Illustrative example of disclosure of the nature, extent and financial effects of interests in associates. All associates are measured using the equity method.
The financial statements of all associates have the same reporting date as the group.
D Limited
The Group has a 25% interest in the ownership and voting rights of D Limited, which is held by a subsidiary, H Limited.
D Limited”s principal place of operations and country of incorporation is Germany.
The principal activity of D Limited is to build housing units, that are leased on a long-term basis to tenants, which is strategic to the Group”s business given the similarity in business lines.
D Limited is restricted by a bank covenant from paying dividends in excess of 50% of profits in any year without permission from the lender.
Dividends of £30,000 (20X2: £20,000) were received from D Limited.
E Inc
The Group has a 30% ownership interest in E Inc with an interest in 25% of the voting rights. E Inc is directly held by the parent.
E Inc”s principal place of operations is the USA but is incorporated in Bermuda.
The principal activity of E Inc is to build housing units that are leased on a long-term basis to tenants, which is strategic to the Group”s business given the similarity in business lines.
The fair value of the Group”s investment in E Inc is £2,800,000 (20X2: £2,558,000), which is the quoted market price (Level 1 measurement).
Dividends of £10,000 (20X2: £10,000) were received from E Inc.
Summarised financial information of D Limited and E Inc
The summarised financial information presented is the amounts included in the IFRS financial statements of the associates adjusted for fair value adjustments made at the time of acquisition and for differences in accounting policies. The fair value adjustments in both D Limited and E Inc principally relate to intangible assets which are being amortised over ten years and the revaluation of property, plant and equipment to fair value.
All operations are continuing.
A reconciliation of the summarised financial information to the carrying amounts of D Limited and E Inc is as,
Notes:
1. There is no specific requirement to show the reporting entity”s share of profits/comprehensive income from material associates but we consider that it is necessary to comply with the overall objective of the disclosures.
2. IFRS 12 is silent as to whether the disclosed profit figure should be gross or net of tax. We have used ‘net’ in the example.
3. The goodwill disclosed in the summarised financial information is the reporting entity”s goodwill only.