Disclosure requirements for interests in joint arrangements and associates – general

The disclosure requirements described will normally apply to interests in joint ventures and associates reported in consolidated financial statements prepared in accordance with IFRS 10. They will also apply when the investor does not prepare consolidated financial statements, because it does not have subsidiaries, but it has a joint venturer’s interest in a joint venture, a joint operator’s interest in a joint operation, or significant influence over an associate.

The disclosure requirements for interests in joint ventures and associates apply to all entities, including those that are venture capital organizations, mutual funds, unit trusts or similar entities. However, some of the disclosures only apply when the equity method is used; therefore, if a venture capital organization, mutual fund, unit trust or similar entity has chosen to account for an interest at fair value through profit or loss instead of using the equity method, those disclosures are not applicable.

Scope – entity accounts for investments in its separate financial statements using the equity method If an entity elects to apply the equity method of accounting to its investments in associates and joint ventures in its separate financial statements, it is not required to comply with the disclosure requirements described. In general, IFRS 12 does not apply to separate financial statements, and this principle is not affected by whether the entity elects to use the equity method in those separate financial statements. However, if an entity has interests in unconsolidated structured entities and prepares separate financial statements as its only financial statements, it is required to provide the disclosures required under IFRS 12. Investment entities are exempted from specified disclosure requirements under this heading; otherwise, the disclosure requirements listed below apply equally to investment entities.

Nature, extent and financial effects of interests in joint arrangements and associates

Nature of interests in joint arrangements and associates – general

An entity is required to disclose information that enables users of its financial statements to evaluate the nature, extent and financial effects of its interests in joint arrangements and associates, including information about the nature and effects of the entity’s contractual relationship with the other investors with joint control of, or significant influence over, joint arrangements and associates.

Investment entities need not present the disclosures required by IFRS 12.

Joint arrangements and associates that are material to the reporting entity

For each joint arrangement and associate that is material to the reporting entity, the reporting entity should disclose:

• its name;
• the nature of the reporting entity’s relationship with it (e.g., by describing the nature of the activities undertaken and whether they are strategic to the reporting entity’s activities);
• its principal place of business and, if applicable and different, the country of incorporation; and
• the proportion of ownership interest or participating share held by the reporting entity and, if applicable and different, the proportion of voting rights held.

Note that the reference to joint arrangements means that the disclosure requirements set out above apply both to joint ventures and to joint operations, whereas those set out do not apply to joint operations.

Additional disclosures for joint ventures and associates that are material to the reporting entity

In addition to the information disclosed under IFRS 12, for each joint venture and associate that is material to the reporting entity, the reporting entity should disclose:

• whether the investment in the joint venture or associate is measured using the equity method or at fair value;
• if the investment is measured using the equity method, and there is a quoted market price for the investment, the investment’s fair value;
• dividends received by the reporting entity from the joint venture or associate;
• summarized financial information (unless the joint venture or associate, or a portion thereof, is classified as held for sale in accordance with IFRS 5), including, but not necessarily limited to:
  • current assets;
  • non-current assets;
  • current liabilities;
  • non-current liabilities;
  • revenue;
  • profit or loss from continuing operations;
  • post-tax profit or loss from discontinued operations;
  • other comprehensive income; and
  • total comprehensive income;
• for each joint venture that is material to the reporting entity (unless the joint venture or associate, or a portion thereof, is classified as held for sale in accordance with IFRS 5), the amount of:
  • cash and cash equivalents included in current assets;
  • current financial liabilities (excluding trade and other payables and provisions) included in current liabilities;
  • non-current financial liabilities (excluding trade and other payables and provisions) included in non-current liabilities;
  • depreciation and amortization;
  • interest income;
  • interest expense; and
  • income tax expense or income; and
• if the reporting entity uses the equity method to account for its interest in the joint venture or associate, a reconciliation of the summarized financial information to the carrying amount of its interest in the joint venture or associate.

