· controlling interests have in the group’s activities and cash flows. it includes the assets,...

www.pwc.co.uk

Practical guide

September 2013

Practical guide Draft

PwC Contents

Contents

Supplement to the practical guide – Understanding the disclosure requirements in IFRS 12 1

Appendices 5

Appendix 1: Example disclosures for subsidiaries 6 Appendix 2: Example disclosures for unconsolidated structured entities 13 Appendix 3: Illustration of disclosures for interests in joint arrangements and associates 16 Appendix 4: Disclosure checklist extracts 22


PwC 1

What do the requirements cover? IFRS 12, ‘Disclosure of Interests in Other Entities’, requires extensive disclosures for:

interests in subsidiaries;

structured entities (both consolidated and not consolidated);

joint arrangements; and

associates.

IFRS 12 is applicable for annual reporting periods beginning on or after 1 January 2013. In this paper, we highlight the key disclosure requirements and provide example disclosures.

IFRS 12 aims to provide the users of financial statements with sufficient disclosures for them to assess the nature of, and risks and financial effects associated with, the entity’s interests in subsidiaries, joint arrangements, associates and unconsolidated structured entities. Entities should consider the level of detail that is needed to satisfy this objective, how much emphasis to place on each of the requirements, and to what extent it should aggregate the information (taking consideration of materiality). Useful information should not be obscured by the inclusion of a large amount of insignificant detail, on the one hand, or by too much aggregation of items with different risk and return characteristics, on the other.

Significant judgements and assumptions IFRS 12 requires an entity to disclose information about the significant judgements and assumptions it has made, including those relating to whether it has control of another entity, and where changes in circumstances alter the entity’s conclusion about whether it has control.

In particular, an entity should disclose significant judgements and assumptions made in determining that:

it holds more than half of the voting rights of another entity where it does not have control;

it holds less than half of the voting rights of another entity where it has control; and

it is an agent or principal with respect to another entity.

Interest in subsidiaries IFRS 12 requires disclosures for each of an entity’s subsidiaries that have material non-controlling interests. Such disclosures assist users when estimating future profit or loss and cash flows (for example, by identifying the assets and liabilities that are held by subsidiaries, risk exposures of particular group entities, and those subsidiaries that have significant cash flows). The disclosures are as follows (new disclosures compared to the previous standard are in bold):

The subsidiary’s name1.

Its principal place of business (and country of incorporation, if different)1.

The proportion of ownership interests held by non-controlling interests1.

The proportion of voting rights held by non-controlling interests, if different from the proportion of ownership interests held1.

The profit or loss allocated to non-controlling interests of the subsidiary during the reporting period.

The accumulated non-controlling interests of the subsidiary at the end of the reporting period.

Summarised financial information about

the subsidiary.

1 These disclosures only had to be made in separate financial

statements of a parent entity. However, information of this

nature would also be required under IAS 24, ‘Related Party

Disclosures’.

Supplement to the practical guide – Understanding the disclosure requirements in IFRS 12


PwC 2

Non-controlling interests The summarised financial information referred to above helps users to understand the interest that non-controlling interests have in the group’s activities and cash flows. It includes the assets, liabilities, profit or loss and cash flows of the subsidiary. It might include, but is not limited to, current/non-current assets, current/non-current liabilities, revenue, profit or loss, and total comprehensive income. Dividends paid to non-controlling interests should also be disclosed. The amounts disclosed should be given before inter-company eliminations.

Significant restrictions An entity must explain if there are any significant restrictions on its ability to access or use the assets and settle the liabilities of the group (for example, a limited ability to transfer cash or assets within the group, restrictions on distributions or loan repayments, and the existence of protective rights held by non-controlling interests).

Changes in a parent’s ownership interest If there is a change in a parent's ownership interest in a subsidiary that does not result in loss of control, an entity should present a schedule that shows the effects on the equity attributable to the parent’s owners. This would typically be in relation to a share buyback or a subsidiary issuing shares in a stock-based compensation arrangement.

Conversely, if the entity has lost control of a subsidiary during the reporting period, it must disclose:

the gain or loss, calculated in accordance with paragraph 25 of IFRS 10; and

the portion of that gain or loss that is attributable to measuring any investment retained in the former subsidiary at its fair value at the date when control is lost, and the line item(s) in profit or loss in which the gain or loss is recognised (if not presented separately).

Consolidated structured entities – Nature of the risks A structured entity is an entity that has been designed so that voting or similar rights are not the dominant factor in deciding who controls the entity. An example would be when voting rights relate to administrative tasks only, and the relevant activities are directed by means of contractual arrangements.

If the entity holds interests in consolidated structured entities, it must disclose information that enables users of its financial statements to evaluate the nature of, and changes in, the risks associated with its interests in consolidated structured entities. This includes:

the terms of any contractual arrangements that could require any entity within the group to provide financial support to a consolidated structured entity;

the type and amount of financial or other support provided to a consolidated structured entity during the reporting period (including assistance to the structured entity in obtaining financial support), and the reasons for providing such support;

if an entity within the group has provided financial or other support to a previously unconsolidated structured entity (without the obligation to do so) which resulted in the entity controlling the structured entity, an explanation of the relevant factors in reaching this decision; and

disclosure of any current intentions to provide financial or other support to a consolidated structured entity (including intentions to assist the structured entity in obtaining financial support).

Interests in unconsolidated structured entities If the entity has any interests in unconsolidated structured entities, there are a number of new disclosures that will apply for the first time. In summary, it must disclose information that enables users of its financial statements:

to understand the nature and extent of its interests in unconsolidated structured entities; and

to evaluate the nature of, and changes in, the risks associated with its interests in unconsolidated structured entities (including an entity’s exposure to risk from involvement with unconsolidated structured entities in previous periods, even if the contractual involvement had ceased at the reporting date).


PwC 3

To achieve this, the entity should provide:

qualitative and quantitative information about its interest in unconsolidated structured entities (nature, purpose, size and activities of the entity, and how the entity is financed);

the carrying amounts of assets and liabilities recognised in its financial statements relating to its interests in unconsolidated structured entities, and the line items in the statement of financial position in which those assets and liabilities are recognised;

the amount that best represents its maximum exposure to loss from its interests in unconsolidated structured entities, including how the maximum amount is determined;

a comparison of the amounts from the last two points above;

if it has provided financial or other support to an unconsolidated structured entity (without having a contractual obligation to do so) in which it previously had or currently has an interest, an explanation of the type of and amount of support provided and the reasons for providing the support;

any current intentions to provide financial or other support to an unconsolidated structured entity, including intentions to assist the entity in obtaining financial support; and

information about sponsored unconsolidated

structured entities which are not included in the disclosures above (for example, because the entity does not have an interest in the unconsolidated structured entity at the reporting date), including income from those entities and the carrying amount of assets transferred to those entities during the reporting period. The sponsoring activities should be classified into relevant categories (see paras B2–B6 of IFRS 12 for guidance).

The quantitative disclosures above should be provided in tabular format, unless another format is more appropriate.

Relief in the first year IFRS 12 provides relief from disclosing some information about structured entities for the comparative period in the first year of adoption. Entities do not need to disclose comparative information about the nature and extent of their interests and the nature of (and changes to) the risks of their interests in unconsolidated structured entities.

Joint arrangements and associates The new guidance could significantly change the way that companies present and disclose information about their interests in joint arrangements and associates. The disclosures for individual joint ventures and associates are far more detailed than previously required by IAS 31, ‘Interests in Joint Ventures’, and IAS 28, ‘Investments in Associates’. Disclosure is required of certain classes of assets and liabilities of the joint venture or associate, as well as particular totals of assets and liabilities. Certain items of revenue and expenses also need to be disclosed.

The disclosure requirements in IFRS 12 do not apply to parties to a joint arrangement that do not share joint control, except where such parties significantly influence the arrangement.

The following information must be disclosed in relation to an entity’s involvement with joint arrangements and associates:

significant judgements and assumptions made (and changes to those judgements and assumptions) in determining:

- whether there is joint control of an arrangement;

- whether there is significant influence over another entity; and

- the type of joint arrangement (that is, joint operation or joint venture) where the arrangement is structured through a separate vehicle;

the nature, extent and financial effects of an entity’s interest in joint arrangements and associates, including the nature and effects of its contractual relationship with other investors with joint control of, or significant influence over, joint arrangements and associates; and

the nature of, and changes in, the risks associated with its interests in joint ventures and associates.


PwC 4

Other disclosure requirements to consider If a reporting entity has significant interests in joint operations, it should consider disclosing the interests in the assets employed and liabilities incurred in relation to these joint operations. This information will assist users in assessing the extent and financial impact of the joint operations, and it might even be required under IAS 1 if it is relevant to an understanding of the financial statements.

Where an interest in a joint venture or an associate (or a portion of an interest) is classified as held for sale in accordance with IFRS 5, ‘Non-current Assets Held for Sale and Discontinued Operations’, the reporting entity does not need to disclose, for that joint venture or associate, the summarised financial information required under IFRS 12.

Changes in accounting policy Additional disclosures are required when applying a new accounting standard for the first time. Where initial application has an effect on the current period or any prior period, and would have such an effect except that it is impracticable to determine the amount of the adjustment, or it might have an effect on future periods, an entity must disclose:

the title of the IFRS;

where applicable, that the change in accounting policy is made in accordance with its transitional provisions;

the nature of the change in accounting policy;

where applicable, a description of the transitional provisions;

where applicable, the transitional provisions that might have an effect on future periods;

for the current period and the immediately preceding period presented, to the extent practicable, the amount of the adjustment for each financial statement line item affected; and, if IAS 33, ‘Earnings per Share’, applies, for basic and diluted earnings per share (disclosure of the impact on the current period is not required for the adoption of IFRS 10, because of specific relief provided);

the amount of the adjustment relating to periods before those presented, to the extent practicable; and

if retrospective application is impracticable, the circumstances that led to that impracticability, and a description of how and from when the change in accounting policy has been applied.

Financial statements of subsequent periods need not repeat these disclosures.

IAS 8, ‘Accounting Policies, Changes in Accounting Estimates and Errors’, does not prescribe any format for these disclosures. The sample disclosures below use a tabular format, but other ways of presenting this information could be equally suitable, depending on the circumstances.

Additional comparative information – Third balance sheet and related notes If an entity has applied an accounting policy retrospectively, restated items retrospectively or reclassified items in its financial statements, it must present a third balance sheet (statement of financial position) as at the beginning of the earliest comparative period presented. However, where the retrospective change in policy or the restatement has no effect on this earliest statement of financial position, we believe that it would be sufficient for the entity to merely disclose that fact.

The requirement to present comparative information for the beginning of the earliest period presented does not extend to the related notes, because the IASB has issued amendments to IAS 1 which have removed the requirement with effect from 1 January 2013. The amendments are available for early adoption.

Further reading PwC’s IFRS Manual of Accounting 2012

IFRSs 10 and 12 – Questions and Answers

A practical guide to IFRS – Classification of Joint arrangements

PwC – Illustrative IFRS consolidated financial statements for 2012 year ends


PwC 5

Appendices


PwC 6

1. Accounting policy note

(b) Principles of consolidation (extracts)

(i) Subsidiaries

Subsidiaries are all entities (including structured entities) over which the group has control. The group controls an entity where the group is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power to direct the activities of the entity. Subsidiaries are fully consolidated from the date on which control is transferred to the group. They are deconsolidated from the date that control ceases.

(ii) Change in accounting policy

IFRS 10, ‘Consolidated Financial Statements’, was issued in August 2011 and replaces the guidance on control and consolidation in IAS 27, ‘Consolidated and Separate Financial Statements’, and in SIC 12, ‘Consolidation – Special Purpose Entities’.

