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Ind AS 112, Disclosure of Interest in Other Entities, Summary

Indian Accounting Standard (Ind AS) 112 Summary

Indian Accounting Standard (Ind AS) 112, Disclosure of Interest in Other Entities requires the entity to provide users with information that enables them to evaluate the nature of, and risks associated with, its interests in other entities and the effects of those interests on its financial position, financial performance and cash flows.

This Ind AS shall be applied by an entity that has an interest in any of the following:

– Subsidiaries,
– Joint arrangements (i.e. joint operations or joint ventures),
– Associates, and
– Unconsolidated structured entities.

All requirements of this Ind AS (except with respect to disclosure of summarised financial information) would also apply to subsidiaries, joint arrangements, associates and unconsolidated structured entities that are classified (or included in a disposal group that is classified) as held for sale or discontinued operations in accordance with Ind AS 105, Non-current Assets Held for Sale and Discontinued Operations.

If an entity has consolidated subsidiaries, then it provides information in its consolidated financial statements that helps users to understand the composition of the group and the interests of Non-Controlling Interests (NCI) in the group’s activities and cash flows. This includes:

– The nature and extent of significant restrictions on the entity’s ability to access or use assets or settle liabilities of the group,
– Specific information on any subsidiaries with material NCI, such as financial information for the subsidiary and information about the proportion of NCI and accumulated NCI,
– The consequences of changes in its ownership in a subsidiary and of losing control, and
– The nature of and any changes in the risk associated with the interests in consolidated structured entities.

If the entity holds interests in joint arrangement and associates, then it provides information in its consolidated financial statement that helps users to understand the nature and risks associated with these interests. This includes:

– Significant restrictions on a joint arrangement’s ability to transfer cash dividends or to repay loans and advances,
– The nature, extent and financial effect of holding an interest in a joint arrangement or an associate, and
– Any commitments and contingent liabilities towards a joint arrangement or an associate.

If the entity holds interests in consolidated structured entities, then it discloses the terms of any contractual arrangement that could require it to provide financial support to the consolidated structured entity.

If the entity holds interests in unconsolidated structured entities, then it provides disclosures that enable users to understand the specific risks arising from holding these interests and the nature of these interests. The required disclosures include:

– General information about interests in unconsolidated entities – such as the nature, purpose, size and activities of an unconsolidated structured entity, and
– Information about the nature of risk –such as carrying amounts of assets and liabilities recognised in the consolidated financial statements, maximum exposure to loss from the holding and any commitments to provide financial support.

If the entity does not hold an interest in an unconsolidated structured entity, but has sponsored such an entity, then it discloses the following:

– The method for determining how a sponsored entity has been identified,
– Income from the structured entity in the reporting period, and
– The carrying amount of all the assets transferred to the structured entity during the reporting period.

An investment entity discloses quantitative data about its exposure to risks arising from unconsolidated subsidiaries.

To the extent that an investment entity does not have ‘typical’ characteristics, it discloses the significant judgements and assumptions made in concluding that it is an investment entity.

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