A Quarterly Newsletter from the UAE and Oman member firms of the PKF International Ltd.

VOL 15, Issue 01 January 2013

IFRS 12 – Disclosure of Interest in Other Entities

The International Accounting Standards Board (IASB) recently issued a new standard, IFRS 12 Disclosure of Interest in Other Entities that is effective for annual periods beginning on or after 1 January 2013.

IFRS 12 requires all the disclosures that were previously required by IAS 27 Consolidated Financial Statements, IAS 31 Interest in Joint Ventures and IAS 28 Investment in Associates. IFRS 12 requires a number of new disclosures and one of the most significant of these is the judgements made by an entity to determine whether it controls another entity. These changes were introduced by the IASB partly in response to the financial crisis and are intended to improve transparency as to the judgements made in deciding whether or not to consolidate and the financial impact if management reached a different conclusion.

Highlights of IFRS 12
The objective of IFRS 12 is for an entity to disclose information that helps the users of its financial statements understand:

  • The nature of and risks associated with its interests in other entities
  • The effects of those interests on its financial position, financial performance and cash flows.

In addition to the above, under IFRS 12, an entity is required to disclose the most significant judgments and assumptions it has made in determining the following:

  • Whether the entity has control, joint control or significant influence over another entity
  • The type of any joint arrangement (i.e. joint operation or joint venture) when the arrangement is structured through a separate vehicle.

What disclosures are required?
As mentioned above, IFRS 12 requires entities to disclose information that helps users of the financial statements understand the nature, risk and financial effects associated with the entity’s interests in subsidiaries, associates, joint arrangements and unconsolidated structured entities.

To meet this objective, disclosures are required in the following areas:

Significant judgements and assumptions:

  • Interests in subsidiaries
  • Interests in joint arrangements and associates
  • Interests in unconsolidated structured entities.

disclousure diagram









On 9 July 2009 the International Accounting Standards Board (IASB) published an International Financial Reporting Standard (IFRS) designed for use by small and medium-sized entities (SMEs). SMEs include all entities that are not publicly traded and that are not banks or similar financial institutions.

The project started in June 2004 with the publication of the discussion paper (DP) Preliminary Views on Accounting Standards for Small and Medium-sized Entities. The exposure draft (ED) was issued in February 2007 and the ED was subsequently translated into four languages. In addition to this, the board undertook field testing of the ED with 116 small companies in 20 countries participating.

This Update provides an overview of IFRS for SMEs and updates on current initiatives led by the IASB for IFRS for SMEs.

Highlights on IFRS for SMEs
Why did the IASB undertake this project?

Since full IFRSs were designed to meet the needs of equity investors in companies on public capital markets, these covered a wide range of issues, contained a sizeable amount of implementation guidance and included disclosures appropriate for Public companies. Users of the financial statements of SMEs do not have those needs as they are more focused on assessing shorter-term cash flows, liquidity and solvency.

Many SMEs felt that full IFRSs imposed a burden on them and that this has been growing as IFRSs have become more detailed and more countries have begun to implement IFRSs. Thus, in developing the proposed IFRS for SMEs, the IASB’s twin goals were to meet user needs while balancing costs and benefits from a preparer perspective.

Overview of IFRS for SMEs
The IFRS for SMEs is a self-contained standard of 230 pages designed to meet the needs and capabilities of SMEs, which are estimated to account for over 95% of all companies around the world.

Many of the principles in full IFRSs for recognising and measuring assets, liabilities, income and expenses have been simplified, topics not relevant to SMEs have been omitted, and the number of required disclosures has been significantly reduced. To further reduce the reporting burden for SMEs, revisions to the IFRS will be limited to once every three years.

Compared with full IFRSs (and many national GAAPs), the IFRS for SMEs is less complex in a number of ways such as those set out below:

Topics not relevant for SMEs are omitted. For example: earnings per share, interim financial reporting, and segment reporting.

  • Where full IFRSs allow accounting policy choices, the IFRS for SMEs allows only the easier option. For example: no option to revalue property, equipment, or intangibles; a cost depreciation model for investment property unless fair value is readily available without undue cost or effort; no ‘corridor approach’ for actuarial gains and losses.
  • Many principles for recognising and measuring assets, liabilities, income and expenses in full IFRSs are simplified. For example: amortise goodwill; expense all borrowings and R&D costs; cost model for associates and jointly-controlled entities; no available-for-sale or held-to-maturity classes of financial assets.
  • Significantly fewer disclosures are required (roughly 300 versus 3,000).
  • The standard has been written in clear, easily translatable language.

Update on the IFRS for SMEs

The IASB has published a number of useful publications which are available from the IASB website. In this publication we have listed some of the topics on IFRS for SMEs covered on the IASB website together with the relevant website links:

a) Q&As about the IFRS for SMEs
b) IFRS for SMEs translations
c) Training modules
d) IFRS for SMEs ‘train the trainers’ workshop
e) Other useful IFRS for SMEs materials.

a) Q&As about IFRS for SMEs
The Small & Medium-sized Entities Implementation Group (SMEIG) regularly considers implementation questions raised by users of the IFRS for SMEs. In response to these questions, the SMEIG develops implementation guidance for those areas and topics deemed appropriate.

The IASB provided a status report on the Q & As that have been considered and are being considered by the SME Implementation Group (SMEIG) to date.

A summary of these Q & As is provided in the table below and further information can be found on the following website link:


b) IFRS for SMEs translations
Below is a list of countries where translations into the local language of the IFRS for SMEs as approved by the IFRS Foundation have been completed and where the translations are in the process of being completed.
These translations can be obtained from the following website link:


c) Training modules
The IFRS Foundation is developing 35 stand-alone training modules, one for each section of the IFRS for SMEs. These modules are also being translated into a number of languages. Currently these modules are available in the following languages:

  • Arabic
  • English
  • Russian
  • Spanish
  • Turkish

The training modules can be found at the following website link:

d) IFRS for SMEs ‘train the trainers’ workshop
The IFRS Foundation held a five day workshop in Almaty, the Republic of Kazakhstan, to train the trainers on the IFRS for SMEs in January 2012.

The event is run to help participants understand the key principles of IFRS for SMEs and is engineered to train the participants to be able to run training sessions using the material from the IFRS foundation in their firms.

More information about future and past workshops, including free downloads of the PowerPoint slides,
can be found at the following website link:

e) Other Useful IFRS for SMEs material
The following material can be found at these website links:

The IFRS for SMEs standard

Further information on the SME Implementation Group

The IFRS for SMEs Update newsletter

The IFRS for SMEs illustrative financial statements and disclosures checklist


The above publications, prepared by PKF International Ltd. (Abdul Islam, Senior Manager IFRS Specialist), have been distributed on the express terms and understanding that the authors are not responsible for the results of any actions which are undertaken on the basis of the information which is contained within this publication, nor for any error in, or omission from, this publication.

The publishers and the authors expressly disclaim all and any liability and responsibility to any person, entity or corporation who acts or fails to act as a consequence of any reliance upon the whole or any part of the contents of this publication.

Accordingly no person, entity or corporation should act or rely upon any matter or information as contained or implied within these updates without first obtaining advice from an appropriately qualified professional person or firm of advisors, and ensuring that such advice specifically relates to their particular circumstances.

PKF International is a network of legally independent member firms administered by PKF International Limited (PKFI). Neither PKFI nor the member firms of the network generally accept any responsibility or liability for the actions or inactions on the part of any individual member firm or firms.