Introducing IFRS 10, 11 and 12

IFRS 10, 11 and 12 are new additions to IFRS and accountancy literature, these standards serves as improvements and additions to existing standards. Let’s take a quick look at major changes that these standards propose.

IFRS 10:

      i.            IFRS 10 introduces a new definition of control based on which entities need to be consolidated.

     ii             As per new definition lots of factors need to be considered while ascertaining control, which is different from IAS 27 according to which governing financial and operating policies was the single criteria to be analyzed.

    iii.            IFRS 10 replaces some parts of IAS 27 related to consolidated financial statements and SIC 12 (related to SPE`s) in totality.

  iv.            As per IAS 27 Only currently exercisable potential voting rights were considered for assessing control.

    v.            As per IFRS 10 even Potential voting rights are to be considered if substantial.

IFRS 11 :

         i.            IFRS 11 describes the accounting for arrangements in which there exists a joint control.

       ii.            IFRS 11 replaces IAS 31 Interests in Joint Ventures and SIC 13.

      iii.            As per IFRS 11 joint arrangement are to be classified as either a joint venture or a joint operation.

     iv.            Proportionate consolidation (which was required as per IAS 31) is no longer permitted for joint ventures (as newly defined) only equity method is to be used.

       v.            A joint operator is required to recognises in relation to its interest in a joint operation:

a)      its assets, including its share of any assets held jointly;

b)      its liabilities, including its share of any liabilities incurred jointly;

c)       its revenue from the sale of its share of the output of the joint operation;

d)      its share of the revenue from the sale of the output by the joint operation; and

e)      its expenses, including its share of any expenses incurred jointly.

IFRS 12:

         i.            IFRS 12 sets out the disclosure requirements for subsidiaries, joint ventures, associates.

       ii.            IFRS 12 replaces the requirements previouslyincluded in IAS 27, IAS 31, and IAS 28 Investments in Associates related to disclosures.

      iii.            IFRS 12 requires a reporting entity to discloseinformation that helps users to assess the nature and financial effects of the reporting entity’srelationship with other entities.

These IFRS are effective for annual periods beginning on or after 1 January 2013.