Indian Accounting Standard (Ind AS) 112 Disclosure of Interests in Other Entities (This Indian Accounting Standard includes paragraphs set in bold type and plain type, which have equal authority. Paragraphs in bold type indicate the main principles.) 2 To meet the objective in paragraph 1, an entity shall disclose: (ii) the type of joint arrangement in which it has an interest (paragraphs 7–9); (iii) that it meets the definition of an investment entity, if applicable (paragraph 9A); and (b) information about its interests in: (ii) arrangements and associates (paragraphs 20–23); and (iii) structured entities that are not controlled by the entity (unconsolidated structured entities) (paragraphs 24–31). 3 If the disclosures required by this Ind AS, together with disclosures required by other Ind ASs, do not meet the objective in paragraph 1, an entity shall disclose whatever additional information is necessary to meet that objective. Scope a[(b) an entity’s separate financial statements to which Ind AS 27, Separate Financial Statements, applies. However: (i) if an entity has interests in unconsolidated structured entities and prepares separate financial statements as its only financial statements, it shall apply the requirements in paragraphs 24–31 when preparing those separate financial statements. (ii) an investment entity that prepares financial statements in which all of its subsidiaries are measured at fair value through profit or loss in accordance with paragraph 31 of Ind AS 110 shall present the disclosures relating to investment entities required by this Ind AS.] (c) an interest held by an entity that participates in, but does not have joint control of, a joint arrangement unless that interest results in significant influence over the arrangement or is an interest in a structured entity. (d) an interest in another entity that is accounted for in accordance with Ind AS 109,Financial Instruments. However, an entity shall apply this Ind AS: (ii) when that interest is an interest in an unconsolidated structured entity. (a) that it has control of another entity, ie an investee as described in paragraphs 5 and 6 of Ind AS 110, Consolidated Financial Statements; (b) that it has joint control of an arrangement or significant influence over another entity; and (c) the type of joint arrangement (ie joint operation or joint venture) when the arrangement has been structured through a separate vehicle. (a) it does not control another entity even though it holds more than half of the voting rights of the other entity. (b) it controls another entity even though it holds less than half of the voting rights of the other entity. (c) it is an agent or a principal (see paragraphs B58–B72 of Ind AS 110). (d) it does not have significant influence even though it holds 20 per cent or more of the voting rights of another entity. (e) it has significant influence even though it holds less than 20 per cent of the voting rights of another entity. Investment entity status (a) to understand: (i) the composition of the group; and (ii) the interest that non-controlling interests have in the group’s activities and cash flows (paragraph 12); and (b) to evaluate: (i) the nature and extent of significant restrictions on its ability to access or use assets, and settle liabilities, of the group (paragraph 13); (ii) the nature of, and changes in, the risks associated with its interests in consolidated structured entities (paragraphs 14–17); (iii) the consequences of changes in its ownership interest in a subsidiary that do not result in a loss of control (paragraph 18); and (iv) the consequences of losing control of a subsidiary during the reporting period (paragraph 19). 11 When the financial statements of a subsidiary used in the preparation of consolidated financial statements are as of a date or for a period that is different from that of the consolidated financial statements (see paragraphs B92 and B93 of Ind AS 110), an entity shall disclose: (a) the date of the end of the reporting period of the financial statements of that subsidiary; and (b) the reason for using a different date or period. 12 An entity shall disclose for each of its subsidiaries that have non-controlling interests that are material to the reporting entity: (a) the name of the subsidiary. (b) the principal place of business (and country of incorporation if different from the principal place of business) of the subsidiary. (c) the proportion of ownership interests held by non-controlling interests. (e) the profit or loss allocated to non-controlling interests of the subsidiary during the reporting period. (f) accumulated non-controlling interests of the subsidiary at the end of the reporting period. (g) summarised financial information about the subsidiary (see paragraph B10). (i) those that restrict the ability of a parent or its subsidiaries to transfer cash or other assets to (or from) other entities within the group. (ii) guarantees or other requirements that may restrict dividends and other capital distributions being paid, or loans and advances being made or repaid, to (or from) other entities within the group. (c) the carrying amounts in the consolidated financial statements of the assets and liabilities to which those restrictions apply. Nature of the risks associated with an entity’s interests in consolidated structured entities 14 An entity shall disclose the terms of any contractual arrangements that could require the parent or its subsidiaries to provide financial support to a consolidated structured entity, including events or circumstances that could expose the reporting entity to a loss (eg liquidity arrangements or credit rating triggers associated with obligations to purchase assets of the structured entity or provide financial support). 