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Disclosure of Interests in Other Entities

Ind AS - 112 - Rules - B. Indian Accounting Standards (Ind AS) - Companies (Indian Accounting Standards) Rules, 2015 - Ind AS - 112 - Indian Accounting Standard (Ind AS) 112 (This Indian Accounting Standard includes paragraphs set in bold type and plain type, which have equal authority. Paragraphs in bold type indicate the main principles.) Objective 1 The objective of this Indian Accounting Standard (Ind AS) is to require an entity to disclose information that enables users of its financial sta .....

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graphs 7-9); (iii) that it meets the definition of an investment entity, if applicable (paragraph 9A); and (b) information about its interests in: (i) subsidiaries (paragraphs 10-19); (ii) arrangements and associates (paragraphs 20-23); and (iii) structured entities that are not controlled by the entity (unconsolidated structured entities) (paragraphs 24-31). 3 If the disclosures required by this Ind AS, together with disclosures required by other Ind ASs, do not meet the objective in paragraph .....

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B2-B6). Scope 5 This Ind AS shall be applied by an entity that has an interest in any of the following: (a) subsidiaries (b) joint arrangements (ie joint operations or joint ventures) (c) associates (d) unconsolidated structured entities. 2[5A Except as described in paragraph B17, the requirements in this Ind AS apply to an entity s interests listed in paragraph 5 that are classified (or included in a disposal group that is classified) as held for sale or discontinued operations in accordance w .....

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it shall apply the requirements in paragraphs 24-31 when preparing those separate financial statements. (ii) an investment entity that prepares financial statements in which all of its subsidiaries are measured at fair value through profit or loss in accordance with paragraph 31 of Ind AS 110 shall present the disclosures relating to investment entities required by this Ind AS.] (c) an interest held by an entity that participates in, but does not have joint control of, a joint arrangement unless .....

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an interest in an unconsolidated structured entity. Significant judgements and assumptions 7 An entity shall disclose information about significant judgements and assumptions it has made (and changes to those judgements and assumptions) in determining: (a) that it has control of another entity, ie an investee as described in paragraphs 5 and 6 of Ind AS 110, Consolidated Financial Statements; (b) that it has joint control of an arrangement or significant influence over another entity; and (c) th .....

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gnificant judgements and assumptions made in determining that: (a) it does not control another entity even though it holds more than half of the voting rights of the other entity. (b) it controls another entity even though it holds less than half of the voting rights of the other entity. (c) it is an agent or a principal (see paragraphs B58-B72 of Ind AS 110). (d) it does not have significant influence even though it holds 20 per cent or more of the voting rights of another entity. (e) it has si .....

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paragraph 28 of Ind AS 110), it shall disclose its reasons for concluding that it is nevertheless an investment entity. 9B 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: (a) the total fair value, as of the date of change of .....

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s have in the group s activities and cash flows (paragraph 12); and (b) to evaluate: (i) the nature and extent of significant restrictions on its ability to access or use assets, and settle liabilities, of the group (paragraph 13); (ii) the nature of, and changes in, the risks associated with its interests in consolidated structured entities (paragraphs 14-17); (iii) the consequences of changes in its ownership interest in a subsidiary that do not result in a loss of control (paragraph 18); and .....

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using a different date or period. The interest that non-controlling interests have in the group s activities and cash flows 12 An entity shall disclose for each of its subsidiaries that have non-controlling interests that are material to the reporting entity: (a) the name of the subsidiary. (b) the principal place of business (and country of incorporation if different from the principal place of business) of the subsidiary. (c) the proportion of ownership interests held by non-controlling inter .....

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: (a) significant restrictions (eg statutory, contractual and regulatory restrictions) on its ability to access or use the assets and settle the liabilities of the group, such as: (i) those that restrict the ability of a parent or its subsidiaries to transfer cash or other assets to (or from) other entities within the group. (ii) guarantees or other requirements that may restrict dividends and other capital distributions being paid, or loans and advances being made or repaid, to (or from) other .....

