INTERNATIONAL PUBLIC SECTOR

ACCOUNTING STANDARDSTM

IPSAS 38, DISCLOSURE OF INTERESTS IN OTHER ENTITIES

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 IPSAS 38, DISCLOSURE OF INTERESTS IN OTHER ENTITIES
Acknowledgment
This International Public Sector Accounting Standard (IPSAS) is drawn primarily from International Financial
Reporting Standard (IFRS®) 12, Disclosures of Interests in Other Entities published by the International Accounting
Standards Board (IASB®). Extracts from IFRS 12 are reproduced in this publication of the International Public Sector
Accounting Standards Board (IPSASB) of the International Federation of Accountants (IFAC) with the permission of
the International Financial Reporting Standards Foundation.

The approved text of the IFRS Accounting Standards is that published by the IASB in the English language, and
copies may be obtained directly from IFRS Foundation, Customer Service, Columbus Building, 7 Westferry Circus,
Canary Wharf, London E14 4HD, United Kingdom.

E-mail: customerservices@ifrs.org
Internet: www.ifrs.org

IFRS Accounting Standards, IAS Standards, and other publications of the IASB are copyright of the IFRS Foundation.

“IFRS Accounting Standards”, “IAS Standards”, “IASB”, and “IFRS Foundation” are trademarks of the IFRS
Foundation and should not be used without the approval of the IFRS Foundation.

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 IPSAS 38, DISCLOSURE OF INTERESTS IN OTHER ENTITIES
History of IPSAS
This version includes amendments resulting from IPSAS Standards issued up to January 31, 2025.

IPSAS 38, Disclosure of Interests in Other Entities was issued in January 2015.

Since then, IPSAS 38 has been amended by the following IPSAS Standards:
• IPSAS 46, Measurement (issued May 2023)

• IPSAS 44, Non-current Assets Held for Sale and Discontinued Operations (issued May 2022)

• COVID-19: Deferral of Effective Dates (issued November 2020)

• IPSAS 41, Financial Instruments (issued August 2018)

• IPSAS 39, Employee Benefits (issued July 2016)

• The Applicability of IPSAS (issued April 2016)

Table of Amended Paragraphs in IPSAS 38

Paragraph Affected How Affected Affected By

3A New IPSAS 44 May 2022

4 Amended IPSAS 39 July 2016

IPSAS 41 August 2018

5 Deleted The Applicability of IPSAS April 2016

6 Deleted The Applicability of IPSAS April 2016

57A New IPSAS 46 May 2023

57B New IPSAS 46 May 2023

57C New IPSAS 46 May 2023

57D New IPSAS 46 May 2023

57E New IPSAS 46 May 2023

57F New IPSAS 46 May 2023

61A New The Applicability of IPSAS April 2016

61B New IPSAS 39 July 2016

61C Amended COVID-19: Deferral of Effective Dates November 2020

61D New IPSAS 44 May 2022

61E New IPSAS 46 May 2023

AG12 Amended IPSAS 44 May 2022

AG16 Amended IPSAS 44 May 2022

IPSAS 38 1352
Paragraph Affected How Affected Affected By

AG16A New IPSAS 44 May 2022

1353 IPSAS 38
 January 2015

IPSAS 38, DISCLOSURE OF INTERESTS IN OTHER ENTITIES

CONTENTS
Paragraph

Objective ......................................................................................................................................................... 1

Scope .............................................................................................................................................................. 2–6

Definitions ........................................................................................................................................................ 7–8

Binding Arrangement ................................................................................................................................ 8

Disclosing Information about Interests in Other Entities ................................................................................. 9–11

Significant Judgments and Assumptions ........................................................................................................ 12–14

Investment Entity Status ................................................................................................................................. 15–16

Interests in Controlled Entities ........................................................................................................................ 17–26

The Interest that Non-controlling Interests have in the Economic Entity’s Activities and Cash Flows ..... 19
The Nature and Extent of Significant Restrictions .................................................................................... 20

Nature of the Risks Associated with an Entity’s Interests in Consolidated Structured Entities ................ 21–24
Consequences of Changes in a Controlling Entity’s Ownership Interest in a Controlled Entity that
do not Result in a Loss of Control ...................................................................................................... 25
Consequences of Losing Control of a Controlled Entity During the Reporting Period ............................. 26

Interests in Unconsolidated Controlled Entities (Investment Entities) ............................................................ 27–34

Interests in Joint Arrangements and Associates ............................................................................................. 35–39

Nature, Extent and Financial Effects of an Entity’s Interests in Joint Arrangements and Associates ...... 36–38
Risks Associated with an Entity’s Interests in Joint Ventures and Associates ......................................... 39

Interests in Structured Entities that are not Consolidated ........................................................................ 40–48

Nature of Interests .................................................................................................................................... 43–45

Nature of Risks ......................................................................................................................................... 46–48

Non-quantifiable Ownership Interests ............................................................................................................. 49–50

Controlling Interests Acquired with the Intention of Disposal .......................................................................... 51–57

Current Value Measurement ........................................................................................................................... 57A–57F

Transitional Provisions .................................................................................................................................... 58–60

Effective Date .................................................................................................................................................. 61–62

Appendix A: Application Guidance

Appendix B: Amendments to Other IPSAS

Basis for Conclusions
Comparison with IFRS 12

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 DISCLOSURE OF INTERESTS IN OTHER ENTITIES

International Public Sector Accounting Standard 38, Disclosure of Interests in Other Entities, is set out in paragraphs
1–62. All the paragraphs have equal authority. IPSAS 38 should be read in the context of its objective, the Basis for
Conclusions, the Preface to International Public Sector Accounting Standards, and The Conceptual Framework for
General Purpose Financial Reporting by Public Sector Entities. IPSAS 3, Accounting Policies, Changes in Accounting
Estimates and Errors, provides a basis for selecting and applying accounting policies in the absence of explicit
guidance.

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 DISCLOSURE OF INTERESTS IN OTHER ENTITIES

Objective
1. The objective of this Standard is to require an entity to disclose information that enables users of its financial
statements to evaluate:

(a) The nature of, and risks associated with, its interests in controlled entities, unconsolidated controlled
entities, joint arrangements and associates, and structured entities that are not consolidated; and

(b) The effects of those interests on its financial position, financial performance and cash flows.

Scope
2. An entity that prepares and presents financial statements under the accrual basis of accounting shall
apply this Standard in disclosing information about its interests in controlled entities, unconsolidated
controlled entities, joint arrangements and associates, and structured entities that are not
consolidated.

3. This Standard shall be applied by an entity that has an interest in any of the following:

(a) Controlled entities;

(b) Joint arrangements (i.e., joint operations or joint ventures);

(c) Associates; or

(d) Structured entities that are not consolidated.

3A. Except as described in paragraph AG16A, the requirements in this Standard apply to an entity’s interests
listed in paragraph 3 that are classified (or included in a disposal group that is classified) as held for sale or
discontinued operations in accordance with IPSAS 44, Non-current Assets Held for Sale and Discontinued
Operations.

4. This Standard does not apply to:

(a) Post-employment benefit plans or other long-term employee benefit plans to which IPSAS 39,
Employee Benefits applies.

(b) An entity’s separate financial statements to which IPSAS 34, Separate Financial Statements,
applies. However:
(i) If an entity has interests in structured entities that are not consolidated and prepares
separate financial statements as its only financial statements, it shall apply the
requirements in paragraphs 40–48 when preparing those separate financial statements.
(ii) An investment entity that prepares financial statements in which all of its controlled
entities are measured at fair value through surplus or deficit in accordance with
paragraph 56 of IPSAS 35 shall present the disclosures relating to investment entities
required by this Standard.

(c) An interest held by an entity that participates in, but does not have joint control of, a joint
arrangement unless that interest results in significant influence over the arrangement or is an
interest in a structured entity.

