Standard 112: Disclosure of Interests in Other Entities

Standard 112: Disclosure of Interests in Other Entities · Complied AI

(b)

the reasons for providing the support.

31 An entity shall disclose any current intentions to provide financial or other support to an unconsolidated structured entity, including intentions to assist the structured entity in obtaining financial support.

Appendix A

Defined terms

This appendix is an integral part of the Ind AS.

income from a structured entity

For the purpose of this Ind AS, income from a structured

entity includes, but is not limited to, recurring and nonrecurring fees, interest, dividends, gains or losses on the

remeasurement or derecognition of interests in structured

entities and gains or losses from the transfer of assets and

liabilities to the structured entity.

interest in another entity

For the purpose of this Ind AS, an interest in another entity

refers to contractual and non-contractual involvement that

exposes an entity to variability of returns from the

performance of the other entity. An interest in another

entity can be evidenced by, but is not limited to, the

holding of equity or debt instruments as well as other

forms of involvement such as the provision of funding,

liquidity support, credit enhancement and guarantees. It

includes the means by which an entity has control or joint

control of, or significant influence over, another entity. An

entity does not necessarily have an interest in another

entity solely because of a typical customer supplier

relationship.

Paragraphs B7-B9 provide further information about

interests in other entities.

Paragraphs B55-B57 of Ind AS 110 explain variability of

returns.

structured entity

An entity that has been designed so that voting or similar rights are not the dominant factor in deciding who controls the entity, such as when any voting rights relate to administrative tasks only and the relevant activities are directed by means of contractual arrangements.

Paragraphs B22 – B24 provide further information about structured entities.

The following terms are defined in Ind AS 27, Ind AS 28, Ind AS 110 and Ind AS 111, Joint Arrangements, and are used in this Ind AS with the meanings specified in those Ind ASs:

associate

consolidated financial statements

control of an entity

equity method

group

investment entity

joint arrangement

joint control

joint operation

joint venture

non-controlling interest

parent

protective rights

relevant activities

separate financial statements

separate vehicle

significant influence

subsidiary.

Appendix B

Application guidance

This appendix is an integral part of the Ind AS. It describes the application of paragraphs 1–31 and has the same authority as the other parts of the Ind AS.

B1 The examples in this appendix portray hypothetical situations. Although some aspects of the examples may be present in actual fact patterns, all relevant facts and circumstances of a particular fact pattern would need to be evaluated when applying Ind AS 112.

Aggregation ( paragraph 4 )

B2 An entity shall decide, in the light of its circumstances, how much detail it provides to satisfy the information needs of users, how much emphasis it places on different aspects of the requirements and how it aggregates the information. It is necessary to strike a balance between burdening financial statements with excessive detail that may not assist users of financial statements and obscuring information as a result of too much aggregation.

B3 An entity may aggregate the disclosures required by this Ind AS for interests in similar entities if aggregation is consistent with the disclosure objective and the requirement in paragraph B4, and does not obscure the information provided. An entity shall disclose how it has aggregated its interests in similar entities.

B4 An entity shall present information separately for interests in:

(c)

geography (eg country or region)

Interests in other entities

B7 An interest in another entity refers to contractual and non- contractual involvement that exposes the reporting entity to variability of returns from the performance of the other entity. Consideration of the purpose and design of the other entity may help the reporting entity when assessing whether it has an interest in that entity and, therefore, whether it is required to provide the disclosures in this Ind AS. That assessment shall include consideration of the risks that the other entity was designed to create and the risks the other entity was designed to pass on to the reporting entity and other parties.

B8 A reporting entity is typically exposed to variability of returns from the performance of another entity by holding instruments (such as equity or debt instruments issued by the other entity) or having another involvement that absorbs variability. For example, assume a structured entity holds a loan portfolio. The structured entity obtains a credit default swap from another entity (the reporting entity) to protect itself from the default of interest and principal payments on the loans. The reporting entity has involvement that exposes it to variability of returns from the performance of the structured entity because the credit default swap absorbs variability of returns of the structured entity.

B9 Some instruments are designed to transfer risk from a reporting entity to another entity. Such instruments create variability of returns for the other entity but do not typically expose the reporting entity to variability of returns from the performance of the other entity. For example, assume a structured entity is established to provide investment opportunities for investors who wish to have exposure to entity Z’s credit risk (entity Z is unrelated to any party involved in the arrangement). The structured entity obtains funding by issuing to those investors notes that are linked to entity Z’s credit risk (credit- linked notes) and uses the proceeds to invest in a portfolio of risk- free financial assets. The structured entity obtains exposure to entity Z’s credit risk by entering into a credit default swap (CDS) with a swap counterparty. The CDS passes entity Z’s credit risk to the structured entity in return for a fee paid by the swap counterparty. The investors in the structured entity receive a higher return that reflects both the structured entity’s return from its asset portfolio and the CDS fee. The swap counterparty does not have involvement with the structured entity that exposes it to variability of returns from the performance of the structured entity because the CDS transfers variability to the structured entity, rather than absorbing variability of returns of the structured entity.

Summarised financial information for subsidiaries, joint ventures and associates ( paragraphs 12 and 21 )

B10 For each subsidiary that has non-controlling interests that are material to the reporting entity, an entity shall disclose: