IFRS 12 disclosure of interests in other entities

IFRS 12 is a disclosure only standard. It requires an entity with interests in subsidiaries, joint arrangements, associates or unconsolidated structured entities to disclose enough for users to judge the nature of those interests, the risks attached to them and their effect on financial position, performance and cash flows. In practice that means disclosing the key judgements on control, information on material non controlling interests, summarised figures for material joint ventures and associates, and exposures to structured entities the group does not consolidate.

Who has to apply IFRS 12, and what is outside it?

Paragraph 5 applies IFRS 12 to any entity with an interest in a subsidiary, a joint arrangement (joint operation or joint venture), an associate or an unconsolidated structured entity. An interest is broadly any contractual or non contractual involvement that exposes the entity to variability of returns from the other entity’s performance. Paragraph 5A keeps the requirements for interests held for sale under IFRS 5, though paragraph B17 drops the summarised financial information for them.

Paragraph 6 excludes post employment benefit plans under IAS 19, separate financial statements under IAS 27 (with exceptions for an entity whose only financial statements are separate ones and has unconsolidated structured entities, and for investment entities), and interests held by a party without joint control of a joint arrangement unless that gives significant influence or is an interest in a structured entity.

IFRS 12 was issued in May 2011, replacing the disclosure requirements previously in IAS 27, IAS 28 and IAS 31, and applies for annual periods beginning on or after 1 January 2013 (paragraph C1).

What judgements must be disclosed?

Paragraph 7 requires disclosure of significant judgements and assumptions, and changes to them, in deciding that the entity controls another entity, has joint control or significant influence, and what type of joint arrangement it has where a separate vehicle is used. Paragraph 8 extends this to judgements made when the conclusion changes during the period. Paragraph 9 gives examples:

• not controlling an entity despite holding more than half of the voting rights;
• controlling an entity with less than half of the voting rights;
• being an agent or a principal;
• not having significant influence despite holding 20% or more of the votes; and
• having significant influence with less than 20%.

These disclosures are where the reasoning behind IFRS 10 control and IFRS 11 joint arrangement conclusions is shown to the reader.

What must a group disclose about its subsidiaries?

Paragraph 10 sets the aim: users should understand the composition of the group and the interest non controlling interests have in its activities and cash flows, and be able to evaluate restrictions, structured entity risks, changes in ownership and losses of control. The detailed requirements are:

• Different reporting dates. Where a subsidiary’s statements used in consolidation have a different date or period, the date and the reason (paragraph 11).
• Material non controlling interests. For each such subsidiary, its name, principal place of business, the ownership and voting proportions held by non controlling interests, profit or loss allocated to them, accumulated non controlling interests at the year end, and summarised financial information (paragraph 12). Paragraph B10 adds dividends paid to non controlling interests, and paragraph B11 requires the summarised figures before intercompany eliminations.
• Significant restrictions. Statutory, contractual and regulatory limits on moving cash or other assets around the group, including guarantees that restrict dividends or loans, and protective rights of non controlling interests (paragraph 13).
• Consolidated structured entities. Terms that could require the group to provide financial support, support given without a contractual obligation and the reasons, and current intentions to give support (paragraphs 14 to 17).
• Ownership changes. A schedule showing the effect on equity attributable to owners of the parent of changes in ownership without loss of control (paragraph 18), and the gain or loss on losing control, including the portion from remeasuring any retained interest at fair value (paragraph 19).

What must be disclosed about joint arrangements and associates?

For each material joint arrangement and associate, paragraph 21(a) requires its name, the nature of the relationship, its principal place of business and the ownership interest held. For each material joint venture and associate, paragraph 21(b) adds whether it is equity accounted or held at fair value, summarised financial information, and the fair value of the investment if there is a quoted market price.

The summarised information in paragraph B12 covers current and non current assets and liabilities, revenue, profit or loss from continuing operations, post tax discontinued results, other comprehensive income and total comprehensive income, together with dividends received. For material joint ventures only, paragraph B13 adds cash, financial liabilities, depreciation and amortisation, interest income and expense, and tax. Paragraph B14 requires the figures to be 100% amounts from the investee’s IFRS statements, adjusted for fair value and policy alignments, with a reconciliation to the carrying amount. Individually immaterial joint ventures and associates are disclosed in aggregate, separately for each class (paragraph B16).