(d) An interest in another entity that is accounted for in accordance with IPSAS 41, Financial
Instruments. However, an entity shall apply this Standard:

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 DISCLOSURE OF INTERESTS IN OTHER ENTITIES

(i) When that interest is an interest in an associate or a joint venture that, in accordance with
IPSAS 36, Investments in Associates and Joint Ventures, is measured at fair value
through surplus or deficit; or

(ii) When that interest is an interest in a structured entity that is not consolidated.
5. [Deleted]

6. [Deleted]

Definitions
7. The following terms are used in this Standard with the meanings specified:

Binding arrangement: For the purposes of this Standard, a binding arrangement is an arrangement
that confers enforceable rights and obligations on the parties to it as if it were in the form of a
contract. It includes rights from contracts or other legal rights.

An interest in another entity, for the purpose of this Standard, refers to involvement by way of binding
arrangements or otherwise that exposes an entity to variability of benefits from the performance of
the other entity. An interest in another entity can be evidenced by, but is not limited to, the holding
of equity or debt instruments as well as other forms of involvement such as the provision of funding,
liquidity support, credit enhancement and guarantees. It includes the means by which an entity has
control or joint control of, or significant influence over, another entity. An entity does not necessarily
have an interest in another entity solely because of a typical funder/recipient or customer/supplier
relationship.

Paragraphs AG7–AG9 provide further information about interests in other entities.

Paragraphs AG57–AG59 of IPSAS 35, Consolidated Financial Statements explain variability of

benefits.

Revenue from a structured entity, for the purpose of this Standard, includes, but is not limited to,
recurring and non-recurring fees, interest, dividends or similar distributions, gains or losses on the
remeasurement or derecognition of interests in structured entities and gains or losses from the
transfer of assets and liabilities to the structured entity.

A structured entity is:

(a) In the case of entities where administrative arrangements or legislation are normally the
dominant factors in deciding who has control of an entity, an entity that has been designed so
that administrative arrangements or legislation are not the dominant factors in deciding who
controls the entity, such as when binding arrangements are significant to determining control
of the entity and relevant activities are directed by means of binding arrangements; or

(b) In the case of entities where voting or similar rights are normally the dominant factor in deciding
who has control of an entity, an entity that has been designed so that voting or similar rights
are not the dominant factor in deciding who controls the entity, such as when any voting rights
relate to administrative tasks only and the relevant activities are directed by means of binding
arrangements.

Paragraphs AG20–AG23 provide further information about structured entities.

Terms defined in other IPSAS are used in this Standard with the same meaning as in those Standards,
and are reproduced in the Glossary of Defined Terms published separately. The following terms are
defined in either IPSAS 34, Separate Financial Statements, IPSAS 35, Consolidated Financial
Statements, IPSAS 36, Investments in Associates and Joint Ventures or IPSAS 37, Joint

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 DISCLOSURE OF INTERESTS IN OTHER ENTITIES

Arrangements: associate, consolidated financial statements, control, controlled entity, controlling

entity, economic entity, equity method, investment entity, joint arrangement, joint control, joint
operation, joint venture, non-controlling interest, relevant activities, separate financial statements,
separate vehicle and significant influence.

Binding Arrangement

8. Binding arrangements can be evidenced in several ways. A binding arrangement is often, but not always, in
writing, in the form of a contract or documented discussions between the parties. Statutory mechanisms such
as legislative or executive authority can also create enforceable arrangements, similar to contractual
arrangements, either on their own or in conjunction with contracts between the parties.

Disclosing Information about Interests in Other Entities

9. To meet the objective in paragraph 1, an entity shall disclose:

(a) The significant judgments and assumptions it has made in determining:

(i) The nature of its interest in another entity or arrangement;

(ii) The type of joint arrangement in which it has an interest (paragraphs 12–14); and

(iii) That it meets the definition of an investment entity, if applicable (paragraph 15); and

(b) Information about its interests in:

(i) Controlled entities (paragraphs 17–26);

(ii) Joint arrangements and associates (paragraphs 35–39);

(iii) Structured entities that are not consolidated (paragraphs 40–48);

(iv) Non-quantifiable ownership interests (paragraphs 49–50); and

(v) Controlling interests acquired with the intention of disposal (paragraphs 51–57).

10. If the disclosures required by this Standard, together with disclosures required by other IPSAS, do
not meet the objective in paragraph 1, an entity shall disclose whatever additional information is
necessary to meet that objective.

11. An entity shall consider the level of detail necessary to satisfy the disclosure objective in paragraph
1 and how much emphasis to place on each of the requirements in this Standard. It shall aggregate
or disaggregate disclosures so that useful information is not obscured by either the inclusion of a
large amount of insignificant detail or the aggregation of items that have different characteristics (see
paragraphs AG2–AG6).

Significant Judgments and Assumptions

12. An entity shall disclose the methodology used to determine:

(a) That it has control of another entity as described in paragraphs 18 and 20 of IPSAS 35;

(b) That it has joint control of an arrangement or significant influence over another entity; and

(c) The type of joint arrangement (i.e., joint operation or joint venture) when the arrangement has
been structured through a separate vehicle.

13. The disclosures required by paragraph 12 shall be either given in the financial statements or
incorporated by cross-reference from the financial statements to some other statement that is
available to users of the financial statements on the same terms as the financial statements and at

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the same time. Without the information incorporated by cross-reference, the financial statements are
incomplete. The use of such cross-referencing may be subject to jurisdictional restrictions.

14. To comply with paragraph 12, an entity shall disclose, for example, the factors considered in
determining that:
(a) It controls a specific entity (or similar category of entities) where the interest in the other entity
is not evidenced by the holding of equity or debt instruments;

(b) It does not control another entity (or category of entities) even though it holds more than half
of the voting rights of the other entity (or entities);

(c) It controls another entity (or category of entities) even though it holds less than half of the
voting rights of the other entity (or entities);
(d) It is an agent or a principal (see paragraphs AG60–AG74 of IPSAS 35);

(e) It does not have significant influence even though it holds 20 per cent or more of the voting
rights of another entity; and

(f) It has significant influence even though it holds less than 20 per cent of the voting rights of
another entity.

Investment Entity Status

15. When a controlling entity determines that it is an investment entity in accordance with IPSAS 35, the
investment entity shall disclose information about significant judgments and assumptions it has
made in determining that it is an investment entity. An investment entity is not required to disclose
this information if it has all of the characteristics in paragraph 61 of IPSAS 35.

16. When an entity becomes, or ceases to be, an investment entity, it shall disclose the change of
investment entity status and the reasons for the change. In addition, an entity that becomes an
investment entity shall disclose the effect of the change of status on the financial statements for the
period presented, including:

(a) The total fair value, as of the date of change of status, of the controlled entities that cease to
be consolidated;

(b) The total gain or loss, if any, calculated in accordance with paragraph 64 of IPSAS 35; and

(c) The line item(s) in surplus or deficit in which the gain or loss is recognized (if not presented
separately).

Interests in Controlled Entities

17. An entity shall disclose information that enables users of its consolidated financial statements:

(a) To understand:

(i) The composition of the economic entity; and

(ii) The interest that non-controlling interests have in the economic entity’s activities and
cash flows (paragraph 19); and

(b) To evaluate:

(i) The nature and extent of significant restrictions on its ability to access or use assets, and
settle liabilities, of the economic entity (paragraph 20);

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 DISCLOSURE OF INTERESTS IN OTHER ENTITIES

(ii) The nature of, and changes in, the risks associated with its interests in consolidated
structured entities (paragraphs 21–24);

(iii) The consequences of changes in its ownership interest in a controlled entity that do not
result in a loss of control (paragraph 25); and
(iv) The consequences of losing control of a controlled entity during the reporting period
(paragraph 26).

18. When the financial statements of a controlled entity used in the preparation of consolidated financial
statements are as of a date or for a period that is different from that of the consolidated financial
statements (see paragraph 46 of IPSAS 35) an entity shall disclose:

(a) The date of the end of the reporting period of the financial statements of that controlled entity;
and

(b) The reason for using a different date or period.

