the reporting entity is involved

• Maximum exposure to loss

• Any support provided

Example:
Bank sponsors an SPE holding financial assets → must disclose exposure (e.g., guarantees).

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3. Judgements and Assumptions Disclosures

Entities must explain:

1. Why it controls (or does not control) another entity

2. Why joint control or significant influence exists

3. Why the entity is not consolidated (if structure is unusual)

Examples:

• A owns 48% but still controls due to dispersed ownership → disclose reasons

• A owns 60% but does not control because minority shareholders have substantive rights → disclose

• A sponsors a structured entity but has no power → explain why not controlled

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4. Summarized Financial Information Requirements

For material subsidiaries, joint ventures, and associates, disclose:

• Current assets

• Non-current assets

• Current liabilities

• Non-current liabilities

• Revenue

• Profit or loss

• Total comprehensive income

• Cash flows

Example: (Summarized JV Beta Ltd.)

• Current assets: 2.4m

• Non-current assets: 8.0m

• Current liabilities: 1.6m

• Revenue: 10.5m

• Profit: 2.1m

Investor shows its percentage share using the equity method.

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5. Example of IFRS 12 Disclosure Note (Simplified)

Note X: Interests in Other Entities

Subsidiaries

The Group has the following significant subsidiaries:

Non-controlling interests:
NCI share of profit: $400,000
NCI share of net assets: $3,200,000

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Joint Ventures

The Group has a 50% interest in Beta JV.
Summarized financial information:

• Revenue: $10.5m

• Profit: $2.1m

• Assets: $10.4m

• Liabilities: $2.1m

Group share of profit (50%): $1.05m

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Associates

25% interest in Gamma Ltd.
Summarized financial information:

• Profit: $800,000

• Group share: $200,000

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Unconsolidated Structured Entities

The Group sponsors an SPE used to securitize receivables.
Maximum exposure to loss: $3m
No support was provided during the period.

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6. Quick Comparison Summary

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