15 If during the reporting period a parent or any of its subsidiaries has, without having a contractual obligation to do so, provided financial or other support to a consolidated structured entity (eg purchasing assets of or instruments issued by the structured entity), the entity shall disclose: (a) the type and amount of support provided, including situations in which the parent or its subsidiaries assisted the structured entity in obtaining financial support; and (b) the reasons for providing the support. 17 An entity shall disclose any current intentions to provide financial or other support to a consolidated structured entity, including intentions to assist the structured entity in obtaining financial support. Consequences of changes in a parent’s ownership interest in a subsidiary that do not result in a loss of control Consequences of losing control of a subsidiary during the reporting period 19 An entity shall disclose the gain or loss, if any, calculated in accordance with paragraph 25 of Ind AS 110, and: (a) the portion of that gain or loss attributable to measuring any investment retained in the former subsidiary at its fair value at the date when control is lost; and (b) the line item(s) in profit or loss in which the gain or loss is recognised (if not presented separately). (a) the nature, extent and financial effects of its interests in joint arrangements and associates, including the nature and effects of its contractual relationship with the other investors with joint control of, or significant influence over, joint arrangements and associates (paragraphs 21 and 22); and (b) the nature of, and changes in, the risks associated with its interests in joint ventures and associates (paragraph 23). 21 An entity shall disclose: (iii) the principal place of business (and country of incorporation, if applicable and different from the principal place of business) of the joint arrangement or associate. (iv) the proportion of ownership interest or participating share held by the entity and, if different, the proportion of voting rights held (if applicable). (b) for each joint venture and associate that is material to the reporting entity: (i) whether the investment in the joint venture or associate is measured using the equity method or at fair value. (ii) summarised financial information about the joint venture or associate as specified in paragraphs B12 and B13. (iii) if the joint venture or associate is accounted for using the equity method, the fair value of its investment in the joint venture or associate, if there is a quoted market price for the investment. (c) financial information as specified in paragraph B16 about the entity’s investments in joint ventures and associates that are not individually material: (i) in aggregate for all individually immaterial joint ventures and, separately, (ii) in aggregate for all individually immaterial associates. (b) when the financial statements of a joint venture or associate used in applying the equity method are as of a date or for a period that is different from that of the entity: (i) the date of the end of the reporting period of the financial statements of that joint venture or associate; and (ii) the reason for using a different date or period. (c) the unrecognised share of losses of a joint venture or associate, both for the reporting period and cumulatively, if the entity has stopped recognising its share of losses of the joint venture or associate when applying the equity method. Risks associated with an entity’s interests in joint ventures and associates 23 An entity shall disclose: (b) in accordance with Ind AS 37, Provisions, Contingent Liabilities and Contingent Assets, unless the probability of loss is remote, contingent liabilities incurred relating to its interests in joint ventures or associates (including its share of contingent liabilities incurred jointly with other investors with joint control of, or significant influence over, the joint ventures or associates), separately from the amount of other contingent liabilities. Interests in unconsolidated structured entities (b) to evaluate the nature of, and changes in, the risks associated with its interests in unconsolidated structured entities (paragraphs 29–31). 25 The information required by paragraph 24(b) includes information about an entity’s exposure to risk from involvement that it had with unconsolidated structured entities in previous periods (eg sponsoring the structured entity), even if the entity no longer has any contractual involvement with the structured entity at the reporting date 25A An investment entity need not provide the disclosures required by paragraph 24 for an unconsolidated structured entity that it controls and for which it presents the disclosures required by paragraphs 19A–19G. Nature of interests 26 An entity shall disclose qualitative and quantitative information about its interests in unconsolidated structured entities, including, but not limited to, the nature, purpose, size and activities of the structured entity and how the structured entity is financed. 