The Interest that Non-controlling Interests have in the Economic Entity’s Activities and Cash Flows
19. An entity shall disclose for each of its controlled entities that have non-controlling interests that are
material to the reporting entity:

(a) The name of the controlled entity;

(b) The domicile and legal form of the controlled entity and the jurisdiction in which it operates;

(c) The proportion of ownership interests held by non-controlling interests;

(d) The proportion of voting rights held by non-controlling interests, if different from the proportion
of ownership interests held;

(e) The surplus or deficit allocated to non-controlling interests of the controlled entity during the
reporting period;
(f) Accumulated non-controlling interests of the controlled entity at the end of the reporting
period; and

(g) Summarized financial information about the controlled entity (see paragraph AG10).

The Nature and Extent of Significant Restrictions

20. An entity shall disclose:

(a) Significant restrictions in binding arrangements (e.g., statutory, contractual and regulatory
restrictions) on its ability to access or use the assets and settle the liabilities of the economic
entity, such as:

(i) Those that restrict the ability of a controlling entity or its controlled entities to transfer
cash or other assets to (or from) other entities within the economic entity.

(ii) Guarantees or other requirements that may restrict dividends and other capital
distributions being paid, or loans and advances being made or repaid, to (or from) other
entities within the economic entity.

(b) The nature and extent to which protective rights of non-controlling interests can significantly
restrict the entity’s ability to access or use the assets and settle the liabilities of the economic
entity (such as when a controlling entity is obliged to settle liabilities of a controlled entity

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 DISCLOSURE OF INTERESTS IN OTHER ENTITIES

before settling its own liabilities, or approval of non-controlling interests is required either to
access the assets or to settle the liabilities of a controlled entity).

(c) The carrying amounts in the consolidated financial statements of the assets and liabilities to
which those restrictions apply.

Nature of the Risks Associated with an Entity’s Interests in Consolidated Structured Entities

21. An entity shall disclose the terms of any binding arrangements that could require the controlling
entity or its controlled entities to provide financial support to a consolidated structured entity,
including events or circumstances that could expose the reporting entity to a loss (e.g., liquidity
arrangements or credit rating triggers associated with obligations to purchase assets of the
structured entity or provide financial support).

22. If during the reporting period a controlling entity or any of its controlled entities has, without having
an obligation under a binding arrangement to do so, provided financial or other support to a
consolidated structured entity (e.g., purchasing assets of, or instruments issued by, the structured
entity), the entity shall disclose:

(a) The type and amount of support provided, including situations in which the controlling entity
or its controlled entities assisted the structured entity in obtaining financial support; and

(b) The reasons for providing the support.

23. If during the reporting period a controlling entity or any of its controlled entities has, without having
an obligation under a binding arrangement to do so, provided financial or other support to a
previously unconsolidated structured entity and that provision of support resulted in the entity
controlling the structured entity, the entity shall disclose an explanation of the relevant factors in
reaching that decision.

24. An entity shall disclose any current intentions to provide financial or other support to a consolidated
structured entity, including intentions to assist the structured entity in obtaining financial support.

Consequences of Changes in a Controlling Entity’s Ownership Interest in a Controlled Entity that do not
Result in a Loss of Control

25. An entity shall present a schedule that shows the effects on the net assets/equity attributable to
owners of the controlling entity of any changes in its ownership interest in a controlled entity that do
not result in a loss of control.

Consequences of Losing Control of a Controlled Entity During the Reporting Period

26. An entity shall disclose the gain or loss, if any, calculated in accordance with paragraph 52 of
IPSAS 35 and:

(a) The portion of that gain or loss attributable to measuring any investment retained in the former
controlled entity at its fair value at the date when control is lost; and

(b) The line item(s) in surplus or deficit in which the gain or loss is recognized (if not presented
separately).

Interests in Unconsolidated Controlled Entities (Investment Entities)

27. An investment entity that, in accordance with IPSAS 35 is required to apply the exception to
consolidation and instead account for its investment in a controlled entity at fair value through
surplus or deficit shall disclose that fact.

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 DISCLOSURE OF INTERESTS IN OTHER ENTITIES

28. For each unconsolidated controlled entity, an investment entity shall disclose:
(a) The controlled entity’s name;

(b) The domicile and legal form of the controlled entity and the jurisdiction in which it operates;
and

(c) The proportion of ownership interest held by the investment entity and, if different, the
proportion of voting rights held.

29. If an investment entity is the controlling entity of another investment entity, the controlling entity
shall also provide the disclosures in paragraph 28(a)–(c) for investments that are controlled by its
controlled investment entity. The disclosure may be provided by including, in the financial
statements of the controlling entity, the financial statements of the controlled entity (or controlled
entities) that contain the above information.

30. An investment entity shall disclose:

(a) The nature and extent of any significant restrictions arising from binding arrangements (e.g.,
resulting from borrowing arrangements, regulatory requirements or contractual arrangements)
on the ability of an unconsolidated controlled entity to transfer funds to the investment entity
in the form of cash dividends, or similar distributions, or to repay loans or advances made to
the unconsolidated controlled entity by the investment entity; and

(b) Any current commitments or intentions to provide financial or other support to an

unconsolidated controlled entity, including commitments or intentions to assist the controlled
entity in obtaining financial support.

31. If, during the reporting period, an investment entity or any of its controlled entities has, without
having an obligation arising from a binding arrangement to do so, provided financial or other support
to an unconsolidated controlled entity (e.g., purchasing assets of, or instruments issued by, the
controlled entity or assisting the controlled entity in obtaining financial support), the entity shall
disclose:

(a) The type and amount of support provided to each unconsolidated controlled entity; and

(b) The reasons for providing the support.

32. An investment entity shall disclose the terms of any binding arrangements that could require the
entity or its unconsolidated controlled entities to provide financial support to an unconsolidated,
controlled, structured entity, including events or circumstances that could expose the reporting
entity to a loss (e.g., liquidity arrangements or credit rating triggers associated with obligations to
purchase assets of the structured entity or to provide financial support).

33. If during the reporting period an investment entity or any of its unconsolidated controlled entities
has, without having an obligation arising from a binding arrangement to do so, provided financial or
other support to an unconsolidated, structured entity that the investment entity did not control, and
if that provision of support resulted in the investment entity controlling the structured entity, the
investment entity shall disclose an explanation of the relevant factors in reaching the decision to
provide that support.

34. A controlling entity that controls an investment entity and is not itself an investment entity, shall
disclose in its consolidated financial statements, the information required by paragraphs 27 to 33 in
respect of such unconsolidated controlled entities.

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 DISCLOSURE OF INTERESTS IN OTHER ENTITIES

Interests in Joint Arrangements and Associates

35. An entity shall disclose information that enables users of its financial statements to evaluate:

(a) The nature, extent and financial effects of its interests in joint arrangements and associates,
including the nature and effects of its relationship with the other investors with joint control of,
or significant influence over, joint arrangements and associates (paragraphs 36 and 38); and

(b) The nature of, and changes in, the risks associated with its interests in joint ventures and
associates (paragraph 39).

Nature, Extent and Financial Effects of an Entity’s Interests in Joint Arrangements and Associates

36. An entity shall disclose:

(a) For each joint arrangement and associate that is material to the reporting entity:

(i) The name of the joint arrangement or associate;

(ii) The nature of the entity’s relationship with the joint arrangement or associate (by, for
example, describing the nature of the activities of the joint arrangement or associate and
whether they are strategic to the entity’s activities);

(iii) The domicile and legal form of the joint arrangement or associate and the jurisdiction in
which it operates; and
(iv) The proportion of ownership interest or participating share held by the entity and, if
different, the proportion of voting rights held (if applicable).

(b) For each joint venture and associate that is material to the reporting entity:

(i) Whether the investment in the joint venture or associate is measured using the equity
method or at fair value;

(ii) Summarized financial information about the joint venture or associate as specified in
paragraphs AG12 and AG13; and

(iii) If the joint venture or associate is accounted for using the equity method, the fair value
of its investment in the joint venture or associate, if there is a quoted market price for the
investment.

(c) Financial information as specified in paragraph AG16 about the entity’s investments in joint
ventures and associates that are not individually material:
(i) In aggregate for all individually immaterial joint ventures; and

(ii) In aggregate for all individually immaterial associates. This aggregated information is to
be disclosed separately from the aggregated information on joint ventures.
37. An investment entity need not provide the disclosures required by paragraphs 36(b)–36(c).

38. An entity shall also disclose:

(a) The nature and extent of any significant restrictions (e.g., resulting from borrowing
arrangements, regulatory requirements or binding arrangements between investors with joint
control of, or significant influence over, a joint venture or an associate) on the ability of joint
ventures or associates to transfer funds to the entity in the form of cash dividends or similar
distributions, or to repay loans or advances made by the entity.

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(b) When the financial statements of a joint venture or associate used in applying the equity
method are as of a date or for a period that is different from that of the entity:

(i) The date of the end of the reporting period of the financial statements of that joint venture
or associate; and
(ii) The reason for using a different date or period.

(c) The unrecognized 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

39. An entity shall disclose:

(a) Commitments that it has relating to its joint ventures separately from the amount of other
commitments as specified in paragraphs AG17–AG19; and

(b) In accordance with IPSAS 19, Provisions, Contingent Liabilities and Contingent Assets, unless
the probability of loss is remote, contingent liabilities incurred relating to its interests in joint
ventures or associates (including its share of contingent liabilities incurred jointly with other
investors with joint control of, or significant influence over, the joint ventures or associates),
separately from the amount of other contingent liabilities.

Interests in Structured Entities that are not Consolidated

40. An entity shall disclose information that enables users of its financial statements:

(a) To understand the nature and extent of its interests in structured entities that are not
consolidated (paragraphs 43–45); and

(b) To evaluate the nature of, and changes in, the risks associated with its interests in structured
entities that are not consolidated (paragraphs 46–48).

41. The information required by paragraph 40(b) includes information about an entity’s exposure to risk from
involvement that it had with structured entities that are not consolidated in previous periods (e.g., sponsoring
the structured entity), even if the entity no longer has any involvement by way of binding arrangement with
the structured entity at the reporting date.

42. An investment entity need not provide the disclosures required by paragraph 40 for a structured entity that it
controls but which is not consolidated, and for which it presents the disclosures required by paragraphs 27–
33.

Nature of Interests

43. An entity shall disclose qualitative and quantitative information about its interests in structured
entities that are not consolidated, including, but not limited to, the nature, purpose, size and activities
of the structured entity and how the structured entity is financed.

44. If an entity has sponsored a structured entity that is not consolidated for which it does not provide
information required by paragraph 46 (e.g., because it does not have an interest in the entity at the
reporting date), the entity shall disclose:

(a) How it has determined which structured entities it has sponsored;

(b) Revenue from those structured entities during the reporting period, including a description of
the types of revenue presented; and

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(c) The carrying amount (at the time of transfer) of all assets transferred to those structured entities
during the reporting period.

45. An entity shall present the information in paragraph 44(b) and (c) in tabular format, unless another
format is more appropriate, and classify its sponsoring activities into relevant categories (see
paragraphs AG2–AG6).

Nature of Risks

46. An entity shall disclose in tabular format, unless another format is more appropriate, a summary of:
(a) The carrying amounts of the assets and liabilities recognized in its financial statements relating
to its interests in structured entities that are not consolidated;

(b) The line items in the statement of financial position in which those assets and liabilities are
recognized;

(c) The amount that best represents the entity’s maximum exposure to loss from its interests in
structured entities that are not consolidated, including how the maximum exposure to loss is
determined. If an entity cannot quantify its maximum exposure to loss from its interests in
structured entities that are not consolidated it shall disclose that fact and the reasons; and

(d) A comparison of the carrying amounts of the assets and liabilities of the entity that relate to its
interests in structured entities that are not consolidated and the entity’s maximum exposure to
loss from those entities.

47. If during the reporting period an entity has, without having an obligation under a binding arrangement
to do so, provided financial or other support to a structured entity that is not consolidated in which
it previously had or currently has an interest (for example, purchasing assets of, or instruments
issued by, the structured entity), the entity shall disclose:

(a) The type and amount of support provided, including situations in which the entity assisted the
structured entity in obtaining financial support; and

(b) The reasons for providing the support.

48. An entity shall disclose any current intentions to provide financial or other support to a structured
entity that is not consolidated, including intentions to assist the structured entity in obtaining
financial support. Such current intentions include intentions to provide support as a result of
obligations under binding arrangements and intentions to provide support where the entity has no
obligation under a binding arrangement.

Non-quantifiable Ownership Interests

49. An entity shall disclose information that enables users of its financial statements to understand the
nature and extent of any non-quantifiable ownership interests in other entities.

50. To the extent that this information has not already been provided in accordance with this Standard,
an entity shall disclose, in respect of each non-quantifiable ownership interest that is material to the
reporting entity:

(a) The name of the entity in which it has an ownership interest; and
(b) The nature of its ownership interest in the entity.

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 DISCLOSURE OF INTERESTS IN OTHER ENTITIES

Controlling Interests Acquired with the Intention of Disposal

51. An entity, other than an investment entity, shall disclose information regarding its interest in a
controlled entity when, at the point at which control arose, the entity had the intention of disposing
of that interest and, at the reporting date, it has an active intention to dispose of that interest.
52. There are a number of situations in which a public sector entity may obtain control of another entity, but
where the entity has an active intention to dispose of all or part of its controlling interest in the near future.

53. Because of a government’s broad responsibility for the economic well-being of a jurisdiction it may intervene
to prevent the consequences of failure of an entity, such as a financial institution. Such interventions may
lead to a government obtaining control of another entity, although it has no intention of maintaining control
over that entity. Rather, its intention may be to sell, or otherwise dispose of, its interest in the controlled entity.
If the other entity needs to be restructured to facilitate disposal the restructuring can occur over a period of
one or more years and the government may retain some residual assets or liabilities at the end of the process.
The consolidation of such controlled entities for the reporting periods in which control is present, can have a
significant impact on the consolidated financial statements. The obtaining of control as a result of
interventions to prevent failure is most likely to occur in the context of governments, but could also occur in
the case of individual public sector entities.

54. A public sector entity may also acquire a controlling interest in another entity, with the intention of disposing
of all or part of that interest, in implementing a government’s policy objectives. For example, a government
may direct an entity to acquire certain interests in other entities for the purpose of redistribution.

55. An entity shall disclose the following information in the notes in respect of each controlled entity
referred to in paragraph 51:

(a) The name of the controlled entity and a description of its key activities;

(b) The rationale for the acquisition of the controlling interest and the factors considered in
determining that control exists;

(c) The impact on the consolidated financial statements of consolidating the controlled entity
including the effect on assets, liabilities, revenue, expenses and net assets/equity; and

(d) The current status of the approach to disposal, including the expected method and timing of
disposal.

56. The disclosures required by paragraph 55 shall be provided at each reporting date until the entity
disposes of the controlling interest or ceases to have the intention to dispose of that interest. In the
period in which the entity disposes of the controlling interest or ceases to have the intention to
dispose of the controlling interest it shall disclose:

(a) The fact that there has been a disposal or change of intention; and

(b) The effect of the disposal or change of intention on the consolidated financial statements.

57. Where other disclosures required by this Standard or other IPSAS would provide information relevant
to paragraphs 55 or 56 a cross-reference to those other disclosures shall be provided.

Current Value Measurement

57A. An entity shall disclose information that helps users of its financial statements assess both of the
following:

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 DISCLOSURE OF INTERESTS IN OTHER ENTITIES

(a) For interests in other entities that are measured at fair value on a recurring or non‑recurring
basis in the statement of financial position after initial recognition, the measurement
techniques and inputs used to develop those measurements; and

(b) For recurring fair value measurements using significant unobservable inputs (Level 3), the
effect of the measurements on surplus or deficit or net assets/equity for the period.