The group has reviewed its investments in other entities to assess whether the conclusion to consolidate is different under IFRS 10 than under IAS 27. No differences were found for any of the investments with the exception of VALUE ACCOUNTS Overseas Ltd. The group has determined that, while it did not have control over this entity under the principles of IAS 277, it now does have control over the entity under the current standard. The group acquired its 45% interest in this entity on 1 July 2009. The remaining interests in the entity are widely held and dispersed. The application of IFRS 10 resulted in the group concluding it had de facto control of the entity.

As required under IFRS 10, the change in policy has been applied retrospectively and, as a consequence, adjustments were recognised in the balance sheet as of 1 July 2012.

The tables below show the effect of the change in accounting policy on individual line items in each of the financial statements. Line items that were not affected by the change have not been included. As a result, the sub-totals and totals disclosed cannot be recalculated from the numbers provided.

Appendix 1: Example disclosures for subsidiaries


PwC 7

The impact of this change in the entity’s accounting policy on individual line items in the financial statements can be summarised as follows:

Prior year restatement

Income statement (extract) 2013 (previously stated)

Profit increase/(decrease)

2013 (restated)

Revenue 84,460 3,957 88,417

Other income 2,481 129 2,610

Cost of sales (43,524) (1,284) (44,808)

Distribution expenses (18,548) (297) (18,845)

Marketing expenses (8,966) (150) (9,116)

Administrative expense (5,877) (325) (6,202)

Share of net profits of associates 170 (170) 0

Profit for the period 10,196 1,860 12,056

Profit is attributable to:

Owners 10,196 1,302 11,498

Non-controlling interests 0 558 558

10,196 1,860 12,056

Other comprehensive income for the period

5,599 0 5,599

Total comprehensive income for the period

15,795 1,860 17,655

Total comprehensive income attributable to:

Owners 15,795 1,860 17,655

Non-controlling interests 0 0 0

15,795 1,860 17,655

Basic earnings per share xx xx

Diluted earnings per share xx xx


PwC 8

Prior year restatement

Statement of cash flows (extract)

2013 (previously stated)

Increase/(decrease) 2013 (restated)

Gross cash flow from operating activities

41,067 1,965 43,032

Interest paid (4,124) (149) (4,273)

Net cash flows from operating activities

36,943 1,816 38,759

Cash flows from investing activities

Purchase of property, plant and equipment

(18,132) (638) (18,770)

Acquisition of intangible assets (760) (23) (783)

(18,892) (661) (19,553)

Cash flow from financing activities

Repayment of borrowings (25,255) (192) (25,447)

Net movements in cash flows (7,204) 963 (6,241)


PwC 9

Prior years restatement

Balance sheet (extract) 30 June 2013 (previously stated)

Increase/

(decrease)

30 June 2013 (restated)

1 July 2012 (previously stated)

Increase/

(decrease)

1 July 2012 (restated)

Current Assets

Cash 24,473 1,000 25,473 17,145 759 17,904

Trade receivables 12,564 585 13,149 8,573 590 9,163

Inventories 16,942 900 17,842 13,960 823 14,783

Non-current assets

Property, plant and equipment 100,830 34,890 135,720 88,835 29,754 118,589

Associate 4,956 (4,401) 555 3,754 (2,541) 1,213

Intangible assets 22,795 395 23,190 22,780 299 23,079

Total assets 182,560 33,369 215,929 155,047 29,684 184,731

Current liabilities

Trade and other payables 12,827 498 13,325 13,180 365 13,545

Non-current liabilities

Borrowings 62,575 19,786 82,361 59,400 20,172 79,572

Total liabilities 75,402 20,284 95,686 72,580 20,537 93,117

Net assets 107,158 13,085 120,243 82,467 9,147 91,614

Equity attributable to:

Parent 107,158 9,160 116,318 82,467 6,403 88,870

Non-controlling interests 0 3,926 3,926 0 2,744 2,744

107,158 13,085 120,243 82,467 9,147 91,614

Please note that the disclosures and financial impacts are purely for illustrative purposes and are not necessarily consistent with the numbers in the statement of comprehensive income.


PwC 10

2. Critical accounting estimates and judgements (extracts)

(b) Critical judgements in applying the entity’s accounting policies (extracts)

(i) Consolidation of entities in which the group holds less than 50%

The directors have concluded that the group controls value accounts Overseas Ltd, even though it holds less than half of the voting rights of this subsidiary. This is because the group is the largest shareholder with a 45% equity interest, while the remaining shares are held by eight investors.

An agreement signed between the shareholders and value accounts Overseas Ltd grants Value Accounts Holdings Ltd the right to appoint, remove and set the remuneration of management responsible for directing the relevant activities. A 67% majority vote is required to change this agreement, which cannot be achieved without the group’s consent as the group holds 45% of the voting rights.

(ii) Non-consolidation of entities in which the group holds more than 50%

The directors have also determined that they do not control a company called value accounts Trustee Pty Ltd even though value accounts Holdings Ltd owns 100% of the issued capital of this entity. Value Accounts Trustee Pty Ltd is the trustee of the Value Accounts Employees’ Superannuation Fund. It is not a controlled entity of Value Accounts Holdings Ltd, because Value Accounts Holdings Ltd is not exposed, and has no right, to variable returns from this entity and is not able to use its power over the entity to affect those returns.

Note 42 Subsidiaries and transactions with non-controlling interests (extract)

(a) Interest in subsidiaries

Set out below are the group’s principal subsidiaries at 30 June 2014. Unless otherwise stated, the subsidiaries have share capital consisting solely of ordinary shares, which are held directly by the group, and the proportion of ownership interests held equals the voting rights held by the group. The country of incorporation or registration is also their principal place of business.

