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Basis for conclusions on IFRS 12 interests in join arrangements and associates

Basis for conclusions on IFRS 12 interests in join arrangements and associates

Basis for conclusions on IFRS 12 interests in join arrangements and associates

The  Board  proposed  in  ED  9  to  align  the  disclosure  requirements for joint ventures and associates by proposing consequential amendments to IAS 28 and by extending the application of some disclosure requirements in IAS 28 to investments in joint ventures.

During its consideration of responses to ED 9, the Board questioned  whether it was possible to achieve further alignment between the disclosure requirements for joint ventures and associates, to the extent that the nature of the particular type of interest does not justify different disclosure requirements. Although joint control is different from significant influence, the Board concluded that  the disclosure requirements for joint arrangements and associates could share a common disclosure objective—to disclose information that enables users of financial statements to evaluate the nature, extent and financial effects of an entity’s interests in joint arrangements and associates, and the nature of the risks associated with those interests.

Basis for conclusions on IFRS 12 interests in join arrangements and associates

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

In response to requests from users of financial statements, the Board proposed in ED 9 that an entity should disclose a list and description of investments in significant joint ventures and associates. Respondents to ED 9 generally welcomed the proposal. The Board decided to carry the proposals forward into IFRS 12 with some modifications as described in paragraphs BC45 and BC46.

The  Board  decided  to  require  the  information  for  joint    arrangements  and associates that are material to the reporting entity rather than for significant joint arrangements and associates. The Conceptual Framework for Financial Reporting defines materiality whereas the term ‘significant’ is undefined and can be interpreted differently. Consequently, the Board  decided  to  replace  ‘significant’ with ‘material’, which is also used in IFRS 3. The Board noted that materiality should be assessed in relation to an entity’s consolidated financial statements or other primary financial statements in which joint ventures and associates  are  accounted  for  using  the  equity method.

In addition, the Board noted that ED 9 unintentionally changed   the application of the requirement in IAS 31 to provide a description of interests in all joint arrangements to interests in joint ventures only. As such, the Board modified the requirement so that it would continue to be required for all joint arrangements that are material to an  entity.

Basis for conclusions on IFRS 12 interests in join arrangements and associates

Summarised financial information

IAS  28  and  IAS  31  required  disclosure  of  aggregated  summarised  financial information relating to joint ventures and associates. In response to requests from users of financial statements, ED 9 proposed to expand the requirements so that summarised financial information would be provided for each joint  venture that is material to an  entity.

Respondents to ED 9 generally agreed that summarised financial information should be provided. Some had concerns about confidentiality when providing summarised financial information on an individual basis for some joint  ventures that were established to implement a single project. Others, including users of financial statements, were concerned that the elimination of proportionate consolidation would result in a loss of information. They therefore requested more detailed disclosures so that the effect of joint ventures on the activities of an entity could be better understood. They stated that there was a need for a detailed breakdown of current assets and current and non-current liabilities (in particular, cash and financial liabilities excluding  trade payables and provisions), which would help users understand the net debt position of joint ventures. These users also highlighted the need for a more detailed breakdown of amounts presented in the statement of comprehensive income (such as depreciation and amortisation) that would help when valuing an entity’s investment in a joint  venture.

Basis for conclusions on IFRS 12 interests in join arrangements and associates

The International Financial Reporting Standards Foundation, or IFRS Foundation, is a nonprofit accounting organization. Its main objectives include the development and promotion of the International Financial Reporting Standards (IFRSs) through the International Accounting Standards Board (IASB), which it oversees.[1][3]

The foundation was formerly named the International Accounting Standards Committee (IASC) Foundation until a renaming on 1 July 2010, and as of 2012 is governed by a board of 22 trustees.

The IFRS Foundation also develops and maintains the IFRS Taxonomy, which is the representation of the IFRSs in eXtensible Business Reporting Language (XBRL), via its XBRL team. The team is supported by the XBRL Advisory Council and the XBRL Quality Review Team, which respectively provide strategic advice and reviews developed taxonomies.Additionally, in 2012 the foundation issued a call for industry participants in a project to develop “common industry practice concepts” for the taxonomy.

XBRL provides a “common, electronic format for business and financial reporting”, which will contribute to the global convergence of accounting standards towards IFRS; the director of XBRL activities at the IFRS Foundation, Olivier Servais, hopes that “everybody will be using it” in future.As of March 2012, the IFRS Taxonomies have “considerably fewer” tags than GAAP taxonomies, and the Security and Exchange Commission has not approved the IFRS Taxonomy for use in XBRL filings in the United States.

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