57B. To meet the objectives in paragraph 57A, an entity shall consider all the following:

(a) The level of detail necessary to satisfy the disclosure requirements;

(b) How much emphasis to place on each of the various requirements;

(c) How much aggregation or disaggregation to undertake; and

(d) Whether users of financial statements need additional information to evaluate the quantitative
information disclosed.

If the disclosures provided in accordance with this IPSAS and other IPSAS are insufficient to meet the
objectives in paragraph 57A, an entity shall disclose additional information necessary to meet those
objectives.

57C. To meet the objectives in paragraph 57A, an entity shall disclose, at a minimum, the following information for
each class of interests in other entities (see paragraph 57D for information on determining appropriate
classes of interests in other entities) measured at fair value (including measurements based on fair value
within the scope of IPSAS 46, Measurement) in the statement of financial position after initial recognition:

(a) For recurring and non‑recurring fair value measurements, the fair value measurement at the end of the
reporting period, and for non‑recurring fair value measurements, the reasons for the measurement.
Recurring fair value measurements of interests in other entities are those that this Standard requires
or permits in the statement of financial position at the end of each reporting period. Non‑recurring fair
value measurements of interests in other entities are those that this Standard requires or permits in
the statement of financial position in particular circumstances;

(b) For recurring and non‑recurring fair value measurements, the level of the fair value hierarchy within
which the fair value measurements are categorized in their entirety (Level 1, 2 or 3);

(c) For recurring and non‑recurring fair value measurements estimated using unobservable inputs, a
description of the measurement technique(s) and the inputs used in the fair value measurement. If
there has been a change in measurement technique (e.g., changing from a market approach to an
income approach or the use of an additional measurement technique), the entity shall disclose that
change and the reason(s) for making it. For fair value measurements categorized within Level 3 of the
fair value hierarchy, or for fair value measurements estimated using unobservable inputs, an entity
shall provide quantitative information about the significant unobservable inputs used in the fair value
measurement. An entity is not required to create quantitative information to comply with this disclosure
requirement if quantitative unobservable inputs are not developed by the entity when measuring fair
value (e.g., when an entity uses prices from prior transactions or third‑party pricing information without
adjustment). However, when providing this disclosure an entity cannot ignore quantitative
unobservable inputs that are significant to the fair value measurement and are reasonably available to
the entity;

(d) For recurring fair value measurements categorized within Level 3 of the fair value hierarchy a
reconciliation from the opening balances to the closing balances, disclosing separately changes during
the period attributable to the following:

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 DISCLOSURE OF INTERESTS IN OTHER ENTITIES

(i) Total gains or losses for the period recognized in surplus or deficit, and the line item(s) in surplus
or deficit in which those gains or losses are recognized;

(ii) Total gains or losses for the period recognized in net assets/equity, and the line item(s) in net
assets/equity in which those gains or losses are recognized; and
(iii) Purchases, sales, issues and settlements (each of those types of changes disclosed separately).

(e) For recurring fair value measurements categorized within Level 3 of the fair value hierarchy, the amount
of the total gains or losses for the period in (e)(i) included in surplus or deficit that is attributable to the
change in unrealized gains or losses relating to those interests in other entities held at the end of the
reporting period, and the line item(s) in surplus or deficit in which those unrealized gains or losses are
recognized;
(f) For recurring and non‑recurring fair value measurements categorized within Level 3 of the fair value
hierarchy, a description of the valuation processes used by the entity (including, for example, how an
entity decides its valuation policies and procedures and analyses changes in fair value measurements
from period to period); and

(g) For recurring fair value measurements categorized within Level 3 of the fair value hierarchy, a narrative
description of the sensitivity of the fair value measurement to changes in unobservable inputs if a
change in those inputs to a different amount might result in a significantly higher or lower fair value
measurement. If there are interrelationships between those inputs and other unobservable inputs used
in the fair value measurement, an entity shall also provide a description of those interrelationships and
of how they might magnify or mitigate the effect of changes in the unobservable inputs on the fair value
measurement. To comply with that disclosure requirement, the narrative description of the sensitivity
to changes in unobservable inputs shall include, at a minimum, the unobservable inputs disclosed
when complying with (c).

57D. An entity shall determine the appropriate disaggregation of interests in other entities on the basis of the
following:
(a) The nature, characteristics and risks of the interests in other entities; and

(b) The level of the fair value hierarchy within which the fair value measurement is categorized.

The disaggregation may need to be greater for fair value measurements categorized within Level 3 of the fair
value hierarchy, or for fair value measurements estimated using unobservable inputs, because those
measurements have a greater degree of uncertainty and subjectivity. Determining the appropriate
disaggregation of interests in other entities for which disclosures about fair value measurements should be
provided requires judgment. Interests in other entities will often require greater disaggregation than the line
items presented in the statement of financial position. However, an entity shall provide information sufficient
to permit reconciliation to the line items presented in the statement of financial position. If another IPSAS
specifies the disaggregation for interests in other entities, an entity may use that disaggregation in providing
the disclosures required in this Standard if that disaggregation meets the requirements in this paragraph.

57E. For each class of interests in other entities not measured at fair value in the statement of financial position
but for which the fair value is disclosed, an entity shall disclose the information required by paragraph 57C(b),
(c) and (g). However, an entity is not required to provide the quantitative disclosures about significant
unobservable inputs used in fair value measurements categorized within Level 3 of the fair value hierarchy,
or for fair value measurements estimated using unobservable inputs, required by paragraph 57C(c). For such
interests in other entities, an entity does not need to provide the other disclosures required by this Standard.

57F. An entity shall present the quantitative disclosures required by this Standard in a tabular format unless
another format is more appropriate.

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Transitional Provisions
58. An entity is encouraged to provide information required by this Standard earlier than annual periods beginning
on or after January 1, 2017. Providing some of the disclosures required by this Standard does not compel
the entity to comply with all the requirements of this Standard or to apply IPSAS 34, IPSAS 35, IPSAS 36,
and IPSAS 37 early.

59. The disclosure requirements of this Standard need not be applied for any period presented that begins before
the annual period immediately preceding the first annual period for which this Standard is applied.

60. The disclosure requirements of paragraphs 40–56 and the corresponding guidance in paragraphs AG20–
AG25 of this Standard need not be applied for any period presented that begins before the first annual period
for which this Standard is applied.

Effective Date
61. An entity shall apply this Standard for annual financial statements covering periods beginning on or
after January 1, 2017. Earlier application is encouraged.

61A. Paragraphs 5 and 6 were deleted by The Applicability of IPSAS, issued in April 2016. An entity shall
apply those amendments for annual financial statements covering periods beginning on or after
January 1, 2018. Earlier application is encouraged. If an entity applies the amendments for a period
beginning before January 1, 2018, it shall disclose that fact.

61B. Paragraph 4 was amended by IPSAS 39, Employee Benefits, issued in July 2016. An entity shall apply
that amendment for annual financial statements covering periods beginning on or after January 1,
2018. Earlier application is encouraged. If an entity applies the amendment for a period beginning
before January 1, 2018 it shall disclose that fact and apply IPSAS 39 at the same time.

61C. Paragraph 4 was amended by IPSAS 41, in August 2018. An entity shall apply this amendment for
annual financial statements covering periods beginning on or after January 1, 2023. Earlier
application is encouraged. If an entity applies the amendment for a period beginning before
January 1, 2023 it shall disclose that fact and apply IPSAS 41 at the same time.
61D. Paragraphs AG12 and AG16 were amended and paragraphs 3A and AG16A were added by IPSAS 44
issued in May 2022. An entity shall apply these amendments for annual financial statements covering
periods beginning on or after January 1, 2025. Earlier application is permitted. If an entity applies the
amendments for a period beginning before January 1, 2025, it shall disclose that fact and apply
IPSAS 44 at the same time.

