This free, guided checker walks your finance team through the key decision points for IFRS 12 Unconsolidated Structured Entities. Answer a few questions to see the likely treatment and the evidence to document.
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This tool is a high-level IFRS screening aid for general information only and is not accounting, audit or legal advice. Conclusions require entity-specific evidence and judgement - confirm the treatment with your advisor.
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IFRS 12.24 sets a disclosure objective for interests in unconsolidated structured entities, and an interest is any contractual or non-contractual involvement that exposes the group to variability in the vehicle's returns (IFRS 12 Appendix A; IFRS 12.B7). Run the test by scanning for financing, guarantees, liquidity lines, derivatives, servicing, and residual positions across the group, even where individually immaterial. The common trap is treating a vehicle as out of scope simply because the group holds no equity in it.
Confirm the group has no financing, guarantee, liquidity, derivative, servicing, or residual interest in any unconsolidated structured entity before omitting the IFRS 12.24 to 12.31 disclosures.
Official guidance: IFRS issued standards
A structured entity is one designed so that voting or similar rights are not the dominant factor in deciding control, with the relevant activities directed by contractual arrangements (IFRS 12.B21). Test by checking for the typical features in IFRS 12.B22 - restricted activities, a narrow objective, insufficient equity, and tranched financing - and the examples in IFRS 12.B23 such as securitisation vehicles and conduits. The common trap is classifying an ordinary voting-controlled investee as a structured entity, or the reverse (IFRS 12.B24).
Apply the IFRS 12 disclosures for subsidiaries, associates, or joint ventures instead of the structured-entity requirements, because control turns on voting or similar rights (IFRS 12.B21; IFRS 12.B24).
Official guidance: IFRS issued standards
An unconsolidated structured entity is one over which the group does not have control under IFRS 10.7, meaning power, variable-return exposure, and the link between them are not all present. Run the test by reassessing power arising from contractual rights, kick-out and removal rights, and exposure through the interests held. The common trap is assuming that holding a residual or first-loss interest, or acting as servicer, automatically means the group controls the vehicle, or that it never does.
Complete the IFRS 10 control assessment - power, variable returns, and the link between them - before concluding the structured entity is unconsolidated (IFRS 10.7).
Official guidance: IFRS issued standards
IFRS 12.26 requires the nature of the group's interests to be disclosed, and the involvement typically takes the form of financing, liquidity or credit support, derivatives or servicing, or a residual interest. Identify each form of involvement because it drives the maximum exposure to loss and the income effects to be disclosed. The common trap is capturing only the funded, on-balance-sheet interest and overlooking guarantees, commitments, and derivatives.
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Official guidance: IFRS issued standards
IFRS 12.26 requires qualitative and quantitative information about the nature, purpose, size, and activities of each type of structured entity and how it is financed, presented by type rather than vehicle by vehicle. Gather offering memoranda, trust deeds, and servicing agreements to describe the design and whether the group sponsored the vehicle. The common trap is listing individual immaterial vehicles instead of aggregating the disclosure by type.
Document the nature, purpose, size, activities, and financing of each type of structured entity, and its sponsor status, before drafting disclosures (IFRS 12.26).
Official guidance: IFRS issued standards
IFRS 12.29(c) requires disclosure of the amount that best represents the group's maximum exposure to loss, determined under the guidance in IFRS 12.B25 to B26, including funded interests, undrawn commitments, guarantees, and derivative exposures. Run the test by aggregating every way a loss could be absorbed, even where the probability is remote, and document how the amount was determined. The common trap is limiting the figure to recognised carrying amounts and excluding off-balance-sheet support.
Quantify maximum exposure to loss, including guarantees, unfunded commitments, and derivative exposures, before completing the disclosures (IFRS 12.29(c); IFRS 12.B25).
Official guidance: IFRS issued standards
IFRS 12.30 requires disclosure where the group has provided financial or other support to an unconsolidated structured entity without a contractual obligation to do so, and IFRS 12.31 requires disclosure of any current intention to provide such support. Review side letters, historical support, and reputational commitments that may lead the group to absorb losses beyond its recorded exposure. The common trap is disclosing only legally enforceable obligations and omitting voluntary or expected support.
Use the interactive tool above to see how this applies to your situation.
Official guidance: IFRS issued standards
IFRS 12.29(a) to (b) require the carrying amounts of the assets and liabilities recognised for the interests, and the statement of financial position line items in which they sit, to be disclosed in tabular form. Tie the structured-entity register to the trial balance and to the fair value and amortised cost classifications. The common trap is presenting a single aggregate figure that cannot be reconciled to the balance sheet line items.
Reconcile the carrying amounts of the interests to the statement of financial position line items before disclosure sign-off (IFRS 12.29(a) to (b)).
Official guidance: IFRS issued standards
IFRS 12.26 requires quantitative information about the group's interests, including the income, expense, and cash flows arising from involvement during the period. Extract fees, interest, impairment, funding costs, and derivative gains or losses by category of involvement from the ledger. The common trap is reporting only period-end balances and omitting the income statement and cash flow effects of the involvement.
Extract the income, expense, and cash flow effects by structured-entity category for the quantitative disclosure tables (IFRS 12.26).
Official guidance: IFRS issued standards
Sponsors, key management personnel, or other related parties may hold interests in the same vehicle, so the IFRS 12 structured-entity disclosures must be coordinated with the IAS 24.18 related-party disclosures. Test by checking the investor register and sponsor arrangements against the related-party list. The common trap is disclosing the structured-entity involvement but omitting that a related party is a co-investor or counterparty.
Use the interactive tool above to see how this applies to your situation.
Official guidance: IFRS issued standards
IAS 1.38 requires comparative information, so the prior-period structured-entity tables and narrative must be rolled forward for vehicles newly established, terminated, deconsolidated, or with revised support and exposure. Reconcile the opening register to the closing register and explain the movements. The common trap is carrying forward last year's tables unchanged when the involvement has changed.
Update the comparative tables and narrative for period movements in structured-entity involvement (IAS 1.38; IFRS 12.24).
Official guidance: IFRS issued standards
Choose the outcome that reflects whether every IFRS 12.24 to 12.31 requirement is satisfied for each category of unconsolidated structured entity, or whether quantitative tables remain open. Confirm the nature-of-involvement narrative, maximum exposure, carrying-amount reconciliation, and income effects are all complete before selecting the complete outcome. The common trap is signing off a full note when the maximum exposure or reconciliation tie-out is still outstanding.
Finalise the IFRS 12 unconsolidated structured-entity note and cross-reference to the IFRS 7 and IFRS 13 risk disclosures (IFRS 12.24 to 12.31). Complete the maximum exposure and carrying-amount reconciliations before authorising the financial statements (IFRS 12.29).
Official guidance: IFRS issued standards
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