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idated financial statements of the assets and liabilities to which those restrictions apply. Nature of the risks associated with an entity s interests in consolidated structured entities 14 An entity shall disclose the terms of any contractual arrangements that could require the parent or its subsidiaries to provide financial support to a consolidated structured entity, including events or circumstances that could expose the reporting entity to a loss (eg liquidity arrangements or credit rating .....

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ts subsidiaries assisted the structured entity in obtaining financial support; and (b) the reasons for providing the support. 16 If during the reporting period a parent or any of its subsidiaries has, without having a contractual obligation to do so, provided financial or other support to a previously unconsolidated structured entity and that provision of support resulted in the entity controlling the structured entity, the entity shall disclose an explanation of the relevant factors in reaching .....

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bsidiary that do not result in a loss of control. Consequences of losing control of a subsidiary during the reporting period 19 An entity shall disclose the gain or loss, if any, calculated in accordance with paragraph 25 of Ind AS 110, and: (a) the portion of that gain or loss attributable to measuring any investment retained in the former subsidiary at its fair value at the date when control is lost; and (b) the line item(s) in profit or loss in which the gain or loss is recognised (if not pre .....

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om the principal place of business) of the subsidiary; and (c) the proportion of ownership interest held by the investment entity and, if different, the proportion of voting rights held. 19C If an investment entity is the parent of another investment entity, the parent shall also provide the disclosures in 19B(a)-(c) for investments that are controlled by its investment entity subsidiary. The disclosure may be provided by including, in the financial statements of the parent, the financial statem .....

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rrent commitments or intentions to provide financial or other support to an unconsolidated subsidiary, including commitments or intentions to assist the subsidiary in obtaining financial support. 19E If, during the reporting period, an investment entity or any of its subsidiaries has, without having a contractual obligation to do so, provided financial or other support to an unconsolidated subsidiary (eg purchasing assets of, or instruments issued by, the subsidiary or assisting the subsidiary i .....

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liquidity arrangements or credit rating triggers associated with obligations to purchase assets of the structured entity or to provide financial support). 19G If during the reporting period an investment entity or any of its unconsolidated subsidiaries has, without having a contractual obligation to do so, provided financial or other support to an unconsolidated, structured entity that the investment entity did not control, and if that provision of support resulted in the investment entity cont .....

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oint control of, or significant influence over, joint arrangements and associates (paragraphs 21 and 22); and (b) the nature of, and changes in, the risks associated with its interests in joint ventures and associates (paragraph 23). Nature, extent and financial effects of an entity s interests in joint arrangements and associates 21 An entity shall disclose: (a) for each joint arrangement and associate that is material to the reporting entity: (i) the name of the joint arrangement or associate. .....

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and, if different, the proportion of voting rights held (if applicable). (b) for each joint venture and associate that is material to the reporting entity: (i) whether the investment in the joint venture or associate is measured using the equity method or at fair value. (ii) summarised financial information about the joint venture or associate as specified in paragraphs B12 and B13. (iii) if the joint venture or associate is accounted for using the equity method, the fair value of its investment .....

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all also disclose: (a) the nature and extent of any significant restrictions (eg 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 entity in the form of cash dividends, or to repay loans or advances made by the entity. (b) when the financial statements of a joint venture or associate .....

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lying the equity method. Risks associated with an entity s interests in joint ventures and associates 23 An entity shall disclose: (a) commitments that it has relating to its joint ventures separately from the amount of other commitments as specified in paragraphs B18-B20. (b) in accordance with Ind AS 37, Provisions, Contingent Liabilities and Contingent Assets, unless the probability of loss is remote, contingent liabilities incurred relating to its interests in joint ventures or associates (i .....

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te the nature of, and changes in, the risks associated with its interests in unconsolidated structured entities (paragraphs 29-31). 25 The information required by paragraph 24(b) includes information about an entity s exposure to risk from involvement that it had with unconsolidated structured entities in previous periods (eg sponsoring the structured entity), even if the entity no longer has any contractual involvement with the structured entity at the reporting date. 25A An investment entity n .....