61E. Paragraphs 57A–57F were added by IPSAS 46, Measurement, issued in May 2023. An entity shall
apply these amendments for annual financial statements covering periods beginning on or after
January 1, 2025. Earlier application is encouraged. If an entity applies the amendment for a period
beginning before January 1, 2025, it shall disclose that fact and apply IPSAS 46 at the same time.
62. When an entity adopts the accrual basis IPSAS as defined in IPSAS 33, First-time Adoption of Accrual Basis
International Public Sector Accounting Standards (IPSAS), for financial reporting purposes subsequent to
this effective date, this Standard applies to the entity’s annual financial statements covering periods beginning
on or after the date of adoption of IPSAS.

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Appendix A
Application Guidance
This Appendix is an integral part of IPSAS 38.

AG1. The examples in this appendix portray hypothetical situations. Although some aspects of the examples may
be present in actual fact patterns, all relevant facts and circumstances of a particular fact pattern would need
to be evaluated when applying this Standard.

Aggregation (paragraph 11)

AG2. An entity shall decide, in the light of its circumstances, how much detail it provides to satisfy the information
needs of users, how much emphasis it places on different aspects of the requirements and how it aggregates
the information. It is necessary to strike a balance between burdening financial statements with excessive
detail that may not assist users of financial statements and obscuring information as a result of too much
aggregation.

AG3. An entity may aggregate the disclosures required by this Standard for interests in similar entities if
aggregation is consistent with the disclosure objective and the requirement in paragraph AG4, and does not
obscure the information provided. An entity shall disclose how it has aggregated its interests in similar
entities.

AG4. An entity shall present information separately for interests in:

(a) Controlled entities;

(b) Joint ventures;

(c) Joint operations;

(d) Associates; and

(e) Structured entities that are not consolidated.

AG5. In determining whether to aggregate information, an entity shall consider quantitative and qualitative
information about the different risk and benefit characteristics of each entity it is considering for aggregation
and the significance of each such entity to the reporting entity. The entity shall present the disclosures in a
manner that clearly explains to users of financial statements the nature and extent of its interests in those
other entities.

AG6. Examples of aggregation levels within the classes of entities set out in paragraph AG4 that might be
appropriate are:

(a) Nature of activities (e.g., a research and development entity, a revolving credit card securitization
entity).

(b) Industry classification.

(c) Geography (e.g., country or region).

Interests in Other Entities

AG7. An interest in another entity refers to involvement by way of binding arrangements or otherwise that exposes
the reporting entity to variability of benefits from the performance of the other entity. Consideration of the
purpose and design of the other entity may help the reporting entity when assessing whether it has an interest
in that entity and, therefore, whether it is required to provide the disclosures in this Standard. That

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assessment shall include consideration of the risks that the other entity was designed to create and the risks
the other entity was designed to pass on to the reporting entity and other parties.

AG8. A reporting entity is typically exposed to variability of benefits from the performance of another entity by
holding instruments (such as equity or debt instruments issued by the other entity) or having another
involvement that absorbs variability. For example, assume a structured entity holds a loan portfolio. The
structured entity obtains a credit default swap from another entity (the reporting entity) to protect itself from
the default of interest and principal payments on the loans. The reporting entity has involvement that exposes
it to variability of benefits from the performance of the structured entity because the credit default swap
absorbs variability of benefits, in the form of returns, of the structured entity.

AG9. Some instruments are designed to transfer risk from a reporting entity to another entity. Such instruments
create variability of benefits for the other entity but do not typically expose the reporting entity to variability of
benefits from the performance of the other entity. For example, assume a structured entity is established to
provide investment opportunities for investors who wish to have exposure to entity Z’s credit risk (entity Z is
unrelated to any party involved in the arrangement). The structured entity obtains funding by issuing to those
investors notes that are linked to entity Z’s credit risk (credit-linked notes) and uses the proceeds to invest in
a portfolio of risk-free financial assets. The structured entity obtains exposure to entity Z’s credit risk by
entering into a credit default swap (CDS) with a swap counterparty. The CDS passes entity Z’s credit risk to
the structured entity in return for a fee paid by the swap counterparty. The investors in the structured entity
receive higher benefits that reflect both the structured entity’s return from its asset portfolio and the CDS fee.
The swap counterparty does not have involvement with the structured entity that exposes it to variability of
benefits from the performance of the structured entity because the CDS transfers variability to the structured
entity, rather than absorbing variability of benefits of the structured entity.

Summarized Financial Information for Controlled Entities, Joint Ventures and Associates
(paragraphs 19 and 36)
AG10. For each controlled entity that has non-controlling interests that are material to the reporting entity, an entity
shall disclose:

(a) Dividends or similar distributions paid to non-controlling interests; and

(b) Summarized financial information about the assets, liabilities, surplus or deficit and cash flows of the
controlled entity that enables users to understand the interest that non-controlling interests have in the
economic entity’s activities and cash flows. That information might include but is not limited to, for
example, current assets, non-current assets, current liabilities, non-current liabilities, revenue and
surplus or deficit.

AG11. The summarized financial information required by paragraph AG10(b) shall be the amounts before inter-
entity eliminations.

AG12. For each joint venture and associate that is material to the reporting entity, an entity shall disclose:

(a) Dividends or similar distributions received from the joint venture or associate; and

(b) Summarized financial information for the joint venture or associate (see paragraphs AG14 and AG15)
including, but not necessarily limited to:

(i) Current assets;

(ii) Non-current assets;

(iii) Current liabilities;

(iv) Non-current liabilities;

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(v) Revenue;
(vi) Tax expense;

(vii) Post-tax surplus or deficit from discontinued operations; and

(viii) Surplus or deficit.

AG13. In addition to the summarized financial information required by paragraph AG12, an entity shall disclose for
each joint venture that is material to the reporting entity the amount of:

(a) Cash and cash equivalents included in paragraph AG12(b)(i);

(b) Current financial liabilities (excluding taxes and transfers payable, payables under exchange
transactions and provisions) included in paragraph AG12(b)(iii);

(c) Non-current financial liabilities (excluding taxes and transfers payable, payables under exchange
transactions and provisions) included in paragraph AG12(b)(iv);

(d) Depreciation and amortization;

(e) Interest revenue;

(f) Interest expense; and

(g) Income tax expense.

AG14. The summarized financial information presented in accordance with paragraphs AG12 and AG13 shall be
the amounts included in the IPSAS financial statements of the joint venture or associate (and not the entity’s
share of those amounts). If the entity accounts for its interest in the joint venture or associate using the equity
method:

(a) The amounts included in the IPSAS financial statements of the joint venture or associate shall be
adjusted to reflect adjustments made by the entity when using the equity method, such as fair value
adjustments made at the time of acquisition and adjustments for differences in accounting policies.

(b) The entity shall provide a reconciliation of the summarized financial information presented to the
carrying amount of its interest in the joint venture or associate.

AG15. An entity may present the summarized financial information required by paragraphs AG12 and AG13 on the
basis of the joint venture’s or associate’s financial statements if:

(a) The entity measures its interest in the joint venture or associate at fair value in accordance with
IPSAS 36; and

(b) The joint venture or associate does not prepare IPSAS financial statements and preparation on that
basis would be impracticable or cause undue cost.

In that case, the entity shall disclose the basis on which the summarized financial information has been
prepared.

AG16. An entity shall disclose, in aggregate, the carrying amount of its interests in all individually immaterial joint
ventures or associates that are accounted for using the equity method. An entity shall also disclose separately
the aggregate amount of its share of those joint ventures’ or associates’:

(a) Revenue.

(b) Tax expense.

(c) Post-tax surplus or deficit from discontinued operations.

(d) Surplus or deficit.

