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:
- Joint arrangements (i.e. joint operations or joint ventures),
- Associates
- Unconsolidated structured entities.
- Subsidiaries
Significant Judgements and Assumptions
Ind AS 112 requires that an entity shall disclose information about significant judgements and assumptions it has made (and changes to those judgements and assumptions) in determining:
- That it has control of another entity;
- That it has joint control of an arrangement or significant influence over another entity; and
- The type of joint arrangement (i.e., joint operation or joint venture) when the arrangement has been structured through a separate
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.
Investment entity status under Ind AS 112
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 investment entity 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:
- The total fair value, as of the date of change of status, of the subsidiaries that cease to be consolidated;
- The total gain or loss, if any, calculated in accordance with ind as 110; and
- The line item(s) in profit or loss in which the gain or loss is recognised (if not presented separately).
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.
- The nature of and any changes in the risk associated with the interests in consolidated structured entities.
Interest in Subsidiaries
Ind AS 112 requires that an entity should disclose information that enables users of its consolidated financial statements:
To understand:
- The composition of the group; and
- The interest that non-controlling interests have in the group’s activities and cash flows; and
To evaluate:
- The nature of, and changes in, the risks associated with its interests in consolidated structured entities.
- The nature and extent of significant restrictions on its ability to access or use assets, and settle liabilities, of the group.
- The consequences of losing control of a subsidiary during the reporting.
- The consequences of changes in its ownership interest in a subsidiary that do not result in a loss of control.
Interest in joint arrangements and associates
Ind AS 112 requires that an entity should 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.
- 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.
Interests in unconsolidated structured entities
Ind AS 112 also requires that an entity should disclose information that enables users of its financial statements:
- to understand the nature and extent of its interests in unconsolidated structured entities.
- to evaluate the nature of, and changes in, the risks associated with its interests in unconsolidated structured.
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