Paragraphs 22 and 23 then cover restrictions on the investee paying cash to the entity, different reporting dates, unrecognised shares of losses, commitments relating to joint ventures (paragraph B18), and contingent liabilities relating to joint ventures and associates unless the probability of loss is remote.

What is an unconsolidated structured entity, and why disclose it?

A structured entity is designed so that voting or similar rights are not the dominant factor in deciding who controls it, for example where votes relate only to administration and the relevant activities are directed by contract (paragraph B21). Paragraph B22 lists typical features: restricted activities, a narrow objective such as a securitisation or a funding vehicle, insufficient equity to operate without subordinated support, and tranched financing.

Where the group has an interest in one but does not consolidate it, paragraphs 24 to 31 require:

1. qualitative and quantitative information on its nature, purpose, size, activities and financing (paragraph 26);
2. for sponsored entities in which the group no longer has an interest, how sponsorship was determined, income received and assets transferred (paragraph 27);
3. a summary, normally in a table, of the carrying amounts of related assets and liabilities, where they appear in the balance sheet, the maximum exposure to loss and how it is determined, and a comparison between the two (paragraph 29); and
4. non contractual support given in the period and the reasons, and any current intention to give support (paragraphs 30 and 31).

Paragraph 25 makes clear that risk from past involvement, such as having sponsored the entity, can still need disclosure.

How much detail is enough?

IFRS 12 is built around objectives. If the specific requirements, together with other IFRS disclosures, do not meet the objective in paragraph 1, the entity must disclose whatever else is needed (paragraph 3). Paragraph 4 and paragraph B2 require a balance between excessive detail and over aggregation. Information is presented separately for subsidiaries, joint ventures, joint operations, associates and unconsolidated structured entities (paragraph B4), and can be aggregated within those classes by activity, industry or geography (paragraph B6).

Illustration only. A group owns 70% of a manufacturing subsidiary and the 30% non controlling interest is material. The note names the subsidiary, gives its principal place of business, states the 30% interest, the profit allocated to it for the year, the accumulated non controlling interest and dividends paid to it, and gives summarised assets, liabilities, profit and cash flows of the subsidiary before intercompany eliminations. A 25% associate that is not material appears only within the aggregated associate figures.

What does UK company law add?

Section 409 of the Companies Act 2006 allows regulations requiring information about related undertakings in the notes. Regulation 7 of SI 2008/410 applies Schedule 4 to both Companies Act and IAS individual or group accounts. Part 1 of Schedule 4 requires, for example, the name and registered office address of every subsidiary undertaking, and capital, reserves and profit or loss for subsidiaries not consolidated, subject to stated exceptions.

This list is not filtered by materiality in the way IFRS 12 is, so UK groups reporting under IFRS give both. Regulation 7(3) allows information about overseas undertakings to be omitted where the directors consider it seriously prejudicial and the Secretary of State agrees, as set out in section 409(4), and section 409(5) requires the omission to be stated. For UK GAAP group reporting see FRS 102 consolidated accounts, and for reduced disclosures in IFRS subsidiaries see IFRS 19.

Where do groups go wrong?

• Giving boilerplate on control judgements instead of the specific facts, such as a 48% holding with dispersed other shareholders.
• Disclosing the group’s share of joint venture figures rather than 100% amounts with a reconciliation.
• Omitting the B13 extra lines for material joint ventures.
• Overlooking structured entities the group sponsored or manages but does not consolidate, including funds and securitisation vehicles.
• Assuming the IFRS 12 note satisfies the Companies Act list of related undertakings.

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Related Accountapedia entries

• FRS 102 Section 12: other financial instruments
• IFRS 18 presentation and disclosure
• Reduced disclosures for qualifying entities
• The Register of Overseas Entities
• Deferred tax: IAS 12 vs FRS 102

Sources

• IFRS Foundation: Ifrs12
• IFRS Foundation: Ifrs 12 disclosure of interests in other entities
• legislation.gov.uk: Act 2006 c. 46, section 409
• legislation.gov.uk: SI 2008/410, regulation 7
• legislation.gov.uk: SI 2008/410, schedule 4

Reviewed by Christine Anderson, Broker, Solar Protect. Last reviewed 24 October 2026. Part of Accountapedia, the Solar Protect guide to UK tax and accounting. This page is general information, not personalised advice.