The summarized financial information required to be presented under IFRS 12 should reflect the amounts reported in the joint venture’s or associate’s IFRS financial statements (i.e., it is not the reporting entity’s share of those amounts). But when the interest in the joint venture or associate is accounted for by the reporting entity using the equity method, the amounts included in the IFRS financial statements of the joint venture or associate should be adjusted to reflect adjustments made in applying the equity method (e.g., to bring accounting policies into line with those of the reporting entity or to reflect fair value adjustments made on acquisition).

If the reporting entity’s interest in the joint venture or associate is measured at fair value, in accordance with IAS 28, the summarized information may be disclosed on the basis of the joint venture’s or associate’s financial statements if the joint venture or associate does not produce IFRS financial statements and to prepare IFRS financial statements would be impracticable or cause undue cost. In such circumstances, the basis of preparation of the summarized financial information should be disclosed.

Joint ventures and associates that are not individually material to the reporting entity

The reporting entity should disclose the following information, in aggregate for all joint ventures that are not individually material to the reporting entity and, separately, in aggregate for all associates that are not individually material to the reporting entity:

• the carrying amount of the interests accounted for using the equity method; and
• the reporting entity’s share of those joint ventures’ or associates’:
  • profit or loss from continuing operations;
  • post-tax profit or loss from discontinued operations;
  • other comprehensive income; and
  • total comprehensive income.

The summarized financial information required under IFRS 12 need not be provided for any subsidiaries classified as held for sale in accordance with IFRS 5.

Significant restrictions

The reporting entity should disclose the nature and extent of any significant restrictions (e.g., resulting from borrowing arrangements, regulatory requirements or contractual arrangements between investors with joint control of or significant influence over a joint venture or an associate) on the ability of joint ventures or associates to transfer funds to the reporting entity in the form of cash dividends or repay loans or advances from the reporting entity.

Financial statements to a different date or for a different period

If 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 reporting entity, the reporting entity should disclose:

• the date of the end of the reporting period of the joint venture’s or associate’s financial statements; and
• the reason for using a different date or different period.

Unrecognized share of losses

If the reporting entity, in applying the equity method, has stopped recognizing its share of losses of a joint venture or associate, it should disclose the unrecognized share of losses of the joint venture or associate, both for the period and cumulatively.

Risks associated with interests in joint ventures and associates

Risks associated with interests in joint ventures and associates – general

An entity is required to disclose information that enables users of its financial statements to evaluate the nature of, and changes in, the risks associated with its interests in joint ventures and associates.

Contingent liabilities relating to interests in joint ventures or associates

Contingent liabilities incurred by a reporting entity relating to its interests in joint ventures or associates should be disclosed (unless the probability of loss is remote) separately from other contingent liabilities. The amounts reported should include the reporting entity’s share of contingent liabilities incurred jointly with other investors with joint control of, or significant influence over, joint ventures and associates.

Commitments for joint ventures

The reporting entity should disclose commitments that it has made relating to its joint ventures separately from its other commitments.

The amount disclosed for commitments relating to joint ventures should be the reporting entity’s total commitments that it has made but not recognized at the reporting date. Commitments to be disclosed are those that may give rise to a future outflow of cash or other resources. This disclosure should include the reporting entity’s share of commitments made jointly with other joint venturers.

Unrecognized commitments that may give rise to a future outflow of cash or other resources include:

• unrecognized commitments to contribute funding or resources to the joint venture itself as a result of, for example:
  • the constitution or acquisition agreements of a joint venture (that, for example, require contribution of funds over a specific period);
  • capital-intensive projects undertaken by a joint venture;
  • 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;
  • unrecognized commitments to provide loans or other financial support to a joint venture;
  • unrecognized commitments to contribute resources to a joint venture, such as assets or services; and
  • other non-cancellable unrecognized commitments relating to a joint venture; and
• unrecognized commitments to purchase another party’s ownership interest, or a portion thereof, in a joint venture if a particular event occurs or does not occur in the future.

Some of these disclosures are likely to be required by IAS 24 as well as by IFRS 12.