International Financial Reporting Standards trying their level best to standardize accounting standard all over the country but there are few country don't really follow IFRS standards and there are some country follow accounting standard of IFRS or adopt it to their country as well, one of the country is Malaysia where the accounting standard all most same as IFRS, and they call it MFRS, Malaysian Financial Reporting Standard, when we look at MFRS 12, Disclosure of interests in other entities. The objective of IFRS 12 is to mandate disclosures such that users of financial statements can evaluate the nature of, and risks related with, an entity's interests in other entities. First we look at the history of the accounting standard of MFRS or IFRS 12:
History of MFRS/IFRS 12
April 2002 Project on consolidation added to the IASB's agenda
November 2004 Project on joint arrangements added to the IASB's agenda
September 2007 ED 9 Joint Arrangements published
December 2008 ED 10 Consolidated Financial Statements published
January 2010 IASB decision to issue a separate disclosure standard addressing a reporting entity's involvement with other entities that are not in the scope of IAS 39/IFRS 9 (including subsidiaries, associates and joint arrangements and unconsolidated SPEs/structured entities)
12 May 2011 IFRS 12 Disclosure of Interests in Other Entities published
28 June 2012 Consolidated Financial Statements, Joint Arrangements and Disclosure of Interests in Other Entities: Transition Guidance published
1 January 2013 Effective date of IFRS 12 and June 2012 amendments
On April 2002 reason they develop this standard is to develop all consolidation for all entities base on the standard and improve disclosures of consolidated and unconsolidated entities, on November 2004 they added join arrangement in the list as after the research done with Australia Accounting standard Board (AASB), the reason came out with this reducing differences between IFRS and US GAAP.
September 2007, Joint Arrangements where to companies are engage to agreement and have their obligation and right by two companies, have published as one of part in IFRS/MFRS. December 2008, Consolidated Financial Statements publish, this is for prepare for presentation of consolidation financial statement published and they have to consolidate entities it controls. January 2010 IASB decision to issue a separate disclosure standard addressing a reporting entity's involvement with other entities that are not in the scope of IAS 39/IFRS 9, this IFRS has realized entities are not in the scope of accounting standard with involving with other entities.
12 May 2011 IFRS 12 Disclosure of Interests in Other Entities published with combination of Joint Arrangement and consolidation of financial statement, IASB realized there many looped hole on this accounting standard which they have to come out with combination of other two. 28 June 2012, Consolidated Financial Statements, Joint Arrangements and Disclosure of Interests in Other Entities: Transition Guidance published, it was immediate amendments consolidation financial statement to improve important of requirements of that standard are more troublesome with has planned. Starting from next year new amendments have done, at will publish on 1 January 2013, which effective of IFRS 12, and with the amendments.
When we look in to the history of the IFRS 12, start with joint agreements, join arrangements, consolidation of financial statement and more are combination are MFRS 12, Disclosure of interests in other entities, which all the entities have to follow this standard which have combined to gather. The reason they came out with this decision because it has many series of objective disclosure presented with the proper guidance on full fill satisfying objectives.
Discuss the purpose, scope and content of the standard
The purpose of IFRS 12 is to directive disclosures such that users of financial statements can assess the nature of, and risks associated with, an entity's interests in other entities, and the Special effects of individuals' interests on its financial position, financial performance, and cash flows. To gather those goals, an entity is essential to disclose the significant judgments and assumptions it has made in shaping the nature of its interest in another entity or arrangement, and in formative the type of joint arrangement in which it has an interest. It is also estimated to present detailed information about its interests in any subsidiaries, joint arrangements, Associates or an unconsolidated planned entity that is not required by other IFRSs but is required to meet these goals.
Scope of the IFRS/MFRS 12, relate to some entity that has an interest in any of the entity mention previous, namely subsidiaries, joint arrangements, associates or unconsolidated structured entities. But this accounting standard does not connected to other purpose which is, Post-employment benefit plans or other long-term employee benefit plans to which IAS 19 - Employee Benefits applies. An entity's separate financial statements to which IAS 27, detach Financial Statements, applies. On the other hand, if an entity has interests in unconsolidated controlled entities and organize detach financial statements as its only financial statements, it apply the necessities once prepare those separate financial statements. An importance held by an entity that take part in, but does not have combined control of, a joint arrangement except that interest outcome in important control over the agreement or is an interest in a planned entity . Interest in a further entity that is accounted for in conformity with IFRS 9, Financial Instruments. However, an entity shall relate IFRS 12 in this circumstance, Except for interests in an join together or joint venture measured at fair value as required by IAS 28, Investments in Associates and Joint Ventures.
