IFRS 12 – Disclosure of Interests in Other Entities
IFRS 12 was released to define the disclosure requirements needed when releasing information about interest in other entities.
When one entity has an interest in another, it will normally need to inform investors of such arrangement in the interest of full disclosure. This includes interests in subsidiaries, joint ventures, or unconsolidated structured entities. Over the years, investors have demanded better information surrounding this and the IASB has finally responded with this standard.
The main aspects are the disclosure of the risk which is associated with those entities and the potential impact on financial performance and cash flow, including that which may occur due to losing control of the entity. In order to do this, the entity must disclosure what significant assumptions it is making in order to arrive on these conclusions.
IFRS are principles based standards, rather than strict rules based standards that govern international accounting. IFRS standards differ from IAS standards in that they began being introduced in 2001, whereas IAS were produced prior to this date by the IASC, or the International Accounting Standards Committee. Therefore when an IFRS standard and an IAS standard conflict, the IFRS is generally more authoritative due to being more recent.
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