Entities with interests in subsidiaries, joint arrangements, associates or unconsolidated structured entities should ensure that their SFRS(I) 12 disclosure assessment is complete and properly documented. The standard also requires transparent disclosure of significant judgements made in assessing control, joint control, significant influence and investment entity status.
Analysis of impacts
Broader disclosure focus beyond consolidation outcomes
SFRS(I) 12 is not limited to consolidated subsidiaries. It also applies to interests in joint operations, joint ventures, associates and unconsolidated structured entities. As a result, management must consider whether disclosure obligations arise even where the interest is not consolidated or is measured at fair value.
Held-for-sale and discontinued operations remain relevant
Interests classified as held for sale, included in a disposal group, or presented as discontinued operations under SFRS(I) 5 may still fall within SFRS(I) 12 disclosure requirements, subject to the specific exception in the standard. This means entities should not automatically exclude such interests from their disclosure review.
Judgement disclosures are central to compliance
Entities must disclose the key judgements and assumptions used in determining whether they control another entity, have joint control, or exercise significant influence. These disclosures are especially important where the legal ownership percentage does not align with the accounting conclusion, such as control with less than a majority of voting rights or no control despite holding more than half of the voting rights.
Investment entities require additional attention
A parent that concludes it is an investment entity must explain the significant judgements supporting that conclusion. Where the entity does not display all typical investment entity characteristics, further explanation is required. If an entity becomes or ceases to be an investment entity, it must disclose the change, reasons for the change and the financial statement effects, including fair value information and related gains or losses.
Separate financial statements may still require structured entity disclosures
Although SFRS(I) 12 generally does not apply to separate financial statements prepared under SFRS(I) 1-27, an exception applies where those separate financial statements are the entity’s only financial statements and the entity has interests in unconsolidated structured entities. In that case, the relevant structured entity disclosures must still be provided.
Practical issues
- Completeness of entity population: Groups should maintain an up-to-date register of subsidiaries, associates, joint arrangements and structured entities, including entities not consolidated.
- Documentation of judgement areas: Management should prepare clear position papers for cases involving non-standard conclusions, such as de facto control, agency relationships, protective rights, dispersed shareholdings or influence below the usual 20% threshold.
- Consistency across standards: The SFRS(I) 12 disclosure assessment should be aligned with conclusions reached under SFRS(I) 10, SFRS(I) 1-28, SFRS(I) 11, SFRS(I) 5 and SFRS(I) 9.
- Fair value and systems readiness: Investment entities and entities holding fair value interests may need valuation processes capable of producing reliable information at the required reporting dates.
- Audit evidence expectations: Auditors are likely to focus on whether management’s control and influence assessments are supported by contracts, shareholder agreements, board rights, voting patterns and other relevant facts.
- Disclosure drafting: Boilerplate disclosures are unlikely to be sufficient where significant judgement is involved. The disclosure should explain the entity-specific facts and assumptions that affected management’s conclusion.
Conclusion
Entities preparing financial statements under SFRS(I) should revisit their SFRS(I) 12 scoping assessment before year-end reporting. Particular attention should be given to unconsolidated structured entities, held-for-sale interests, fair value investments in associates or joint ventures, and investment entity conclusions.
Finance teams should also ensure that significant judgements are documented contemporaneously and that disclosures are tailored to the entity’s facts. This will support both financial reporting quality and audit readiness for reporting periods beginning on or after 1 January 2026.