Content
Judgments and assumptions
Significant judgments and assumptions the center of attention here is disclose information about important result and assumptions the entity has made and adjust to those result and assumptions in determining, That it has control of one more entity, That it has joint control of an arrangement or significant influence over another entity, and The type of joint arrangement joint operation or joint undertaking when the arrangement has been prepared through a detach vehicle.
Interests in subsidiaries
Require that an entity disclose information that allow users of its consolidated financial statements to:
Recognize the work of the group
Recognize the interest that non-controlling interests have in the group's activities and
Cash flows
Evaluate the nature and extent of significant restrictions on its ability to access or use assets, and settle liabilities, of the group
Evaluate the nature of, and changes in, the risks associated with its interests in consolidated structured entities
Evaluate the consequences of changes in its ownership interest in a subsidiary that do not result in a loss of control
Evaluate the consequences of losing control of a subsidiary during the reporting period
Interests in unconsolidated structured entities
IFRS 12 requires that
An entity is necessary to disclose information that enables users of its financial statements
To know the nature and level of its interests in unconsolidated structured entities.
Nature of interests - An entity is necessary to disclose qualitative and quantitative detail about its interests in unconsolidated structured entities, including but not limited to the nature, purpose, size and activities of the ordered entity and how the structured entity is financed.
Nature of risks - The carrying amounts of the assets and liabilities recognized in its financial statements relating to its interests in unconsolidated structured entities. The line things in the statement of financial position in which those assets and liabilities are recognized.
INTERESTS IN JOINT ARRANGEMENTS AND ASSOCIATES
An entity is required to disclose information that enables users of its financial statements to evaluate,
Nature, extent and financial effects of an entity's interests in joint arrangements and associates, An entity is required to disclose for each joint arrangement and associate that is material, An entity is required to disclose for each for each joint venture and associate that is material, Financial information about the entity's investments in joint ventures and associates that are not individually material, The nature and extent of any significant restrictions on the ability of joint ventures or associates to transfer funds to the entity in the form of cash dividends, or to repay loans or advances made by the entity, When there is a difference in reporting date of a joint venture or associate's financial statements used in applying the equity method and The unrecognised share of losses of a joint venture or associate, both for the reporting period and cumulatively, if the entity has stopped recognizing its share of losses of the joint venture or associate when applying the equity method.
Risks associated with an entity's interests in joint ventures and associates, Commitments that it has relating to its joint ventures separately from the amount of other commitments.
Critically analyze how this standard is adopted in the disclosure of the financial
Statements of the company you have chosen to do this assignment (500-750 words)
Imperial Tobacco plc is a British multinational tobacco company headquartered in Bristol, United Kingdom. It is the world's fourth-largest cigarette company deliberate by market share and the world's largest producer of cigars, fine-cut tobacco and tobacco papers. Imperial Tobacco produces over 320 billion cigarettes per year, has 51 factories worldwide and its products are sold in over 160 countries. Its brands include Davidoff, West, Gauloises Blondes, Montecristo, Drum ,Imperial Tobacco is listed on the London Stock Exchange and is a constituent of the FTSE 100 Index. It had a market capitalization of approximately £24.3 billion as of 23 December 2011, the 19th-largest of any company with a primary listing on the London Stock Exchange.