27 If an entity has sponsored an unconsolidated structured entity for which it does not provide information required by paragraph 29 (eg because it does not have an interest in the entity at the reporting date), the entity shall disclose: (a) how it has determined which structured entities it has sponsored; (b) income from those structured entities during the reporting period, including a description of the types of income presented; and (c) the carrying amount (at the time of transfer) of all assets transferred to those structured entities during the reporting period. 28 An entity shall present the information in paragraph 27(b) and (c) in tabular format, unless another format is more appropriate, and classify its sponsoring activities into relevant categories (see paragraphs B2–B6). Nature of risks 29 An entity shall disclose in tabular format, unless another format is more appropriate, a summary of: (a) the carrying amounts of the assets and liabilities recognised in its financial statements relating to its interests in unconsolidated structured entities. (b) the line items in the balance sheet in which those assets and liabilities are recognised. (c) the amount that best represents the entity’s maximum exposure to loss from its interests in unconsolidated structured entities, including how the maximum exposure to loss is determined. If an entity cannot quantify its maximum exposure to loss from its interests in unconsolidated structured entities it shall disclose that fact and the reasons. (d) a comparison of the carrying amounts of the assets and liabilities of the entity that relate to its interests in unconsolidated structured entities and the entity’s maximum exposure to loss from those entities. 30 If during the reporting period an entity has, without having a contractual obligation to do so, provided financial or other support to an unconsolidated structured entity in which it previously had or currently has an interest (for example, purchasing assets of or instruments issued by the structured entity), the entity shall disclose: (a) the type and amount of support provided, including situations in which the entity assisted the structured entity in obtaining financial support; and (b) the reasons for providing the support. Defined terms This appendix is an integral part of the Ind AS.
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. Aggregation (paragraph 4) 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: (a) subsidiaries; (b) joint ventures; (c) joint operations; (d) associates; and (e) unconsolidated structured entities. B5 In determining whether to aggregate information, an entity shall consider quantitative and qualitative information about the different risk and return characteristics of each entity it is considering for aggregation and the significance of each such entity to the reporting entity. The entity shall present the disclosures in a manner that clearly explains to users of financial statements the nature and extent of its interests in those other entities. (a) nature of activities (eg a research and development entity, a revolving credit card securitisation entity). (b) industry classification. 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. (a) dividends paid to non-controlling interests. (b) summarised financial information about the assets, liabilities, profit or loss and cash flows of the subsidiary that enables users to understand the interest that non- controlling interests have in the group’s activities and cash flows. That information might include but is not limited to, for example, current assets, non- current assets, current liabilities, non-current liabilities, revenue, profit or loss and total comprehensive income. B11 The summarised financial information required by paragraph B10(b) shall be the amounts before inter-company eliminations. B12 For each joint venture and associate that is material to the reporting entity, an entity shall disclose: (a) dividends received from the joint venture or associate. (b) summarised financial information for the joint venture or associate (see paragraphs B14 and B15) including, but not necessarily limited to: (i) current assets. (ii) non-current assets. (iii) current liabilities. (iv) non-current liabilities. (v) revenue. (vi) profit or loss from continuing operations. (vii) post-tax profit or loss from discontinued operations. (viii) other comprehensive income. (ix) total comprehensive income. (a) cash and cash equivalents included in paragraph B12(b)(i). (b) current financial liabilities (excluding trade and other payables and provisions) included in paragraph B12(b)(iii). (c) non-current financial liabilities (excluding trade and other payables and provisions) included in paragraph B12(b)(iv). (d) depreciation and amortisation. (e) interest income. (f) interest expense. (g) income tax expense or income. (a) the amounts included in the Ind AS financial statements of the joint venture or associate shall be adjusted to reflect adjustments made by the entity when using the equity method, such as fair value adjustments made at the time of acquisition and adjustments for differences in accounting policies. (b) the entity shall provide a reconciliation of the summarised financial information presented to the carrying amount of its interest in the joint venture or associate. B15 An entity may present the summarised financial information required by paragraphs B12 and B13 on the basis of the joint venture’s or associate’s financial statements if: (a) the entity measures its interest in the joint venture or associate at fair value in accordance with Ind AS 28 ; and (b) the joint venture or associate does not prepare Ind AS financial statements and preparation on that basis would be impracticable or cause undue cost. (a) profit or loss from continuing operations. B19 Unrecognised commitments that may give rise to a future outflow of cash or other resources include: (a) unrecognised commitments to contribute funding or resources as a result of, for example: (i) the constitution or acquisition agreements of a joint venture (that, for example, require an entity to contribute funds over a specific period). (ii) capital-intensive projects undertaken by a joint venture. (iii) unconditional purchase obligations, comprising procurement of equipment, inventory or services that an entity is committed to purchasing from, or on behalf of, a joint venture. (iv) unrecognised commitments to provide loans or other financial support to a joint venture. (v) unrecognised commitments to contribute resources to a joint venture, such as assets or services. (vi) other non-cancellable unrecognised commitments relating to a joint venture. (b) unrecognised commitments to acquire another party’s ownership interest (or a portion of that ownership interest) in a joint venture if a particular event occurs or does not occur in the future. B20 The requirements and examples in paragraphs B18 and B19 illustrate some of the types of disclosure required by paragraph 18 of Ind AS 24, Related Party Disclosures. B21 A structured entity is 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. B22 A structured entity often has some or all of the following features or attributes: (a) restricted activities. (b) a narrow and well-defined objective, such as to effect a tax-efficient lease, carry out research and development activities, provide a source of capital or funding to an entity or provide investment opportunities for investors by passing on risks and rewards associated with the assets of the structured entity to investors. (c) insufficient equity to permit the structured entity to finance its activities without subordinated financial support. (d) financing in the form of multiple contractually linked instruments to investors that create concentrations of credit or other risks (tranches). B23 Examples of entities that are regarded as structured entities include, but are not limited to: Nature of risks from interests in unconsolidated structured entities (paragraphs 29–31) B25 In addition to the information required by paragraphs 29–31, an entity shall disclose additional information that is necessary to meet the disclosure objective in paragraph 24(b). B26 Examples of additional information that, depending on the circumstances, might be relevant to an assessment of the risks to which an entity is exposed when it has an interest in an unconsolidated structured entity are: (i) a description of events or circumstances that could expose the reporting entity to a loss. (ii) whether there are any terms that would limit the obligation. (iii) whether there are any other parties that provide financial support and, if so, how the reporting entity’s obligation ranks with those of other parties. (b) losses incurred by the entity during the reporting period relating to its interests in unconsolidated structured entities. (c) the types of income the entity received during the reporting period from its interests in unconsolidated structured entities. (d) whether the entity is required to absorb losses of an unconsolidated structured entity before other parties, the maximum limit of such losses for the entity, and (if relevant) the ranking and amounts of potential losses borne by parties whose interests rank lower than the entity’s interest in the unconsolidated structured entity. (f) any difficulties an unconsolidated structured entity has experienced in financing its activities during the reporting period. (g) in relation to the funding of an unconsolidated structured entity, the forms of funding (eg commercial paper or medium-term notes) and their weighted-average life. That information might include maturity analyses of the assets and funding of an unconsolidated structured entity if the structured entity has longer-term assets funded by shorter-term funding. 1. Different terminology is used, as used in existing laws eg, the term ‘balance sheet’ is used instead of ‘Statement of financial position’.
Amendments a. Substituted by Notification Dated 30th March, 2016. In paragraph 6, for item (b), "(b) an entity’s separate financial statements to which Ind AS 27, Separate Financial Statements, applies. However, if an entity has interests in unconsolidated structured entities and prepares separate financial statements as its only financial statements, it shall apply the requirements in paragraphs 24–31 when preparing those separate financial statements." the following item shall be substituted, namely:- ‘‘(b) an entity’s separate financial statements to which Ind AS 27, Separate Financial Statements, applies. However: (i) if an entity has interests in unconsolidated structured entities and prepares separate financial statements as its only financial statements, it shall apply the requirements in paragraphs 24–31 when preparing those separate financial statements. (ii) an investment entity that prepares financial statements in which all of its subsidiaries are measured at fair value through profit or loss in accordance with paragraph 31 of Ind AS 110 shall present the disclosures relating to investment entities required by this Ind AS.’’ |