Name of entity Place of business/Country of incorporation

% of ownership interest held by the group

% of ownership interest held by the non-controlling interests (NCI)

Principal activities

2014 2013 2014 2013

Value Accounts Retail Ltd

Australia 100 100 0 0 Furniture retail stores

Value Accounts Manufacturing Ltd

Australia 88.3 85 11.7 15 Furniture manufacture

Value Accounts Electronics Pty Ltd

Australia 70 0 30 0 Electronic equipment manufacture

Value Accounts Overseas Ltd

Indonesia 45 45 55 55 Furniture manufacture

Value Accounts Consulting Ltd

Australia 100 100 0 0 IT consulting

Value Accounts Development Ltd

Australia 100 100 0 0 Development of residential land


PwC 11

(b) Significant restrictions

Cash and short-term deposits held in Asian countries (including Indonesia) are subject to local exchange control regulations. These regulations provide for restrictions on exporting capital from those countries, other than through normal dividends.

The carrying amount of the assets included within the consolidated financial statements to which these restrictions apply is CU650,000 (2013 – CU410,000).

(c) Non-controlling interests

Set out below is summarised financial information for each subsidiary that has non-controlling interests (NCI) that are material to the group. The amounts disclosed for each subsidiary are before inter-company eliminations.

Value accounts Manufacturing Ltd

Value accounts Overseas Ltd

Value accounts Electronics Ltd

Summarised balance sheet 30 June 2013

30 June 2012

30 June 2013

30 June 2012

30 June 2013

30 June 2012

CU000 CU000 CU000 CU000 CU000 CU000

Current assets 13,870 13,250 11,500 9,800 7,825 -

Current liabilities 12,570 7,595 10,570 8,300 1,200 -

Current net assets 1,300 5,655 930 1,500 6,675

Non-current assets 28,010 22,910 15,570 12,730 18,900 -

Non-current liabilities 5,800 3,400 12,735 10,748 10,100 -

Non-current net assets 22,210 19,510 2,835 1,982 8,800 -

Net assets 23,510 25,164 3,765 3,482 15,475 -

Accumulated NCI 2,751 3,775 2,071 1,914 4,641 -




Summarised statement of comprehensive income

2013 2012 2013 2012 2013 2012

CU000 CU000 CU000 CU000 CU000 CU000

Revenue 30,200 27,800 14,100 14,450 3,850 -

Profit for the period 10,745 7,900 2,412 2,062 1,405 -

Other comprehensive income 1,265 830 (447) 243 - -

Total comprehensive income

12,010 8,730 1,965 2,305 1,405 -

Profit/(loss) allocated to NCI 1,257 1,185 1,327 1,134 422 -

Dividends paid to NCI 1,262 935 925 893 830 -


PwC 12




Summarised cash flows 2013 2012 2013 2012 2013 2012

CU000 CU000 CU000 CU000 CU000 CU000

Cash flows from operating activities

2,989 2,780 1,203 1,160 980 -

Cash flows from investing activities

(1,760) (1,563) (584) (859) (870) -

Cash flows from financing activities

390 (950) 256 330 (235) -

Net increase/(decrease) in cash and cash equivalents

1,619 267 875 631 (125) -

(d) Transactions with non-controlling interests

On 21 April 2014, VALUE ACCOUNTS Holdings Ltd acquired an additional 3.35% of the issued shares of VALUE ACCOUNTS Manufacturing Ltd for a purchase consideration of CU500,000. The carrying amount of the non-controlling interests in VALUE ACCOUNTS Manufacturing Ltd on the date of the transaction was CU1,300,000. The group recognised a decrease in non-controlling interests of CU290,000, and a decrease in equity attributable to owners of the parent of CU210,000. The effect of changes in the ownership interest of VALUE ACCOUNTS Manufacturing Ltd on the equity attributable to the owners of VALUE ACCOUNTS Holdings Ltd during the year is summarised as follows:

2013 CU000 2012 CU000

Carrying amount of non-controlling interests acquired 1,167 -

Consideration paid to non-controlling interests (1,500) -

Excess of consideration paid recognised in the transactions with non-controlling interests reserve within equity

(333) -

There were no transactions with non-controlling interests in 2013.


PwC 13

Notes – Summary of accounting policies (extracts) Standards effective for annual periods beginning on or after 1 January 2013 and which have been adopted by the Fund.

IFRS 12, ‘Disclosure of Interests in other Entities’: the standard requires entities to disclose significant judgements and assumptions made in determining whether the entity controls, jointly controls, significantly influences or has some other interests in other entities. Entities are also required to provide more disclosures around certain ‘structured entities’. Adoption of the standard has impacted the Fund’s level of disclosures in certain of the above-noted areas, but has not impacted the Fund’s financial position or results of operations.

IFRS 10, ‘Consolidated Financial Statements’, IFRS 11, ‘Joint Arrangements’, IAS 27 (revised 2011), ‘Separate Financial Statements’, IAS 28 (revised 2011), ‘Associates and Joint Ventures’ and the ‘Transition Guidance (Amendments to IFRS 10, IFRS 11 and IFRS 12)’ have also been early adopted, as required by IFRS 12; however, these standards and amendments have had no significant impact on the Fund.

Structured entities

A structured entity is an entity that has been designed so that voting or similar rights are not the dominant factor in deciding who controls the entity, such as when any voting rights relate to administrative tasks only, and the relevant activities are directed by means of contractual arrangements. 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 provide investment opportunities for investors by passing on risks and rewards associated with the assets of the structured entity to investors; (c) insufficient equity to permit the structured entity to finance its activities without subordinated financial support; and (d) financing in the form of multiple contractually linked instruments to investors that create concentrations of credit or other risks (tranches).

The Fund has determined that all of its investments in other funds (‘Investee Funds’) are investments in unconsolidated structured entities. The Fund invests in Investee Funds whose objectives range from achieving medium- to long-term capital growth and whose investment strategy does not include the use of leverage. The Investee Funds are managed by unrelated asset managers and apply various investment strategies to accomplish their respective investment objectives. The Investee Funds finance their operations by issuing redeemable shares which are puttable at the holder’s option and entitle the holder to a proportional stake in the respective fund’s net assets.

