Global Standards for the world economy

Sunday 28 February 2021

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Post-implementation review of IFRS 10, IFRS 11 and IFRS 12

The objective of the post-implementation review (PIR) is to assess the effect of the new requirements of IFRS 10 Consolidated Financial Statements, IFRS 11 Joint Arrangements, IFRS 12 Disclosure of Interests in Other Entities, on investors, preparers and auditors. The International Accounting Standards Board (the Board) will consider the use of the equity method for reporting interests in joint ventures as part of this PIR.


The Board issued IFRS 10 to deal with the divergence in practice between the predecessor guidance, IAS 27 Consolidated and Separate Financial Statements and SIC-12 Consolidation – Special Purpose Entities. IAS 27 required the consolidation of entities that are controlled by the reporting entity. SIC-12, which interpreted the requirements of IAS 27 in the context of special purpose entities, placed greater emphasis on risks and rewards. There was also some confusion over which entities met the definition of a special purpose entity and, thus, whether to apply IAS 27 or SIC-12. IFRS 10 provides a single consolidation model that identifies control as the basis for consolidation for all types of entities.

The Board amended IFRS 10 (and IFRS 12 and IAS 27) in October 2012 to introduce an exception to the principle that all subsidiaries shall be consolidated. The Investment Entities amendment requires an entity that qualifies as an investment entity to measure its investments in subsidiaries, associates and joint ventures at fair value through profit or loss in accordance with IFRS 9 Financial Instruments. The PIR will also assess the effects of the Investment Entities requirements.


The Board issued IFRS 11 to address two concerns with the predecessor Standard, IAS 31 Interests in Joint Ventures; first, that the structure of the arrangement was the only determinant of the accounting and, second, that an entity had a choice of accounting treatment for interests in jointly controlled entities. The Board’s objective was to improve the accounting for joint arrangements by introducing a principle-based approach that requires a party to a joint arrangement to recognise its rights and obligations arising from the arrangement. Such a principle-based approach was intended to provide users with greater clarity about an entity’s involvement in its joint arrangements by increasing the verifiability, comparability and understandability of the reporting of those arrangements.

One of the consequences of the new requirements of IFRS 11 was greater use of the equity method of accounting compared with the application of IAS 31. The Board will additionally seek feedback on investors' information needs regarding investments accounted for using the equity method as part of this PIR.


IFRS 12 was issued in response to requests from financial statement users for improvements to the disclosures of a reporting entity’s interests in other entities. Users asked for enhanced disclosures that would help them to understand the composition of a reporting entity, understand the relationships that an entity has with other entities and estimate the value of its investments in other entities. This included the need for better information about the subsidiaries that are consolidated, as well as an entity’s interests in joint arrangements and associates that are not consolidated but with which the entity has a special relationship.

The global financial crisis highlighted the importance of enhancing disclosure requirements, in particular for special purpose or structured entities. IFRS 12 reflects the Board’s response to the requests from the G20, the Financial Stability Board and others to review the disclosure requirements regarding the risks to which entities are exposed from their involvement with structured entities.

IFRS 12 establishes disclosure objectives that require an entity to disclose information that helps users:

  • understand the judgements and assumptions made by a reporting entity when deciding how to classify its involvement with another entity;
  • understand the interest that non-controlling interests have in consolidated entities; and
  • assess the nature of the risks associated with interests in other entities.


In undertaking the PIR the Board:

  1. Considers important or contentious issues in the development of the IFRS Standards;
  2. Considers issues that have come to the Board’s attention since publication; and
  3. Identifies areas where unexpected costs or implementation problems were encountered.

In the first phase of the PIR the Board will identify the issues to examine in greater detail. The Board will then publish a Request for Information seeking input from stakeholders on their experiences with the Standards. The Board will also review relevant academic studies and other reports and may also conduct surveys and other outreach.

At the end of the PIR the Board will publish a Report and Feedback Statement summarising its findings, and set out the steps it plans to take, if any, as a result of the PIR.