IFRS 12 , para 7(a), IFRS 10 paras B2-B42, significant judgements , control where less than half voting power held

SoftBank Group Corp. – Annual report – 31 March 2020

Industry: telecoms, software

  1. Significant judgments and estimates

In preparing the consolidated financial statements under IFRS, management makes judgments, estimates, and assumptions that affect the application of accounting policies and reported amounts of assets, liabilities, revenue, and expenses.

These estimates and underlying assumptions are based on management’s best judgments, through their evaluation of various factors that were considered reasonable as of the respective period end, based on historical experience and by collecting available information.

By the nature of its estimates or assumptions, however, actual results in the future may differ from those projected estimates or assumptions.

Estimates and underlying assumptions are continuously reviewed. Revisions to accounting estimates are recognized in the fiscal year in which the estimates are revised as well as in the subsequent fiscal years.

(1) Significant judgments (extract)

Significant judgments that affect the amounts recognized in the Group’s consolidated financial statements are as follows:

a. Judgments of whether an entity is controlled by the Company in determining the scope of consolidation (“(1) Basis of consolidation” under “Note 3. Significant accounting policies”)

The Company assesses whether or not it has the ability to control subsidiaries based on whether the Company has the practical ability to direct the relevant activities of the subsidiary unilaterally. In making this judgment, the Company considers the absolute size of its equity share, voting interest, contractual rights, and any other factors that may indicate the Company’s ability to direct the relevant activities of the entity. Upon completion of the assessment, the Company will then determine if the subsidiary should be consolidated, accounted for using the equity method, or accounted for as an investment. For further details, refer to “Note 19. Major subsidiaries” and “Note 21. Structured entities.”

3. Significant accounting policies (extract)

a. Subsidiaries

A subsidiary is an entity that is controlled by the Group.

The Company controls an entity when the Company is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity.

The subsidiaries’ financial statements are consolidated from the date when control is acquired (“acquisition date”) until the date when control is lost. For the accounting policies for transactions under common control at the time of consolidation, refer to “(2) Business combinations” under “Note 3. Significant accounting policies.”

Where the accounting policies adopted by subsidiaries differ from the accounting policies of the Group, adjustments are made to the financial statements of such subsidiaries as necessary.

Non-controlling interests consist of those interests at the acquisition date and any adjustments for subsequent changes in those interests.

Total comprehensive income of subsidiaries is generally attributed to the owners of the Company and to the non-controlling interests, even if this results in the non-controlling interests having a deficit balance.

All intragroup balances and transactions and unrealized gains or losses arising from intragroup transactions are eliminated on consolidation.

Changes in the Group’s ownership interests in subsidiaries that do not result in the Group losing control over the subsidiaries are accounted for as equity transactions. The carrying amounts of the Group’s interests and the non-controlling interests are adjusted to reflect the changes in its interests in the subsidiaries.

Any difference between the amount by which the non-controlling interests are adjusted and the fair value of the consideration paid or received is recognized directly in equity and attributed to owners of the Company.

When the Group loses control of a subsidiary, a gain or loss is calculated as the difference between:

  • the aggregate of the fair value of the consideration received and the fair value of any retained interest; and
  • the net carrying amount of the assets (including goodwill), liabilities and non-controlling interests of the subsidiary at the date that control is lost.

Any amounts previously recognized in accumulated other comprehensive income in relation to the former subsidiaries are reclassified to profit or loss.

19. Major subsidiaries (extract)

Organizational structure

The Group’s major subsidiaries are as follows:

Notes:

  1. As noted in “(2) Business combinations” under “Note 3. Significant accounting policies,” regardless of the actual date of the business combination transaction under common control, the Group retrospectively consolidates the financial statements of the transferred companies as if such transactions were executed by the Group on the later of the control acquisition date of the transferred companies by parent company or the opening balance sheet date of the comparative period as part of the consolidated financial statements of the Group. For details of the actual acquisition dates and accounting treatment of the major subsidiaries listed in the table above, refer to “Note 6. Business combinations.”
  2. The Group does not own a majority of the voting rights of WCP. However, directors and executive officers of the Company account for the majority of the members of WCP’s Board of Directors, and WCP’s business activities depend heavily on the Company. Accordingly, the Company determined that it controls WCP and consequently consolidated it.
  3. The Group does not own a majority of the voting rights of Z Holdings Corporation. However, the Group owns 44.6% of the voting rights of Z Holding Corporation and holds the majority of the seats on Z Holdings Corporation’s Board of Directors. As a result, Z Holdings Corporation is considered to be substantially controlled by the Group and became a subsidiary of the Group considering the dispersion of holdings of the other vote holders and the pattern of voting in past general meetings of shareholders.
  4. The Group does not own a majority of the voting rights of ASKUL Corporation. However, taking into consideration that the Group owns 45.1% of the voting rights of ASKUL Corporation, and the dispersion of holdings of the other vote holders and the voting patterns of past shareholders’ meetings, as a result, ASKUL Corporation is considered substantially controlled by the Group and became a subsidiary of the Group.
  5. The Group does not own a majority of the voting rights of The Japan Net Bank, Limited. However, the Group owns 46.6% of the voting rights of The Japan Net Bank, Limited, and since it holds the majority of the members of the Board of Directors of The Japan Net Bank, Limited. As a result, The Japan Net Bank, Limited is considered substantially controlled by the Group and became a subsidiary of the Group.