The Fund holds redeemable shares in each of its Investee Funds.

The change in fair value of each Investee Fund is included in the statement of comprehensive income in ‘Net gains/(losses) on financial instruments held at fair value through profit or loss’.

Commentary – sponsored structural entities

For the purpose of this example disclosure, it is assumed that the Fund has not sponsored any structured entities; if the Fund had sponsored a structured entity, it would need to make the additional disclosures required by paragraph 27 of IFRS12.

Appendix 2: Example disclosures for unconsolidated structured entities


PwC 14

Notes – financial risk management (extracts)

The Fund’s investments in Investee Funds are subject to the terms and conditions of the respective Investee Fund’s offering documentation and are susceptible to market price risk arising from uncertainties about future values of those Investee Funds. The investment manager makes investment decisions after extensive due diligence of the underlying fund, its strategy and the overall quality of the underlying fund’s manager. All of the Investee Funds in the investment portfolio are managed by portfolio managers who are compensated by the respective Investee Funds for their services. Such compensation generally consists of an asset-based fee and a performance-based incentive fee and is reflected in the valuation of the Fund’s investment in each of the Investee Funds.

The right of the Fund to request redemption of its investments in Investee Funds ranges in frequency from weekly to semi-annually.

The exposure to investments in Investee Funds at fair value, by strategy employed, is disclosed in the following table.

These investments are included in financial assets at fair value through profit or loss in the statement of financial position.

Strategy Number of investee funds

Net asset value of investee fund (range and weighted average) CUmillion

Fair value of fund’s assets of investment CU000*

% of net assets attributable to holders of redeemable shares**

Equity long/short 12 25–60/(45) 55,548 40.6

Event driven 10 75–107/(82) 41,531 37.2

Directional trading 6 100–225/(175) 9,668 8.7

Multi-strategy 2 37–45/(41) 5,752 5.2

Fund of Funds 2 21–25/(23) 5,565 5.0

Relative value 5 25–100/(66) 1,456 1.3

119,520

*The fair value of financial assets (CU119,520) is included in financial assets at fair value through profit or loss in the statement of financial position

**This represents the entity’s percentage interest in the total net assets of the Investee Funds

Commentary – paragraph 26 of IFRS 12 and comparative disclosure

IFRS 12 requires disclosure of qualitative and quantitative information about an entity’s interests in unconsolidated structured entities, including, but not limited to, the nature, purpose, size and activities of the structured entity and how the structured entity is financed. Paragraph C2B of IFRS12 states that ‘the disclosure requirements of paragraphs 24–31 and the corresponding guidance in paragraphs B21–B26 of this IFRS need not be applied for any period presented that begins before the first annual period for which IFRS 12 is applied’. As such, no comparative disclosure has been included above.


PwC 15

The Fund’s maximum exposure to loss from its interests in Investee Funds is equal to the total fair value of its investments in Investee Funds.

Once the Fund has disposed of its shares in an Investee Fund, it ceases to be exposed to any risk from that Investee Fund.

The Fund’s investment strategy entails trading in other funds on a regular basis. Total purchases in Investee Funds during the year ended 30 June 2014 was CU35,345,000. The Fund intends to continue opportunistic trading in other funds. As at 30 June 2014 and 30 June 2013, there were no capital commitment obligations and no amounts due to Investee Funds for unsettled purchases.

During the year ended 30 June 2014, total net losses incurred on investments in Investee Funds were CU17,381,000.

Commentary – IFRS 7

The disclosure requirements of IFRS 7 and IFRS 12 might overlap to some extent. However, the intention is that both standards complement each other. [IFRS 12 paras BC72–BC74]. Therefore, in situations where a fund invests in other funds, which fall within the definition of a structured entity, additional disclosures requirements will result from the application of IFRS 12.


PwC 16

Illustrated below are some of the key disclosure requirements for the example scenario presented.

Please note:, this is not a complete listing – these are example extracts only.

Background information and assumptions In compiling this illustrative example, we have made the following assumptions:

All joint arrangements and associates have the same financial year end as the reporting entity.

None of the joint arrangements or associates are measured at fair value.

None of the entity’s investments in the joint arrangements or associates are impaired.

There are no unrecognised losses in relation to any equity accounted investments.

There are no changes to the facts and circumstances during the period that would lead to a change in classification of the joint arrangements or associates.

The reporting entity has three material arrangements for disclosure: Kangaroo Pty Ltd (associate); Koala Pty Ltd (joint venture); and Crocodile Venture Agreement (joint operation).

The reporting entity also has interests in five individually immaterial associates that are accounted for using the equity method.

1. Accounting policy note disclosure

(a) Associates

Associates are all entities over which the group has significant influence but not control or joint control, generally accompanying a shareholding of between 20% and 50% of the voting rights. Investments in associates are accounted for using the equity method of accounting, after initially being recognised at cost. The group’s investment in associates includes goodwill identified on acquisition.

The group’s share of its associates’ post-acquisition profits or losses is recognised in profit or loss, and its share of post-acquisition other comprehensive income is recognised in other comprehensive income. The cumulative post-acquisition movements are adjusted against the carrying amount of the investment. Dividends receivable from associates are recognised as a reduction in the carrying amount of the investment.

Where the group’s share of losses in an associate equals or exceeds its interest in the associate, including any other unsecured long-term receivables, the group does not recognise further losses, unless it has incurred obligations or made payments on behalf of the associate.

Unrealised gains on transactions between the group and its associates are eliminated to the extent of the group’s interest in the associates. Unrealised losses are also eliminated, unless the transaction provides evidence of an impairment of the asset transferred. Accounting policies of associates have been changed, where necessary, to ensure consistency with the policies adopted by the group.