As in imperial tobacco website under principle undertaking stated number of company wholly owned and partially owned, joint ventures as well:
England and Wales, wholly owned
Name
Principal activity
Imperial Tobacco Holdings (2007) Limited
Holding investments in subsidiary companies
Imperial Tobacco Limited
Manufacture, marketing and sale of tobacco products in
the UK
Imperial Tobacco International Limited
Export and marketing of tobacco products
Imperial Tobacco Finance PLC
Finance company
Incorporated overseas, wholly owned
Name
Country of incorporation
Principal activity
Altadis SA
Spain
Manufacture, marketing, sale and distribution of tobacco products in Spain
Altadis Distribution France SAS
France
Distribution of tobacco products in France
Altadis Emisiones Financieras SAU
Spain
Finance company
Altadis Finance BV
Netherlands
Finance company
Altadis Middle East Fzco
United Arab Emirates
Marketing and sale of tobacco products in the Middle East
Altadis USA Inc
United States of America
Manufacture, marketing and sale of cigars in the United States of America
Commonwealth Brands Inc
United States of America
Manufacture, marketing and sale of tobacco products in the United States of America
Compañía de Distribución Integral
Logista SAU
Spain
Distribution of tobacco products and related services in Spain
Ets L Lacroix Fils NV
Belgium
Manufacture, marketing and sale of tobacco products
in Belgium
Imperial Tobacco Australia Limited
Australia
Marketing and sale of tobacco products in Australia
Imperial Tobacco CR sro
Czech Republic
Marketing and sale of tobacco products in the
Czech Republic
Imperial Tobacco Finland Oy
Finland
Marketing and sale of tobacco products in Finland
Imperial Tobacco Hellas SA
Greece
Marketing and sale of tobacco products in Greece
Imperial Tobacco Italia Srl
Italy
Marketing and sale of tobacco products in Italy
Imperial Tobacco Magyarorszäg Dohänyforgalmazö Kft
Hungary
Marketing and sale of tobacco products in Hungary
Imperial Tobacco Maroc SA
Morocco
Manufacture, marketing, sale and distribution of tobacco products in Morocco
Imperial Tobacco Mullingar
Republic of Ireland
Manufacture of fine cut tobacco in the Republic of Ireland
Imperial Tobacco New Zealand Limited
New Zealand
Manufacture, marketing and sale of tobacco products in
New Zealand
Imperial Tobacco Norway AS
Norway
Marketing and sale of tobacco products in Norway
Imperial Tobacco Polska SA
Poland
Manufacture, marketing and sale of tobacco products
in Poland
Imperial Tobacco Sales & Marketing LLC
Russia
Marketing and sale of tobacco products in Russia
Imperial Tobacco Sigara ve Tutunculuck Sanayi ve Ticaret AS
Turkey
Manufacture of tobacco products in Turkey
Imperial Tobacco Slovakia AS
Slovak Republic
Marketing and sale of tobacco products in the
Slovak Republic
Imperial Tobacco Taiwan Co Limited
Taiwan
Marketing and sale of tobacco products in Taiwan
Imperial Tobacco Taiwan Manufacturing Company Limited
Taiwan
Manufacture of tobacco products in Taiwan
Imperial Tobacco Tutun Urunleri Satis ve Pazarlama AS
Turkey
Marketing and sale of tobacco products in Turkey
Imperial Tobacco Ukraine
Ukraine
Marketing and sale of tobacco products in Ukraine
OOO Imperial Tobacco Volga LLC
Russia
Manufacture of tobacco products in Russia
John Player SA
Spain
Marketing and sale of tobacco products in the Canary Islands
John Player & Sons Limited
Republic of Ireland
Marketing and sale of tobacco products in the Republic
of Ireland
Logista Italia SpA
Italy
Distribution of tobacco products in Italy
Reemtsma Cigarettenfabriken GmbH
Germany
Manufacture, marketing and sale of tobacco products
in Germany
Reemtsma International Asia
Services Limited
China
Marketing of tobacco products in China
Skruf Snus AB
Sweden
Manufacture, marketing and sale of tobacco products
in Sweden
Société Nationale d'Exploitation Industrielle des Tabacs et Allumettes SA
France
Manufacture, marketing and sale of tobacco products in France and export of tobacco products
Supergroup SAS
France
Wholesale distribution in France
Tobaccor SAS
France
Holding investments in subsidiary companies involved in
the manufacture, marketing and sale of tobacco products
in Africa
Tobacna Ljubljana doo
Slovenia
Marketing and sale of tobacco products in Slovenia
Van Nelle Tabak Nederland BV
Netherlands
Manufacture, marketing and sale of tobacco products in
the Netherlands
800 JR Cigar Inc
United States of America
Holding investments in subsidiary companies involved in
the sale of cigars in the United States of America
Incorporated overseas, partly owned
Name
Country of incorporation
Principal activity
Percentage owned
Imperial Tobacco Polska
Manufacturing SA
Poland
Manufacture of tobacco products in Poland
99.97
ZAO Imperial Tobacco Yaroslavl CJSC
Russia
Manufacture of tobacco products in Russia
99.9
Imperial Tobacco Production Ukraine
Ukraine
Manufacture of cigarettes in Ukraine
99.8