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sored an unconsolidated structured entity for which it does not provide information required by paragraph 29 (eg because it does not have an interest in the entity at the reporting date), the entity shall disclose: (a) how it has determined which structured entities it has sponsored; (b) income from those structured entities during the reporting period, including a description of the types of income presented; and (c) the carrying amount (at the time of transfer) of all assets transferred to tho .....

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s interests in unconsolidated structured entities. (b) the line items in the balance sheet in which those assets and liabilities are recognised. (c) the amount that best represents the entity s maximum exposure to loss from its interests in unconsolidated structured entities, including how the maximum exposure to loss is determined. If an entity cannot quantify its maximum exposure to loss from its interests in unconsolidated structured entities it shall disclose that fact and the reasons. (d) a .....

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the structured entity), the entity shall disclose: (a) the type and amount of support provided, including situations in which the entity assisted the structured entity in obtaining financial support; and (b) the reasons for providing the support. 31 An entity shall disclose any current intentions to provide financial or other support to an unconsolidated structured entity, including intentions to assist the structured entity in obtaining financial support. Appendix A Defined terms This appendix .....

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tractual and non-contractual involvement that exposes an entity to variability of returns from the performance of the other entity. An interest in another entity can be evidenced by, but is not limited to, the holding of equity or debt instruments as well as other forms of involvement such as the provision of funding, liquidity support, credit enhancement and guarantees. It includes the means by which an entity has control or joint control of, or significant influence over, another entity. An en .....

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ctivities are directed by means of contractual arrangements. Paragraphs B22-B24 provide further information about structured entities. The following terms are defined in Ind AS 27 , Ind AS 28 , Ind AS 110 and Ind AS 111, Joint Arrangements, and are used in this Ind AS with the meanings specified in those Ind ASs: • associate • consolidated financial statements • control of an entity • equity method • group • investment entity • joint arrangement • joint co .....

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situations. Although some aspects of the examples may be present in actual fact patterns, all relevant facts and circumstances of a particular fact pattern would need to be evaluated when applying Ind AS 112. Aggregation (paragraph 4) B2 An entity shall decide, in the light of its circumstances, how much detail it provides to satisfy the information needs of users, how much emphasis it places on different aspects of the requirements and how it aggregates the information. It is necessary to stri .....

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ar entities. B4 An entity shall present information separately for interests in: (a) subsidiaries; (b) joint ventures; (c) joint operations; (d) associates; and (e) unconsolidated structured entities. B5 In determining whether to aggregate information, an entity shall consider quantitative and qualitative information about the different risk and return characteristics of each entity it is considering for aggregation and the significance of each such entity to the reporting entity. The entity sha .....

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n another entity refers to contractual and non-contractual involvement that exposes the reporting entity to variability of returns from the performance of the other entity. Consideration of the purpose and design of the other entity may help the reporting entity when assessing whether it has an interest in that entity and, therefore, whether it is required to provide the disclosures in this Ind AS. That assessment shall include consideration of the risks that the other entity was designed to cre .....

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ing entity) to protect itself from the default of interest and principal payments on the loans. The reporting entity has involvement that exposes it to variability of returns from the performance of the structured entity because the credit default swap absorbs variability of returns of the structured entity. B9 Some instruments are designed to transfer risk from a reporting entity to another entity. Such instruments create variability of returns for the other entity but do not typically expose t .....

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isk-free financial assets. The structured entity obtains exposure to entity Z s credit risk by entering into a credit default swap (CDS) with a swap counterparty. The CDS passes entity Z s credit risk to the structured entity in return for a fee paid by the swap counterparty. The investors in the structured entity receive a higher return that reflects both the structured entity s return from its asset portfolio and the CDS fee. The swap counterparty does not have involvement with the structured .....

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interests. (b) summarised financial information about the assets, liabilities, profit or loss and cash flows of the subsidiary that enables users to understand the interest that noncontrolling interests have in the group s activities and cash flows. That information might include but is not limited to, for example, current assets, noncurrent assets, current liabilities, non-current liabilities, revenue, profit or loss and total comprehensive income. B11 The summarised financial information requi .....