IAS 28 paras 28, 35

Appendix 3: Illustration of disclosures for interests in joint arrangements and associates


PwC 17

(b) Joint arrangements

Under IFRS 11, ‘Joint Arrangements’, investments in joint arrangements are classified as either joint operations or joint ventures, depending on the contractual rights and obligations that each investor has, rather than the legal structure of the joint arrangement. The entity has assessed the nature of its joint arrangements and determined that it has both joint operations and joint ventures.

IFRS 11 para 14

(i) Joint operations

The entity recognises its direct rights to the (and its share of) jointly held assets, liabilities, revenues and expenses of joint operations. These have been incorporated in the financial statements under the appropriate headings.

IFRS 11 para 20

(ii) Joint ventures

Interests in joint ventures are accounted for using the equity method. Under this method, the interests are initially recognised in the consolidated balance sheet at cost and adjusted thereafter to recognise the group’s share of the post-acquisition profits or losses, and movements in other comprehensive income, in profit or loss and other comprehensive income respectively.

Where the group’s share of losses in a joint venture equals or exceeds its interests in the joint ventures (which include any long-term interests that, in substance, form part of the group’s net investment in the joint ventures), the group does not recognise further losses, unless it has incurred obligations or made payments on behalf of the joint ventures.

Unrealised gains on transactions between the group and its joint ventures are eliminated to the extent of the group’s interest in the joint ventures. Unrealised losses are also eliminated, unless the transaction provides evidence of an impairment of the asset transferred.

Accounting policies of the joint ventures have been changed where necessary, to ensure consistency with the policies adopted by the group.

IFRS 11 para 24

2. Critical accounting estimates and significant judgements note disclosures

IAS 1 para 122

Classification of joint arrangements

The entity’s joint venture, Koala Ltd, is structured in a separate incorporated company. The reporting entity holds 50% of the interest in the arrangement and, under the joint arrangement agreement, unanimous consent is required from all parties to the agreement for all relevant activities. The reporting entity and the parties to the agreement only have rights to the net assets of the company through the terms of the contractual arrangement. Other facts and circumstances, however, have also been considered to determine the classification of this arrangement.


PwC 18

The parties to the arrangement take 60% of the output produced by the venture, with the remaining 40% being sold to third party customers. The level of output taken by the parties to the joint arrangement is not considered substantial to indicate that the arrangement has been set up primarily for the provision of output to the parties and that they have direct rights to substantially all of the economic benefits of the arrangement. Similarly, the parties are not considered to be substantially the only source of cash flows contributing to the continuity of the arrangement, indicating that the parties do not have a direct obligation for the liabilities relating to the arrangement.

This arrangement is therefore classified as a joint venture of the reporting entity.

IFRS 12 para 7

3. Associates and joint arrangements note disclosure

(a) Joint operations

The reporting entity has entered into a joint arrangement, called the Crocodile Venture Agreement, to develop properties for residential housing. The reporting entity has a 40% participating interest in this arrangement and, under the terms of the agreement, has a direct share in all of the assets employed by the arrangement and is liable for its share of the liabilities incurred. There is no legal or contractual separation between the arrangement and the parties to the arrangement. The reporting entity has therefore classified this arrangement as a joint operation. It has included its interests in the assets, liabilities, revenue and expenses in the appropriate line items in the balance sheet and income statement respectively, in accordance with the accounting policy.

IFRS 11 paras 7, 15, 21

The principal place of business of the joint operation is in Australia.

IFRS 12 para 21

(b) Interests in associates and joint ventures

Set out below are the associates and joint ventures of the reporting entity as at 30 June 20XX which, in the opinion of the directors, are material to the reporting entity. The entities listed below have share capital consisting solely of ordinary shares, which are held directly by the reporting entity. The country of incorporation or registration is also their principal place of business, and the proportion of ownership interest is the same as the proportion of voting rights held.

Name of entity

Place of business/country of incorporation

% of ownership interest

Nature of relationship

Measurement method

Quoted fair value

20XX 20XY 20XX 20XY

% % CU CU

Kangaroo Pty Ltd

Australia 30 30 Associate (1) Equity method 750 650

Koala Pty Ltd

Australia 50 50 Joint venture (2)

Equity method -* -*

(1) Kangaroo Pty Ltd develops residential land. It is a strategic investment which uses the reporting entity’s knowledge and expertise in the development of residential land but, at the same time, limits the reporting entity’s risk exposure through a reduced equity holding.


PwC 19

(2) Koala Pty Ltd is a manufacturer of specialised equipment for the hospitality industry. It is a strategic joint venture for the reporting entity which complements the services provided by its own hospitality sector.

* Private entity – no quoted price available.

IFRS 12 para 21

(c) Commitments and contingent liabilities in respect of

20XX 20XY

CU000 CU000

(i) Commitments – joint ventures

Commitment to provide funding for capital commitments, if called 250 200

(ii) Contingent liabilities – associates

Share of contingent liabilities incurred jointly with other investors of the associate

150 100

Contingent liabilities relating to liabilities of the associate for which the reporting entity is severally liable

- 50

(iii) Contingent liabilities – joint ventures

Share of contingent liabilities in respect of a legal claim lodged against the partnership

200 150

IFRS 12 para 23 and B19

(d) Summarised financial information for associates and joint ventures

The tables below provide summarised financial information for those associates and joint ventures that are material to the reporting entity. The information disclosed reflects the amounts presented in the financial statements of the relevant associates and joint ventures, and not the reporting entity’s share of those amounts. They have been amended to reflect adjustments made by the reporting entity when using the equity method, including fair value adjustments and modifications for differences in accounting policy.


