What disclosures are required as per IFRS 12?


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What disclosures are required as per IFRS 12?
What disclosures are required as per IFRS 12?



All disclosure requirements regarding interests in other entities are covered by the comprehensive standard known as IFRS 12. The objective of IFRS 12 is to make it a requirement for an entity to provide information that will allow users from its financial statements to assess the nature of, risks connected to, and effects of its interests in other entities on financial statements.


According to the standard, IFRS 12 aims to make it necessary for an entity to provide information that allows users of its financial statements to assess:

· The nature of its investments in other entities and the risks involved; and

· The impact of those interests on its cash flows, financial status, and financial performance.

To fulfil this aim, an entity must disclose the following:

i. The important judgements and presumptions it made in deciding:

·  the type of interest it has in a different entity or arrangement;

·  the kind of cooperative arrangement in which it is interested;

·  if applicable, that it satisfies the criteria for an investment entity;

ii. Information regarding its interests in:

·  Subsidiaries;

·  joint arrangements and partnerships; and

· structured entities that the entity does not control.


Organizations engaged in the following activities are required to implement IFRS 12: joint ventures, subsidiaries, joint operations, associates, or unconsolidated organised entities are examples of joint arrangements. Not covered by this Quality Standard are:

i. IAS 19 Employee Benefits accounts for long-term employee benefit plans like pensions and other post-employment plans.

ii. Financial statements that are separate from those of the entity for which IAS 27 applies. However, suppose an entity has interests in unconsolidated organised entities and produces discrete financial statements as its only source of financial information. In that case, it must adhere to the pertinent provisions of this Standard.

iii. an interest owned by an entity that takes part in a joint arrangement but does not share control over it unless the interest has a significant impact on the arrangement.

iv. an interest in a different organisation is treated as a financial instrument under IFRS 9.

However, an organisation must follow this Standard:

·   Whether that interest is a share in a joint venture or an associate that is assessed at fair value based on profit or loss in line with IAS 28.

·   When the interest in question relates to a structured, unconsolidated entity.

Investment entities are exempt from certain disclosure obligations in IFRS 12, although they are subject to additional disclosure requirements.

Disclosure requirements imposed by IFRS 12

Users of an entity's consolidated financial statements must be provided with information that enables them to Understand :

· The group's composition.

·  Non-controlling interests' involvement in the group's operations and cash flows.


· The type and scope of major limitations placed on its access to or use of the group's assets, as well as its capacity to settle liabilities.

· The type of risk involved with its interests in consolidated structured companies and any changes to that risk.

· The consequences of modifications to its ownership interest in a subsidiary without a loss of control .

· The effects of a subsidiary losing control during the reporting period.

In Conclusion

The IASB implemented these modifications in response to the global financial crisis, intending to enhance the transparency of management's decisions regarding consolidation and the financial implications of a different result.