IFRS 12 Disclosure of Interests in Other Entities — Core Rule

IFRS 12 Disclosure of Interests in Other Entities requires an entity to disclose information that enables users of financial statements to evaluate the nature, extent, and financial effects of its interests in subsidiaries, associates, joint arrangements, and unconsolidated structured entities (IFRS 12.1).

How IFRS 12 Disclosure of Interests in Other Entities Works

• Consolidated subsidiaries: Disclose the name, principal place of business, ownership interest percentage held by the parent and non-controlling interests, and the proportion of voting rights held if different (IFRS 12.19). Where control is obtained without acquiring equity, explain the mechanism. Material acquisitions and disposals require separate narrative.

• Non-controlling interests (NCI): Present summarized financial information (revenue, profit/loss, and total equity from the perspective of the subsidiary before intra-group eliminations) for each material subsidiary with non-controlling interests (IFRS 12.19(c) and B10). If a subsidiary has non-controlling interests but is immaterial individually, aggregate disclosures of multiple subsidiaries are permitted (IFRS 12.B11).

• Associates and joint ventures: Disclose the name, principal place of business, ownership percentage, and the proportionate share of profit/loss and equity (IFRS 12.21). For investments accounted for using the equity method, provide summarized statement of financial position and comprehensive income data, even if the investee is not a quoted entity (IFRS 12.21(c) and B14–B16).

• Joint arrangements classification: Clarify whether each joint arrangement is classified as a joint operation or joint venture (IFRS 12.22). For joint operations, disclose the nature and extent of the interest, and line-item proportionate shares of assets, liabilities, revenue, and expenses (IFRS 12.22(a)–(b)). For joint ventures, apply the same equity method disclosure framework as associates.

• Unconsolidated structured entities: Even where a structured entity is not consolidated (e.g., due to the absence of control under IFRS 10), disclose the nature, extent, and financial effects of involvement—including assets pledged as collateral, income/expenses recognized, and liquidity arrangements (IFRS 12.24–26). This is critical for special purpose vehicles, securitization vehicles, and similar off-balance-sheet arrangements.

• Changes in ownership and loss of control: Disclose gains or losses on changes in ownership interests in subsidiaries (e.g., partial disposals or NCI buyouts) separately in profit or loss or OCI (IFRS 12.B64–B65). When control is lost, explain the fair value of any retained interest and how it was determined.

IFRS 12 Disclosure of Interests in Other Entities — Practical Example

Parent Co. holds a 75% stake in Sub Ltd. (25% NCI) and a 40% interest in Associate Inc. Sub Ltd. reported revenue of €500,000, profit of €80,000, and total equity of €400,000 in the current year. Parent Co. acquired an additional 10% NCI stake in Sub Ltd. mid-year for €50,000 cash.

Journal entry for NCI buyout:

Disclosure required:

• Sub Ltd.: 75% ownership, €400,000 equity (consolidated). NCI summarized data: revenue €500,000, profit €80,000 (consolidated subsidiary share; NCI's 15% residual share of equity).
• Associate Inc.: 40% ownership interest. Equity-accounted. Disclose proportionate 40% of Associate Inc.'s assets, liabilities, revenue, and profit/loss.
• Gain on NCI transaction: €10,000 credited to retained earnings (difference between carrying amount of NCI acquired and purchase price, per IFRS 12.B64).

IFRS 12 Disclosure of Interests in Other Entities — Common Pitfalls

• Materiality thresholds misapplied: Many preparers aggregate non-material subsidiaries without disclosing individually material ones. IFRS 12 requires itemization of each subsidiary or joint venture where the NCI or equity method investment is material to the group (IFRS 12.B11). Audit firms often challenge this at year-end.

• Summarized financial information omitted for equity-method investments: Practitioners sometimes disclose only the carrying amount of associate or joint venture investments, omitting the required summarized statement of financial position and comprehensive income (IFRS 12.21(c)). This is a frequent audit finding and breach of IFRS 12.

• Structured entity disclosures underestimated: Many entities downplay off-balance-sheet exposure (e.g., SPVs, securitization vehicles, unconsolidated funds). IFRS 12.26 requires disclosure of maximum loss exposure and assets pledged, even where the entity is not consolidated. Non-compliance carries significant audit risk.

IFRS 12 Disclosure of Interests in Other Entities — Key Paragraphs

• IFRS 12.19–20: Consolidated subsidiary disclosures, including NCI summarized financial information.
• IFRS 12.21–23: Associate and joint arrangement disclosures (equity method).
• IFRS 12.24–26: Unconsolidated structured entities and off-balance-sheet interests.
• IFRS 12.B10–B16: Illustrative examples of NCI and equity-method disclosure formats.
• IFRS 12.B64–B65: Changes in ownership interests and transactions with NCI.