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 DISCLOSURE OF INTERESTS IN OTHER ENTITIES

(e) An entity provides the disclosures separately for joint ventures and associates.
AG16A. When an entity’s interest in a controlled entity, a joint venture or an associate (or a portion of its interest in a
joint venture or an associate) is classified (or included in a disposal group that is classified) as held for sale
in accordance with IPSAS 44, Non-current Assets Classified as Held for Sale and Discontinued Operations,
the entity is not required to disclose summarized financial information for that controlled entity, joint venture
or associate in accordance with paragraphs AG10-AG16.

Commitments for Joint Ventures (paragraph 39(a))

AG17. An entity shall disclose total commitments it has made but not recognized at the reporting date (including its
share of commitments made jointly with other investors with joint control of a joint venture) relating to its
interests in joint ventures. Commitments are those that may give rise to a future outflow of cash or other
resources.

AG18. Unrecognized commitments that may give rise to a future outflow of cash or other resources include:

(a) Unrecognized commitments to contribute funding or resources as a result of, for example:
(i) The constitution or acquisition agreements of a joint venture (that, for example, require an entity
to contribute funds over a specific period).

(ii) Capital-intensive projects undertaken by a joint venture.

(iii) Unconditional purchase obligations, comprising procurement of equipment, inventory or services

that an entity is committed to purchasing from, or on behalf of, a joint venture.

(iv) Unrecognized commitments to provide loans or other financial support to a joint venture.

(v) Unrecognized commitments to contribute resources to a joint venture, such as assets or

services.

(vi) Other non-cancellable unrecognized commitments relating to a joint venture.

(b) Unrecognized commitments to acquire another party’s ownership interest (or a portion of that
ownership interest) in a joint venture if a particular event occurs or does not occur in the future.

AG19. The requirements and examples in paragraphs AG17 and AG18 illustrate some of the types of disclosure
required by paragraph 27 of IPSAS 20, Related Party Disclosures.

Interests in Structured Entities that are not Consolidated (paragraphs 40–48)

Structured Entities

AG20. A structured entity is an entity that has been designed so that the conventional ways in which an entity is
controlled are not the dominant factors in deciding who controls the entity. In the case of entities such as
departments or ministries where administrative arrangements or legislation are often the dominant factors in
deciding who has control of an entity, a structured entity is an entity that has been designed so that
administrative arrangements or legislation are not the dominant factor in deciding who controls the entity. In
the case of entities where voting or similar rights are normally the dominant factor in deciding who has control
of an entity (which may be the case for some entities with profit objectives), a structured entity is an entity
that has been designed so that voting or similar rights are not the dominant factor in deciding who controls
the entity. Although binding arrangements frequently occur between public sector entities, binding
arrangements are not normally the dominant factor in determining who controls an entity. Therefore the use
of binding arrangements to determine the relevant activities of an entity may indicate the existence of a
structured entity. Depending on the context a structured entity could be (i) an entity for which most of the
activities are predetermined, with the relevant activities limited in scope but directed through binding

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 DISCLOSURE OF INTERESTS IN OTHER ENTITIES

arrangements or (ii) an entity for which any voting rights relate to administrative tasks only and the relevant
activities are directed by means of binding arrangements.

AG21. A structured entity often has some or all of the following features or attributes:

(a) Restricted activities.

(b) A narrow and well-defined objective, such as to carry out research and development activities, provide
a source of capital or funding to an entity or provide investment opportunities for investors by passing
on risks and rewards associated with the assets of the structured entity to investors.
(c) Insufficient net assets/equity to permit the structured entity to finance its activities without subordinated
financial support.

(d) Financing in the form of multiple contractually linked instruments to investors that create concentrations
of credit or other risks (tranches).

AG22. Examples of entities that are regarded as structured entities include, but are not limited to:

(a) A partnership between a government and a private sector entity that is not a joint venture, being a
partnership established and directed by binding arrangements.

(b) Securitization vehicles.

(c) Asset-backed financings.

(d) Some investment funds.

AG23. The mere fact that a government provides funding to another entity does not make that entity a structured
entity. Nor is an entity that is controlled by voting rights a structured entity simply because, for example, it
receives funding from third parties following a restructuring.

Nature of Risks from Interests in Structured Entities that are not Consolidated (paragraphs
46–48)
AG24. In addition to the information required by paragraphs 46–48, an entity shall disclose additional information
that is necessary to meet the disclosure objective in paragraph 40(b).

AG25. Examples of additional information that, depending on the circumstances, might be relevant to an
assessment of the risks to which an entity is exposed when it has an interest in a structured entity that is not
consolidated are:

(a) The terms of an arrangement that could require the entity to provide financial support to a structured
entity that is not consolidated (e.g., liquidity arrangements or credit rating triggers associated with
obligations to purchase assets of the structured entity or provide financial support), including:

(i) A description of events or circumstances that could expose the reporting entity to a loss.
(ii) Whether there are any terms that would limit the obligation.

(iii) Whether there are any other parties that provide financial support and, if so, how the reporting
entity’s obligation ranks with those of other parties.
(b) Losses incurred by the entity during the reporting period relating to its interests in structured entities
that are not consolidated.

(c) The types of revenue the entity received during the reporting period from its interests in structured
entities that are not consolidated.

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 DISCLOSURE OF INTERESTS IN OTHER ENTITIES

(d) Whether the entity is required to absorb losses of a structured entity that is not consolidated before
other parties, the maximum limit of such losses for the entity, and (if relevant) the ranking and amounts
of potential losses borne by parties whose interests rank lower than the entity’s interest in the structured
entity that is not consolidated.
(e) Information about any liquidity arrangements, guarantees or other commitments with third parties that
may affect the fair value or risk of the entity’s interests in structured entities that are not consolidated.

(f) Any difficulties a structured entity that is not consolidated has experienced in financing its activities
during the reporting period.

(g) In relation to the funding of a structured entity that is not consolidated, the forms of funding (e.g.,
commercial paper or medium-term notes) and their weighted-average life. That information might
include maturity analyses of the assets and funding of a structured entity if the structured entity has
longer-term assets funded by shorter-term funding.

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Appendix B
Amendments to Other IPSAS
[Deleted]

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 DISCLOSURE OF INTERESTS IN OTHER ENTITIES

Basis for Conclusions

This Basis for Conclusions accompanies, but is not part of, IPSAS 38.

Objective

BC1. This Basis for Conclusions summarizes the IPSASB‘s considerations in reaching the conclusions in
IPSAS 38. As this Standard is based on IFRS 12, Disclosure of Interests in Other Entities (issued in 2011,
including amendments up to December 31, 2014), issued by the IASB, the Basis for Conclusions outlines
only those areas where IPSAS 38 departs from the main requirements of IFRS 12.

Overview

BC2. In 2012 the IPSASB commenced work on a project to update those IPSAS that dealt with accounting for
interests in controlled entities, associates and joint ventures. In October 2013 the IPSASB issued Exposure
Drafts (EDs) 48 to 52 which were collectively referred to as Interests in Other Entities. ED 52, Disclosure of
Interests in Other Entities, was based on IFRS 12, Disclosure of Interests in Other Entities, having regard to
the relevant public sector modifications to the disclosure requirements in IPSAS 6, Consolidated and
Separate Financial Statements, IPSAS 7, Investments in Associates, and IPSAS 8, Interests in Joint
Ventures. In January 2015 the IPSASB issued five new IPSAS, including IPSAS 38. These new IPSAS
supersede IPSAS 6, IPSAS 7, and IPSAS 8.

Significant Judgments and Assumptions (paragraphs 12 to 14)

BC3. The IPSASB noted that paragraph 7 of IFRS 12, requires that an entity disclose information about significant
judgments and assumptions it has made in determining the nature of its interest in another entity (for example,
control, joint control or significant influence). Although the IPSASB agreed that users need information about
how an entity has made these judgments, it noted that a public sector entity could be required to make many
judgments and assumptions in relation to particular entities, and that the disclosure of such judgments and
assumptions and changes in such judgments from period to period could result in unnecessary detail. The
IPSASB also noted that, in the public sector, decisions about the reporting entity may be made having regard
to frameworks developed in conjunction with other parties such as legislative bodies or oversight committees.
The assessments made in respect of the classification of certain types of entities as controlled entities, jointly
controlled entities, or entities subject to significant influence may be recorded in public documents other than
the financial statements. The IPSASB therefore agreed to require that an entity disclose the methodology
used to decide the existence or absence of control, joint control of an arrangement or significant influence,
either in the financial statements themselves or by way of reference to another publicly available document.

