Definition of a structured entity

Learning objectives

• Explain that a structured entity is designed so that voting rights are not the dominant factor in deciding who controls it.L1
• Identify, in a case, whether an entity is a structured entity.L2

Normative references

• IFRS 12A structured entity is an entity designed so that voting or similar rights are not the dominant factor in deciding who controls it, for example when any voting rights relate to administrative tasks only and the relevant activities are directed through contractual arrangements. An interest in another entity is a contractual or non-contractual involvement that exposes the entity to variability of returns from the other entity's performance (for example holding equity or debt instruments, providing funding, liquidity support, credit enhancement or guarantees; paras. B7 to B9). Income from a structured entity includes, among other things, fees, interest, dividends, gains or losses on remeasuring or derecognising interests, and gains or losses on transferring assets and liabilities to the structured entity.
• IFRS 12 §B22A structured entity often has restricted activities, a narrow and well-defined objective, insufficient equity to permit it to finance its activities without subordinated financial support, or financing in the form of multiple contractually linked instruments.
• IFRS 12 §B23Examples of structured entities: securitisation vehicles, asset-backed financings, some investment funds.

Original summaries of the paragraphs (reference register), never a quotation of the standard.

3 questions

• Any entity that has few voting rights is a structured entity within the meaning of IFRS 12.L1
• Titri is a securitisation vehicle: its voting rights relate to administrative tasks only, and its relevant activities are directed by contractual arrangements (case facts). How is Titri characterised under IFRS 12?L2
• Boa SA is a fund whose units carry a voting right proportional to contributions, exercised at a meeting; the meeting decides the investment policy and the other relevant activities, and no contractual arrangement directs those activities in its place (case facts). How is Boa characterised under IFRS 12?L2