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evenue. (vi) profit or loss from continuing operations. (vii) post-tax profit or loss from discontinued operations. (viii) other comprehensive income. (ix) total comprehensive income. B13 In addition to the summarised financial information required by paragraph B12, an entity shall disclose for each joint venture that is material to the reporting entity the amount of: (a) cash and cash equivalents included in paragraph B12(b)(i). (b) current financial liabilities (excluding trade and other payab .....

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ty s share of those amounts). If the entity accounts for its interest in the joint venture or associate using the equity method: (a) the amounts included in the Ind AS financial statements of the joint venture or associate shall be adjusted to reflect adjustments made by the entity when using the equity method, such as fair value adjustments made at the time of acquisition and adjustments for differences in accounting policies. (b) the entity shall provide a reconciliation of the summarised fina .....

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basis would be impracticable or cause undue cost. In that case, the entity shall disclose the basis on which the summarised financial information has been prepared. B16 An entity shall disclose, in aggregate, the carrying amount of its interests in all individually immaterial joint ventures or associates that are accounted for using the equity method. An entity shall also disclose separately the aggregate amount of its share of those joint ventures or associates : (a) profit or loss from continu .....

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equired to disclose summarised financial information for that subsidiary, joint venture or associate in accordance with paragraphs B10-B16.] Commitments for joint ventures (paragraph 23(a)) B18 An entity shall disclose total commitments it has made but not recognised at the reporting date (including its share of commitments made jointly with other investors with joint control of a joint venture) relating to its interests in joint ventures. Commitments are those that may give rise to a future out .....

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rement of equipment, inventory or services that an entity is committed to purchasing from, or on behalf of, a joint venture. (iv) unrecognised commitments to provide loans or other financial support to a joint venture. (v) unrecognised commitments to contribute resources to a joint venture, such as assets or services. (vi) other non-cancellable unrecognised commitments relating to a joint venture. (b) unrecognised commitments to acquire another party s ownership interest (or a portion of that ow .....

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the entity, such as when any voting rights relate to administrative tasks only and the relevant activities are directed by means of contractual arrangements. B22 A structured entity often has some or all of the following features or attributes: (a) restricted activities. (b) a narrow and well-defined objective, such as to effect a tax-efficient lease, carry out research and development activities, provide a source of capital or funding to an entity or provide investment opportunities for invest .....

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(b) asset-backed financings. (c) some investment funds. B24 An entity that is controlled by voting rights is not a structured entity simply because, for example, it receives funding from third parties following a restructuring. Nature of risks from interests in unconsolidated structured entities (paragraphs 29-31) B25 In addition to the information required by paragraphs 29-31, an entity shall disclose additional information that is necessary to meet the disclosure objective in paragraph 24(b). .....

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upport), including: (i) a description of events or circumstances that could expose the reporting entity to a loss. (ii) whether there are any terms that would limit the obligation. (iii) whether there are any other parties that provide financial support and, if so, how the reporting entity s obligation ranks with those of other parties. (b) losses incurred by the entity during the reporting period relating to its interests in unconsolidated structured entities. (c) the types of income the entity .....

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r commitments with third parties that may affect the fair value or risk of the entity s interests in unconsolidated structured entities. (f) any difficulties an unconsolidated structured entity has experienced in financing its activities during the reporting period. (g) in relation to the funding of an unconsolidated structured entity, the forms of funding (eg commercial paper or medium-term notes) and their weighted-average life. That information might include maturity analyses of the assets an .....

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ely in accordance with Ind AS 8, Accounting Policies, Changes in Accounting Estimates and Errors, for annual periods beginning on or after 1st April, 2018.] Appendix 1 Note: This Appendix is not a part of the Indian Accounting Standard. The purpose of this Appendix is only to bring out the major differences, if any, between Indian Accounting Standard (Ind AS) 112 and the corresponding International Financial Reporting Standard (IFRS) 12, , issued by the International Accounting Standards Board. .....

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