PwC 20

Summarised balance sheet Kangaroo Ltd Koala Ltd

30 June 20XX

30 June 20XY

30 June 20XX

30 June 20XY

CU000 CU000 CU000 CU000

Current assets

Cash and cash equivalents 300 250

Other current assets 1,500 1,300

Total current assets 800 600 1,800 1,550

Non-current assets 3,500 3,000 7,000 6,500

Current liabilities

Financial liabilities (excluding trade payables) 150 250

Other current liabilities 1,000 600

Total current liabilities 350 250 1,150 850

Non-current liabilities

Financial liabilities (excluding trade payables) 2,000 2,200

Other non-current liabilities 300 350

Total non-current liabilities 1,600 1,300 2,300 2,550

Net assets 2,350 2,050 5,350 4,650

Reconciliation to carrying amounts:

Opening net assets 1 July 2,050 1,650 4,650 4,450

Profit/(loss) for the period 450 300 600 500

Other comprehensive income - 400 350 -

Dividends paid (150) (300) (250) (300)

Closing net assets 2,350 2,050 5,350 4,650

Reporting entity’s share in % 30% 30% 50% 50%

Reporting entity’s share in CU 705 615 2,675 2,325

Goodwill - - - -

Carrying amount 705 615 2,675 2,325


PwC 21

Summarised statements of comprehensive income

Kangaroo Ltd Koala Ltd

30 June 20XX 30 June 20XY 30 June 20XX 30 June 20XY

CU000 CU000 CU000 CU000

Revenue 5,200 5,000 10,000 9,500

Interest income - -

Depreciation and amortisation (2,800) (1,800)

Interest expense (350) (250)

Income tax expense - -

Profit from continuing operations 450 300 600 500

Profit from discontinued operations - - - -

Profit for the period 450 300 600 500

Other comprehensive income - 400 350 -

Total comprehensive income 450 700 950 500

Dividends received from associates and joint venture entities

45 90 125 150

* Shading indicates disclosures that are not required for investments in associates

IFRS 12 paras 21, B12, B13, B14

(e) Individually immaterial associates

In addition to the interests in associates disclosed above, the reporting entity also has interests in a number of individually immaterial associates that are accounted for using the equity method.

20XX 20XY

CU000 CU000

Aggregate carrying amount of individually immaterial associates 400 350

Aggregate amounts of the reporting entity’s share of:

Profit/(loss) from continuing activities 50 10

Post-tax profit or loss from discontinued operations - -

Other comprehensive income - -

Total comprehensive income 50 10

IFRS 12 paras 21, B16


PwC 22

Disclosures Appropriate

disclosures

made?

(Yes/No*/NA)

Significant judgements and assumptions

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 is, an investee as described in paras 5 and 6 of IFRS 10).

The entity is also required to disclose the significant judgements and assumptions where

there are changes in facts and circumstances such that the conclusion about whether it has

control changes during the reporting period.

An entity shall disclose significant judgements and assumptions including those 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; and

c) it is an agent or a principal (see paras B58–B75 of IFRS 10).

An entity shall disclose information about significant judgements and assumptions made

(and changes thereto) in determining whether:

a) an entity has joint control or an arrangement or significant influence over another

entity; and

b) the type of joint arrangement (that is, joint venture or joint operation) where the

arrangement has been structured through a separate vehicle.

The entity is also required to disclose the significant judgements and assumptions where

there are changes in facts and circumstances such that the conclusion about whether it has

joint control or significant influence changes during the reporting period.

An entity shall disclose significant judgements and assumptions including those made in

determining that:

a) it does not have significant influence, even though it holds 20% or more of the voting

rights of another entity; and

b) it has significant influence, even though it holds less than 20% of the voting rights of

another entity.

Appendix 4: Disclosure checklist extracts


PwC 23


disclosures

made?

(Yes/No*/NA)

Interests in subsidiaries

An entity shall disclose information that enables users of its consolidated financial

statements to understand:

a) the composition of the group; and

b) the interest that non-controlling interests have in the group’s activities and cash flows –

that is, for each of its subsidiaries that have non-controlling interests that are material to

the reporting entity, it discloses:

i. the name of the subsidiary;

ii. the principal place of business (and country of incorporation, if different from the principal place of business) of the subsidiary;

iii. the proportion of ownership interests held by non-controlling interests;

iv. the proportion of voting rights held by non-controlling interests, if different from the proportion of ownership interests held;

v. the profit or loss allocated to non-controlling interests of the subsidiary during the reporting period;

vi. accumulated non-controlling interests of the subsidiary at the end of the reporting period; and

vii. summarised financial information about the subsidiary, as follows:

(a) dividends paid to non-controlling interests; and

(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 non-

controlling interests have in the group’s activities and cash flows. That

information might include, but is not limited to, current assets, non-current assets,

current liabilities, non-current liabilities, revenue, profit or loss and total

comprehensive income.


statements to evaluate the nature and extent of significant restrictions on its ability to access

or use assets, and settle liabilities, of the group. In particular, an entity shall disclose:

a) significant restrictions (such as 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; and

ii. guarantees or other requirements that might restrict dividends and other capital distributions from being paid, or loans and advances from being made or repaid, to (or from) other entities within the group;

b) the nature and extent to which protective rights of non-controlling interests can

significantly restrict the entity’s ability to access or use the assets and settle the liabilities

of the group, such as where a parent is obliged to settle liabilities of a subsidiary before

settling its own liabilities, or the approval of non-controlling interests is required either

to access the assets or to settle the liabilities of a subsidiary; and

c) the carrying amounts in the consolidated financial statements of the assets and

liabilities to which those restrictions apply.


PwC 24


disclosures

made?

(Yes/No*/NA)


statements to evaluate the nature of, and changes in, the risks associated with its interests in

consolidated structured entities, by disclosing:

a) 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 (for example,

liquidity arrangements or credit rating triggers associated with obligations to purchase

assets of the structured entity or provide financial support);

b) 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 consolidated

structured entity (for example, by purchasing assets of or instruments issued by the

structured entity):

i. the type and amount of support provided, including situations in which the parent or its subsidiaries assisted the structured entity in obtaining financial support; and

ii. the reasons for providing the support;

c) 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, an explanation of the relevant factors in reaching that

decision; and

d) any current intentions to provide financial or other support to a consolidated structured

entity, including intentions to assist the structured entity in obtaining financial support.


statements to evaluate the consequences of changes in its ownership interest in a subsidiary

that do not result in a loss of control, by disclosing a schedule that shows the effects on the

equity attributable to owners of the parent of any changes in its ownership interest in a

subsidiary that do not result in a loss of control.


statements to evaluate the consequences of losing control of a subsidiary during the

reporting period, by disclosing:

a) any gain or loss arising from the loss of control, calculated in accordance with paragraph

25 of IFRS 10;

b) 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

c) the line item(s) in profit or loss in which the gain or loss is recognised (if not presented

separately).

