Library / Technical Accounting Manual: IFRS, IAS and Ind AS Equivalents

IFRS 12 - Disclosure of Interests in Other Entities

Indian equivalent: Ind AS 112 - Disclosure of Interests in Other Entities

Objective and scope

IFRS 12 is the single disclosure standard for all a company's interests in other entities - subsidiaries, joint arrangements, associates, and unconsolidated 'structured entities' - so readers understand the group's structure, the risks it carries, and the effect on its finances.

Core principle

IFRS 10, 11 and IAS 28 tell you how to account for other entities; IFRS 12 tells you what to disclose about them. Its goal: let readers understand the group's structure, the judgements made about control, the risks from each interest, and the impact of non-controlling and off-balance-sheet interests.

Defined terms and technical terminology

Term	Technical meaning
Interest in another entity	Any involvement exposing the entity to variable returns from another entity's performance (subsidiary, associate, JV, structured entity).
Structured entity	An entity designed so that voting rights are not the dominant factor in deciding control (e.g., some securitisation or financing vehicles).
Significant judgements	The key decisions made in determining control, joint control or significant influence, which must be disclosed.
Significant restrictions	Limits on the group's ability to access or use assets / settle liabilities of its entities.

Application and worked illustrations

What IFRS 12 requires

IFRS 12 pulls together all disclosures about interests in other entities into one place. The entity must disclose: the significant judgements and assumptions made in deciding it has control, joint control or significant influence (e.g., why it consolidates an entity it owns less than half of, or does not consolidate one it owns more than half of); information about subsidiaries (the composition of the group, NCI details, and any significant restrictions on accessing assets); information about joint arrangements and associates (their nature, risks, and summarised financials); and information about unconsolidated structured entities (the nature and extent of risks, including exposure to loss).

Worked example

A banking group sponsors a securitisation vehicle it does not consolidate. Under IFRS 12 it must explain the judgement that it does not control the vehicle, describe the nature and purpose of the vehicle, and disclose its maximum exposure to loss from its involvement (say, a ₹200 crore guarantee) - so readers can see an off-balance-sheet risk that the numbers alone would not reveal. Separately, for a subsidiary that is 70%-owned, the group discloses the NCI's share of profit and accumulated equity, and any regulatory restriction preventing cash from flowing up to the parent.

Common mistake: omitting disclosures about unconsolidated structured entities. IFRS 12 specifically targets these off-balance-sheet risks.

IND AS LINK

Ind AS 112 aligns with IFRS 12 - a single home for disclosures about subsidiaries, joint arrangements, associates and structured entities.

Further worked illustrations

Extra numeric example - disclosing NCI

A group has a 75%-owned subsidiary with total profit ₹40,00,000 and net assets ₹2 crore. IFRS 12 requires disclosing the non-controlling interest: 25% of profit (₹10,00,000) attributable to outside owners and 25% of net assets (₹50,00,000) as their equity stake - plus any dividends paid to them - so readers see how much of the group's results belongs to minority shareholders, not the parent.

INDIAN REGULATORY CONTEXT

For sprawling Indian group structures, Ind AS 112 disclosures reveal the composition of the group, the significant judgements about what is or isn't controlled, and any restrictions (regulatory or contractual) that stop cash moving up from a subsidiary to the parent - vital for assessing whether reported group cash is actually accessible.

TECHNICAL EDGE CASE

A bank sets up and sponsors an investment fund but doesn't control it, so the fund isn't consolidated. IFRS 12 still requires disclosure of this unconsolidated structured entity: its nature and purpose, and the bank's maximum exposure to loss (say, a liquidity guarantee). This surfaces off-balance-sheet risk that the consolidated numbers would otherwise completely hide.