IFRS 12 Example disclosures for interests in unconsolidated structured entities March 2013 Applying IFRS Introduction 1 IFRS 12 disclosure requirements for unconsolidated structured entities 1 1. What is a structured entity? 3 2. What is an interest in a structured entity? 5 3. What disclosure is required to explain the nature, purpose, size and activities of the unconsolidated structured entity and how it is financed? 7 4. What information would an entity disclose to explain the nature of risks from an unconsolidated structured entity? 9 5. At what level should the entity aggregate the required information? 12 6. When would an entity be considered the sponsor of an unconsolidated structured entity? 12 7. What income related disclosures are required in respect of sponsored structured entities? 15 8. What constitutes financial or other support provided to an unconsolidated structured entity? 15 9. What should be disclosed as additional information? 18 Contents IFRS 12 Example disclosures for interests in unconsolidated structured entities1 Introduction IFRS 12 Disclosure of Interests in Other Entities is a disclosure standard that was issued by the International Accounting Standards Board (IASB) in May 2011. IFRS 12 includes all of the disclosure requirements for subsidiaries, joint arrangements, associates and unconsolidated structured entities. ? entity to make disclosures in respect of its interests in structured entities. Prior to the issuance of IFRS 12, IFRS contained no ? purpose entities as described in SIC-12 Consolidation: Special Purpose Entities. This publication focuses on the disclosure requirements that are contained in paragraphs 24 to 31 of IFRS 12 for interests in unconsolidated structured entities, that is, entities that meet the ? the reporting entity (as discussed in section 1 of this publication). Although IFRS 12 is a disclosure standard, it provides no examples to illustrate its disclosure requirements, and so we have included illustrative examples in this publication. IFRS 12 disclosure requirements for unconsolidated structured entities IFRS 12 requires an entity to make disclosures about the ? ? disclosure of interests in unconsolidated structured entities. The disclosure requirements for interests in unconsolidated structured entities are split into two areas, namely nature of interests and nature of risks. Paragraph 25 of IFRS 12 explains that the information required by (b) above includes information about an entitys exposure to risk from involvement it had with unconsolidated entities in previous periods (e.g., sponsoring the structured entity), even if the entity no longer has any contractual involvement with the structured entity at the reporting date. The disclosures required are summarised in the following chart. Paragraph 24 of IFRS 12 requires an entity to disclose ? (a) To understand the nature and extent of its interests in unconsolidated structured entities (paragraphs 26-28); and (b) To evaluate the nature of, and changes in, the risks associated with its interests in unconsolidated structured entities (paragraphs 29-31). IFRS 12 Example disclosures for interests in unconsolidated structured entities2 IFRS reporters are likely to be faced with a number of interpretative and disclosure-related issues as they apply IFRS 12 ? 1. What is a structured entity? 2. What is an interest in a structured entity? 3. What disclosure is required to explain the nature, purpose, size and activities of the unconsolidated structured entity and how ? 4. What information would an entity disclose to explain the nature of risks from an unconsolidated structured entity? 5. At what level should the entity aggregate the required information? 6. When would an entity be considered the sponsor of an unconsolidated structured entity? 7. What income related disclosures are required in respect of sponsored structured entities? ? ? unconsolidated structured entity? 9. What should be disclosed as additional information? In this publication we discuss each of these issues in turn and provide illustrative examples of disclosures that are relevant to ? Unconsolidated structured entities Nature of risks (Para 29, B26) ? (Para 30-31) Entity has interest Entity sponsors but has no interest Information about interests (Para 26) ?How it determined which structured entities it sponsored ?Income from those structured e