Definition of Structured Entity (paragraphs 7 and AG20 to AG23)

BC4. The IPSASB noted that the definition of “structured entity” in IFRS 12 focusses on voting or similar rights,
which tend to occur less frequently or have less significance in the public sector than in the private sector.
However, the IPSASB agreed that it was still appropriate to refer to voting or similar rights in the definition of
a structured entity because voting or similar rights may be the predominant way in which a public sector entity
establishes control over another entity. The IPSASB decided to modify the definition of a structured entity to
highlight that they occur when the conventional ways in which an entity is controlled are not the dominant
factors in deciding who controls the entity and encompass the broader range of circumstances that occur in
the public sector.

BC5. The IPSASB identified administrative arrangements and statutory provisions (legislation) as common means
by which control may be determined for many public sector entities. Accordingly, the IPSASB took the view
that the reference to “similar rights” in the definition of structured entity should encompass administrative
arrangements and statutory provisions. Thus, the ED proposed that entities for which administrative
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 DISCLOSURE OF INTERESTS IN OTHER ENTITIES

arrangements or statutory provisions are dominant factors in determining control of the entity would not be
structured entities. The IPSASB considers that the disclosures required of structured entities are appropriate,
but that in order to be useful they need to be focused on a limited class of entities (consistent with the intention
of the IASB’s requirements in relation to entities applying IFRS 12).
BC6. Some respondents to ED 52 were concerned that the definition of a structured entity could be read as
suggesting that an entity was operating in an unauthorized way or in contravention of laws. The IPSASB
noted that this was not its intention and reviewed the definition of structured entities to see if any clarification
was required. The IPSASB noted that the definition does not suggest that a structured entity would not be
required to comply with relevant statutes or administrative arrangements. Rather the definition allows for the
possibility that a small group of entities may have been established under different arrangements from the
arrangements commonly used to establish similar entities.

Investment Entities (paragraphs 27 to 34)

BC7. The IPSASB considered the investment entity disclosures required by IFRS 12 and concluded that those
disclosures were particularly appropriate in the public sector context. The IPSASB noted that, as a
consequence of the requirements in IPSAS 35 most public sector entities with investment entities would be
required to make these disclosures.

BC8. The IPSASB considered whether a non-investment controlling entity accounting for investment entities at fair
value should be required to make any additional disclosures. The IPSASB considered that the disclosures
required in relation to investment entities were appropriate and should also be provided in the consolidated
financial statements of a controlling entity with investment entities.

Non-quantifiable Ownership Interests (paragraphs 49 and 50)

BC9. The scope of IPSAS 36, Investments in Associates and Joint Ventures, is limited to “quantifiable ownership
interests”. The IPSASB noted that respondents supported this proposal, but considered that disclosure of
information about an entity’s non-quantifiable ownership interests in other entities would be appropriate. The
IPSASB agreed to require, in this Standard, disclosure of information about non-quantifiable ownership
interests.

Controlling Interests Acquired with the Intention of Disposal (paragraphs 50 to 57)

BC10. Some respondents to ED 52 proposed that the IPSASB require disclosures about temporary control (either
by developing a standard based on IFRS 5, Non-current Assets Held for Sale and Discontinued Operations,
or by adding disclosures to this Standard). The IPSASB considered, and rejected, the idea of requiring
disclosure of all controlled investments held for sale on the grounds that it was too broad. Nevertheless, the
IPSASB agreed that some disclosure about controlling interests intended to be held for a limited time could
be of interest to users. For example, the IPSASB considered that users would be interested in information
about interventions to prevent the consequences of the failure of an entity, or acquisitions of entities which
will subsequently be redistributed to achieve policy objectives. The IPSASB agreed that its objective was to
require disclosure of information about controlling interests where there was an active intention to dispose of
the interest, both at the time of the acquisition and at the reporting date.
BC11. In considering the information to be disclosed the IPSASB agreed that the requirements should be general
in nature. The IPSASB acknowledged that the circumstances in which a controlling interest is acquired or
disposed of could vary widely (for example, a controlling interest might be acquired by virtue of providing
guarantees). In addition, entities might wish to provide information about the transactions or events giving
rise to such controlling interests, and the IPSASB did not wish to be unnecessarily prescriptive about the type
of information that should be provided. The IPSASB therefore agreed to require disclosures to assist users

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 DISCLOSURE OF INTERESTS IN OTHER ENTITIES

to understand the impact of consolidating such controlling interests on the consolidated financial statements
by reference to the effect on the main aspects of the financial statements.

BC12. The IPSASB acknowledged that the expected method of disposal might be under consideration at the
reporting date and that plans might change from one period to another. It also acknowledged that disposal
might occur in stages. The IPSASB therefore agreed to require disclosure of the “current status of the
approach to disposal”.

BC13. The IPSASB considered whether to limit the disclosures to situations where control was expected to exist for
a specified time period, such as one or two years. The IPSASB decided not to specify a time period. It
considered that limiting the disclosures to controlling interests and situations where there was still an active
intention to dispose of the interest would lead to informative disclosures without overwhelming readers with
too much detail.

Revision of IPSAS 38 as a result of the IPSASB’s The Applicability of IPSAS, issued in April 2016

BC14. The IPSASB issued The Applicability of IPSAS in April 2016. This pronouncement amends references in all
IPSAS as follows:

(a) Removes the standard paragraphs about The Applicability of IPSAS to “public sector entities other
than GBEs” from the scope section of each Standard;

(b) Replaces the term “GBE” with the term “commercial public sector entities”, where appropriate; and

(c) Amends paragraph 10 of the Preface to International Public Sector Accounting Standards by providing
a positive description of public sector entities for which IPSAS are designed.

The reasons for these changes are set out in the Basis for Conclusions to IPSAS 1.

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 DISCLOSURE OF INTERESTS IN OTHER ENTITIES

COMPARISON WITH IFRS 12

IPSAS 38, Disclosure of Interests in Other Entities is drawn primarily from IFRS 12, Disclosure of Interests in Other
Entities (issued in 2011, including amendments up to December 31, 2014). At the time of issuing this Standard, the
IPSASB has not considered the applicability to public sector entities of IFRS 9, Financial Instruments. References to
IFRS 9 in IFRS 12 are therefore replaced by references to the IPSAS dealing with financial instruments.
The main differences between IPSAS 38 and IFRS 12 are as follows:

• IPSAS 38 uses different terminology, in certain instances, from IFRS 12. The most significant examples are
the use of the terms “net assets/equity,” “economic entity,” “controlling entity,” “controlled entity”, “revenue” in
IPSAS 38. The equivalent terms in IFRS 12 are “equity,” “group,” “parent,” “subsidiary” and “income.”

• The definition of a structured entity in IPSAS 38 acknowledges the differing ways in which control may be
obtained in the public sector.
• IPSAS 38 requires that a controlling entity that controls an investment entity, and is not itself an investment
entity, disclose information in respect of unconsolidated investment entities. IFRS 12 does not require such
disclosures by a controlling entity that controls an investment entity, and is not itself an investment entity
because IFRS 10 requires that such a controlling entity consolidate controlled investment entities.

• IPSAS 38 requires the disclosure of information about non-quantifiable ownership interests. IFRS 12 does not
specify such disclosures.
• IPSAS 38 requires the disclosure of information about interests in entities that were acquired with the intention
of disposal and which are still held for disposal. IFRS 12 does not specify such disclosures. However, IFRS 5,
Non-current Assets Held for Sale and Discontinued Operations requires disclosures about non-current assets
held for sale.

IPSAS 38 COMPARISON WITH IFRS 12 1380