Overview of Ind AS 112, Disclosure of Interests in Other Entities

Indian Accounting Standard 112, Disclosure of Interests in Other Entities

The objective of Ind AS 112 is to require an entity to disclose information that enables users of its financial statements to evaluate:

(a) the nature of, and risks associated with, its interests in other entities; and

(b) the effects of those interests on its financial position, financial performance and cash flows.

The Standard shall be applied by an entity that has an interest in a subsidiary, a joint arrangement (i.e. joint operation or joint venture), an associate or an unconsolidated structured entity.

Significant judgements and assumptions

An entity shall disclose information about significant judgements and assumptions it has made (and changes to those judgements and assumptions) in determining:

(a) that it has control of another entity, ie an investee;

(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.

Investment entity status

When a parent determines that it is an investment entity in accordance with Ind AS 110, the investment entity shall disclose information about significant judgements and assumptions it has made in determining that it is an investment entity. If the investment entity does not have one or more of the typical characteristics of an investment entity, it shall disclose its reasons for concluding that it is nevertheless an investment entity.

When an entity becomes, or ceases to be, an investment entity, it shall disclose the change of status and the reasons for the change. In addition, an entity that becomes an investment entity shall disclose the effect of the change of status on the financial statements for the period presented, including:

(a) the total fair value, as of the date of change of status, of the subsidiaries that cease to be consolidated;

(b) the total gain or loss, if any; and

(c) the line item(s) in profit or loss in which the gain or loss is recognised (if not presented separately).

Insterests in subsidiaries

An entity shall disclose information that enables users of its consolidated financial statements

(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; 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;

(ii) the nature of, and changes in, the risks associated with its interests in consolidated structured entities;

(iii) the consequences of changes in its ownership interest in a subsidiary that do not result in a loss of control; and

(iv) the consequences of losing control of a subsidiary during the reporting period.

An entity shall also disclose for each of its subsidiaries that have non-controlling interests (NCI) that are material to the reporting entity information required by the Standard. The information includes the proportion of voting rights held by NCI, if different from the proportion of ownership interests held, the profit or loss allocated to NCI of the subsidiary during the reporting period, accumulated NCI of the subsidiary at the end of the reporting period, summarised financial information about the subsidiary etc.

Interest in unconsolidated subsidiaries

An investment entity shall disclose:

(a) the name of each unconsolidated subsidiary;

(b) the principal place of business (and country of incorporation if different from the principal place of business) of each unconsolidated subsidiary; and

(c) the proportion of ownership interest held by the investment entity and, if different, the proportion of voting rights held in each unconsolidated subsidiary.

(d) the nature and extent of any significant restrictions on the ability of the unconsolidated subsidiary to transfer funds to the investment entity in the form of cash dividends or to repay loans or advances made to the unconsolidated subsidiary by the investment entity; and

(e) any current commitments or intentions to provide financial or other support to an unconsolidated subsidiary, including commitments or intentions to assist the subsidiary in obtaining financial support.

Interests in joint arrangements and associates

An entity shall disclose information that enables users of its financial statements to evaluate:

(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; and

(b) the nature of, and changes in, the risks associated with its interests in joint ventures and associates.

Interests in unconsolidated structure entities

An entity shall disclose information that enables users of its financial statements:

(a) to understand the nature and extent of its interests in unconsolidated structured entities; and

(b) to evaluate the nature of, and changes in, the risks associated with its interests in unconsolidated structured entities.

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