Where the financial statements of a subsidiary used in the preparation of consolidated

financial statements are as of a date or for a period that is different from that of the

consolidated financial statements (see paras B92 and B93 of IFRS 10), an entity shall

disclose:

a) the date of the end of the reporting period of the financial statements of that subsidiary;

and

b) the reason for using a different date or period.


PwC 25


disclosures

made?

(Yes/No*/NA)

Interests in unconsolidated structured entities

An entity shall disclose information that enables users of its financial statements to

understand the nature and extent of its interests in unconsolidated structured entities, as

follows:

a) An entity shall disclose qualitative and quantitative information about its interests in

unconsolidated structured entities, including, but not limited to, the nature, purpose,

size and activities of the structured entity and how the structured entity is financed.

b) If an entity has sponsored an unconsolidated structured entity for which it does not

provide information required by paragraph 29 of IFRS 12 (for example, because it does

not have an interest in the entity at the reporting date), the entity shall disclose:

i. how it has determined which structured entities it has sponsored;

ii. income from those structured entities during the reporting period, including a description of the types of income presented; and

iii. the carrying amount (at the time of transfer) of all assets transferred to those structured entities during the reporting period.

c) An entity shall present the information in points (ii) and (iii) of (b) above in tabular

format, unless another format is more appropriate, and classify its sponsoring activities

into relevant categories.

An entity shall disclose information that enables users of its financial statements to evaluate

the nature of, and changes in, the risks associated with its interests in unconsolidated

structured entities, as below:

In accordance with paragraph 29 of IFRS 12, an entity shall disclose in tabular format, unless

another format is more appropriate, a summary of:

a) the carrying amounts of the assets and liabilities recognised in its financial statements

relating to its interests in unconsolidated structured entities;

b) the line items in the statement of financial position 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; and

d) a comparison of the carrying amounts of the assets and liabilities of the entity that relate

to its interests in unconsolidated structured entities and the entity’s maximum exposure

to loss from those entities.

If, during the reporting period, an entity has, without having a contractual obligation to do

so, provided financial or other support to an unconsolidated structured entity in which it

previously had or currently has an interest (for example, by purchasing assets of or

instruments issued by 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.

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.


PwC 26


disclosures

made?

(Yes/No*/NA)

The information required in this row includes information about an entity’s exposure to risk

from involvement that it had with unconsolidated structured entities in previous periods (for

example, sponsoring the structured entity), even if the entity no longer has any contractual

involvement with the structured entity at the reporting date.

Nature, extent and financial effects of an entity’s interests in joint

arrangements and associates

For each joint arrangement and associate that is material to the reporting entity, the entity

shall disclose:

a) the name of the joint arrangement or associate;

b) the nature of the entity’s relationship with the joint arrangement or associate;

c) the principal place of business (and country of incorporation, if applicable and different

from the principal place of business) of the joint arrangement or associate; and

d) the proportion of ownership interest or participating share held by the entity and, if

different, the proportion of voting rights held (if applicable).

For each joint venture and associate that is material to the reporting entity, the entity shall

disclose:

a) whether the investment in the joint venture or associate is measured using the equity

method or fair value;

b) if the joint venture or associate is accounted for using the equity method, the fair value

of its investment in the joint venture or associate, if there is a quoted market price for

the investment;

c) dividends received from the joint venture or associate; and

d) summarised financial information** for the joint venture or associate, as presented

within the joint venture’s or associate’s IFRS financial statements (and not the entity’s

share of those amounts), including, but not limited to:

current assets;

non-current assets;

current liabilities;

non-current liabilities;

revenue;

profit or loss from continuing operations;

post-tax profit or loss from discontinued operations;

other comprehensive income; and

total comprehensive income.

** If the entity accounts for its interest in the joint venture or associate using the equity method, the equity accounted investment could be adjusted by the entity (for example, to align accounting policies). The summarised financial information of the joint venture or associate should include these adjustments and a reconciliation between the summarised financial information presented and the carrying amount of its interest in the joint venture or associate.

Where an entity measures its interest in the joint venture or associate at fair value, and IFRS financial statements are not prepared by the joint venture or associate (and preparation on that basis would be impracticable or cause undue cost), the entity is required to disclose the basis on which the summarised financial information has been prepared.

* If the answer is ‘no’, further justification should be provided.

This material has been prepared by PwC for general circulation on matters of interest only. It is not advice and does not take into account the objectives, financial situation or needs of any recipient. Any recipient should, before acting on this material, make their own enquiries and obtain their own professional advice in relation to any issue or matter referred to herein. We do not, in preparing this material, accept or assume responsibility for any purpose or to any person to whom this material is shown and shall not be liable in respect of any loss, damage or expense whatsoever caused by any use the reader may choose to make of this material. © 2013 PwC. All rights reserved. "PwC" refers to PricewaterhouseCoopers, an Australian limited liability partnership, or as the context requires, the PricewaterhouseCoopers global network or other member firms of the network each of which is a separate and independent legal entity.

© 2013 PricewaterhouseCoopers LLP. All rights reserved. In this document, "PwC" refers to the UK member firm, and may sometimes refer to the PwC network. Each member firm is a separate legal entity. Please see www.pwc.com/structure for further details.

130918-103713-MF-OS

· controlling interests have in the group’s activities and cash flows. it includes the assets,...

Documents