The disclosures may be aggregated for interests in similar entities, with the method of aggregation being disclosed (aggregation being consolidation). A quantitative and qualitative analysis, taking into account the different risk and return characteristics of each entity, is made in order to determine the aggregation level. IFRS 12 gives the following examples of aggregation levels: by nature of activities, by industry or by geography. [IFRS 12.4, B2–B6]
However, as a minimum, information is given separately for interests in subsidiaries, joint ventures, joint operations, associates and unconsolidated structured entities. [IFRS 12.B4–B6]
Note a) [IFRS 12 B14(a)]
IFRS 12 indicates that the amounts included in the summarised financial information are those prepared in accordance with IFRS, modified to reflect adjustments made by the entity in applying equity accounting; fair value adjustments and accounting policy alignments are noted as examples.
Fair value adjustments
Although the standard refers to fair value adjustments at the date of acquisition, this would include the effect of the subsequent accounting since that date.
There is no guidance on whether the fair value adjustments should be made on a net basis (reflecting only the investor’s interest) or grossed up to relate to the investee as a whole.
In this example, such adjustments have been grossed up and are embedded in the summarised financial information. An alternative would be to multiply the financial information by the investor’s interest and then adjust for fair value adjustments; this approach might result in a more complex disclosure.
There is no guidance on how goodwill that forms part of the carrying amount of an investment in an associate or joint venture is incorporated into the summarised financial information. Although it can be argued that goodwill is an adjustment made in applying equity accounting, the determination of goodwill is very specific to the particular transaction between the parties. Therefore, in this example goodwill has been included in the reconciliation to the carrying amount of the investee in the statement of financial position, rather than being embedded in the summarised financial information of the associate.
Note b) [IFRS 12 B15]
The summarised financial information may be presented on the basis of the associate’s or joint venture’s financial statements if either:
- the investee is accounted for at fair value; or
- the investee does not prepare IFRS financial statements and preparation on that basis would be impracticable or cause undue cost.
Note c) [IFRS 12 B13] Disclosures material joint ventures
The minimum line item disclosures required for each material joint venture are more extensive than for material associates. In this example, the additional information is presented in the form of footnotes to the tables summarising financial performance and financial position.
Note d) [IFRS 12 B14(b)]
IFRS 12 requires the summarised financial information, which comprises financial position and financial performance, to be reconciled to the carrying amount in the statement of financial position.
One method of reconciliation is to focus the reconciliation on the financial position of equity-accounted investees. This example incorporates both elements – financial performance and financial position – into the reconciliation, which is then adjusted for reconciling items at the group level.
In respect of summarised financial information for subsidiaries with material NCI, IFRS 12 specifies that such information should be before inter-company eliminations. However, the standard is silent in respect of transactions with associates and joint ventures.
In this example, the elimination of unrealised gains or losses is presented as part of the reconciliation. An alternative would be to present the summarised financial information after such eliminations because they are adjustments made in applying equity accounting (see above Note a) and Note b)).
Based on IFRS 12 7, IFRS 12 21, IFRS 12 22, IFRS 12 23, IFRS 12 B12, IFRS 12 B13, IFRS 12 B14, IFRS 12 B18, IFRS 12 B19 the disclosures are made like in this example from the Annual Report 2017 of Ahold Delhaize (page 166):
Integrated disclosure of material and non-material associates with link to the statement of financial position (DSM N.V. 2014 financial statements, pages 158 – 160) Disclosures material joint ventures
This disclosure is both qualitative and quantitative. It states which associates are material to the company. Reference is also made in the financial statements to the discussion of the results in the annual report.The disclosure of the financial information distinguishes between material and non-material associates. The financial information is not limited to the statement of financial position and the statement of income of the associates, but also includes for instance contingent liabilities. The disclosure also states the loans included in the statement of financial position item.
10 Associates and joint ventures Disclosures material joint ventures
The application of IFRS 11 impacted the accounting for the DSM interest of 50% in DSM Sinochem Pharmaceuticals and POET-DSM Advanced Biofuels which were proportionally consolidated in earlier years. With the adoption of IFRS 11, it has been determined that the interests in both companies have to be classified as joint venture under IFRS 11 and accounted for using the equity method. The transition was applied retrospectively and the comparative information was restated. DSM has a 49% interest and significant influence in DPx since the formation of this company early in 2014 and also accounts for this interest using the equity method. Relations with these joint ventures and their strategic importance are discussed in more detail in the sections Pharma Partnerships and Innovation Center in the Report by the Managing Board. Entities that meet the definition of joint operations of IFRS 11 were not identified.
DSM’s share in its most important associates and joint ventures is disclosed below: Disclosures material joint ventures
The following table provides an overview of DSM’s investments in associates and joint ventures. Disclosures material joint ventures
Loans include a USD 61 million loan granted to DPx in 2014 with an annual fixed interest rate of 10.75% and an expected 5-year maturity. Loans of € 6 million and € 12 million to DSP maturing in 2016 together with a loan of CNY 115 million to be repaid in or before 2017. A USD 50 million loan to POET-DSM with a 5% interest repayable in 2018 and secured for 50% by a guarantee from the joint venture partner. Disclosures material joint ventures