Imperial Tobacco TKS ad
Macedonia
Manufacture, marketing and sale of tobacco products in Macedonia
99.1
Reemtsma Kyrgyzstan OJSC
Kyrgyzstan
Manufacture, marketing and sale of tobacco products in Kyrgyzstan
98.6
Société Ivoirienne des Tabacs SA
Ivory Coast
Manufacture, marketing and sale of tobacco products in the Ivory Coast
74.1
Incorporated overseas, joint ventures
Name
Country of incorporation
Principal activity
Percentage owned
Altabana SL
Spain
Holding investments in subsidiary companies involved in the marketing and sale of Cuban cigars
50.0
Corporación Habanos SA
Cuba
Export of cigars manufactured in Cuba
50.0
Partnerships
Name
Country
Principal activity
Imperial Tobacco (EFKA) GmbH & Co KG
Germany
Manufacture of tubes in Germany
As we above is consolidated financial statement of the of the company which include all the subsidiary undertakings and entities shown. As in website stated that which wholly owned by the company none shares in subsidiaries is held by the company. Percentage of shares held by the immediate parent and the voting rights of the company are the same except for imperial tobacco where the entire share capital 100% voting rights held number of group companies.
When we look in wholly owned subsidiary means a company whose common stock is 100% owned by another company, called the parent company. So this what we can see is basically main companies of imperial tobacco, investments in subsidiary company, manufacture company, export marketing, and finance company are wholly owned by the parent company, same field of company is wholly owned by the parent company. But some are manufacture company is partly owned by the parent company most of not less than 98%, what shows here basically most the share own by parent company, that means control the parent company maybe because company in their country come voting rights goes to them. When we look at joint venture, the reason companies joint venture with one or two companies because executing the particular business undertaking, profit and losses are shared, maybe they have good business deal with Spain and Cuba, takes them to become joint venture. And the imperial tobacco has partnership with Germany to manufacture the tubes, Germany know for engineering, so they might have high tech machines to produces good quality machine with cheap price, that's what makes them to become partnership with the Germany .
Conclusion
By sharing resources which can be leveraged for greater strength, costly technological
Innovations, sharing activities to achieve more efficiency ie co-production, co procurement, Getting access to promising technology i.e. robotics, genetic engineering, solar energy, Getting access to distribution networks, local markets, improved brands can increase Sales force productivity, when look in to this imperial tobacco groups, most of it they acquire more, basically all though the company in other countries they have the full control of it.
analyse the research/comments/review on the chosen standard**(1,000 words)
Research
International accounting standard broadband, trying their level best to standardize their accounting standard for most of the countries, reason because in international finance is the biggest financial market, a lot of share holders have invested money into their share, for example retired people try to invest their pension fund in shares to gain more interest the money they have, who is in charge of the hard earn money invested in shares, previous there are many careless port folio manager, so this international IFRS has many account standard have to fulfill, so it easy for them to keep track on public listed company performance, Disclosure of Interests in other entities when a company planning to join with one or two companies for expand their business, does with good purpose or own interest purpose, to avoid to use it for own interest, IFRS have standardize company who have interested with other company they have disclose what is their interest on, what is the purpose, what will be lost on failure part, financial statement according to standard, all this have to prove by the company, a lot research investigation done by IFRS before publish and amended on if there is loophole, by looking at many companies scams, what are possibilities the company can escape from IFRS, at the same time IFRS adopt to market very fast if there and changes in business development for example disclosure of other entities is good example. By looking at many company cases IFRS amends it very fast before investor face lost in future, and before accounting standard issue they will look into it what will be lost if there in changes in accounting standards, also consider the comparative advantage that preparers have in developing information that users would otherwise have to develop themselves.
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