5.3.6
Credit risk: illustrative disclosures ................................................. 4209
5.4
Liquidity risk ........................................................................................................ 4211
5.4.1
Information provided to key management ................................... 4211
5.4.2 Maturity
analyses ................................................................................ 4211
5.4.2.A
Time bands ...................................................................... 4212
5.4.2.B
Cash flows: general requirements .............................. 4213
5.4.2.C Cash
flows: borrowings ................................................ 4214
Financial
instruments:
Presentation and disclosure 4165
5.4.2.D Cash
flows:
derivatives ................................................. 4215
5.4.2.E
Cash flows: embedded derivatives ............................. 4216
5.4.2.F
Cash flows: financial guarantee contracts and
written options ............................................................... 4216
5.4.2.G Examples
of
disclosures in practice ........................... 4217
5.4.3
Management of associated liquidity risk ....................................... 4221
5.4.4 Puttable
financial
instruments classified as equity ...................... 4221
5.5
Market risk .......................................................................................................... 4222
5.5.1
‘Basic’ sensitivity analysis ................................................................. 4222
5.5.2
Value-at-risk and similar analyses ................................................. 4227
5.5.3 Other
market
risk disclosures ......................................................... 4229
5.6
Quantitative disclosures: other matters ........................................................ 4230
5.6.1
Concentrations of risk ...................................................................... 4230
5.6.2 Operational
risk
..................................................................................
4231
5.6.3 Capital
disclosures .............................................................................. 4231
6 TRANSFERS OF FINANCIAL ASSETS ............................................................ 4231
6.1
The meaning of ‘transfer’ ................................................................................. 4232
6.2
Transferred financial assets that are not derecognised in their
entirety ................................................................................................................. 4232
6.3
Transferred financial assets that are derecognised in their entirety ....... 4234
6.3.1
Meaning of continuing involvement .............................................. 4234
6.3.2 Disclosure
requirements .................................................................. 4236
7 PRESENTATION ON THE FACE OF THE FINANCIAL STATEMENTS
AND RELATED DISCLOSURES ..................................................................... 4239
7.1
Gains and losses recognised in profit or loss................................................ 4239
7.1.1
Presentation on the face of the statement of
comprehensive income (or income statement) ........................... 4239
7.1.2
Further analysis of gains and losses recognised in profit or
loss ........................................................................................................ 4242
7.1.3 Offsetting
and hedges ....................................................................... 4243
7.1.4 Embedded
derivatives ...................................................................... 4244
7.1.5
Entities whose share capital is not equity .................................... 4244
7.2
Gains and losses recognised in other comprehensive income ................. 4245
7.3 Statement
of
changes in equity ....................................................................... 4246
7.4 Statement
of
financial position ....................................................................... 4247
7.4.1
Offsetting financial assets and financial liabilities ....................... 4247
7.4.1.A
Criterion (a): Enforceable legal right of set-off ....... 4248
7.4.1.B
Master netting agreements ........................................... 4251
4166 Chapter 50
7.4.1.C
Criterion (b): Intention to settle net or realise
the gross amount simultaneously (‘the net
settlement criterion’) ..................................................... 4251
7.4.1.D
Situations where offset is not normally
appropriate ..................................................................... 4253
7.4.1.E Cash
pooling
arrangements ........................................ 4254
7.4.1.F Offsetting
collateral amounts ...................................... 4255
7.4.1.G
Unit of account .............................................................. 4256
7.4.2
Offsetting financial assets and financial liabilities:
disclosure ............................................................................................ 4256
7.4.2.A
Objective ........................................................................ 4256
7.4.2.B Scope
................................................................................
4257
7.4.2.C Disclosure
requirements...............................................
4257
7.4.2.D
Offsetting disclosures – illustrative examples ........ 4260
7.4.3
Assets and liabilities .......................................................................... 4264
7.4.4
The distinction between current and non-current assets
and liabilities ....................................................................................... 4266
7.4.4.A
Derivatives ..................................................................... 4266
7.4.4.B Convertible loans .......................................................... 4266
7.4.4.C
Long-term loans with repayment on demand
terms ................................................................................ 4267
7.4.4.D
Debt with refinancing or roll over agreements ....... 4267
7.4.4.E Loan
covenants ............................................................. 4268
7.4.5
Equity ................................................................................................... 4268
7.4.6
Entities whose share capital is not equity ............................
........ 4269
7.5
Statement of cash flows ..................................................................................... 4271
8 EFFECTIVE DATES AND TRANSITIONAL PROVISIONS ............................... 4271
8.1
Adoption of IFRS 9: effective date and transitional provisions ................ 4271
8.2
Adoption of IFRS 9: disclosure requirements ............................................... 4271
8.3 IFRS 16 .................................................................................................................. 4273
9 FUTURE DEVELOPMENTS .......................................................................... 4273
9.1
General developments ....................................................................................... 4273
9.2 Enhanced
Disclosure Task Force ................................................................... 4274
List of examples
Example 50.1:
Amounts related to hedged instruments ........................................ 4179
Example 50.2:
Amounts related to hedged items ................................................... 4180
Example 50.3:
Amounts affecting the statement of comprehensive
income. ................................................................................................. 4181
Financial
instruments:
Presentation and disclosure 4167
Example 50.4:
Disclosure of deferred day 1 profits ................................................ 4189
Example 50.5:
Information about changes in the loss allowance ....................... 4202
Example 50.6:
Information about credit risk exposures and significant
credit risk concentrations ................................................................ 4206
Example 50.7:
Information about credit risk exposures using a provision
matrix ................................................................................................... 4207
Example 50.8:
Certain disclosures of impairment allowances by a bank
for one class of lending ..................................................................... 4209
Example 50.9:
Maturity analysis: floating rate borrowing ..................................... 4215
Example 50.10:
Illustration of how sensitivity disclosures can be
determined .......................................................................................... 4223
Example 50.11:
Illustrative disclosure of sensitivity analyses ............................... 4226
Example 50.12:
Quantitative disclosures for transferred assets not fully
derecognised........................................................................................ 4234
Example 50.13:
Quantitative disclosures for transferred assets fully
derecognised ....................................................................................... 4238
Example 50.14:
Statement of comprehensive income (or income
statement) format for a mutual fund .............................................. 4245
Example 50.15:
Statement of comprehensive income (income statement)
format for a co-operative ................................................................. 4245
Example 50.16:
Illustration of offsetting disclosures ............................................... 4260
Example 50.17:
Statement of financial position format for a mutual fund ......... 4269
Example 50.18:
Statement of financial position format for a co-operative ........ 4270
4168 Chapter 50
4169
Chapter 50
Financial instruments:
Presentation and
disclosure
1 INTRODUCTION
Disclosure of financial instruments is largely dealt with in IFRS 7 – Financial
Instruments: Disclosures – and presentation in IAS 32 – Financial Instruments:
Presentation. The development of these standards is outlined below.
1.1 IAS
32
The original version of IAS 32 – Financial Instruments: Disclosure and Presentation –
was published in March 1995 and, as its title suggested, contained requirements about
the disclosures entities should make about financial instruments. These requirements
were superseded by IFRS 7 (see 1.2 below) which also changed the name of the standard.
One of the topics IAS 32 continues to address is when entities should offset financial assets
and financial liabilities, the associated requirements for which are discussed at 7.4.1 below.
It also addresses the classification of financial instruments as equity, financial liabilities or
financial assets, a topic covered in Chapter 43. IAS 32 has been amended a number of
times since publication, including in December 2011 when the IASB addressed certain
practical problems it had identified in its offsetting requirements.
1.2 IFRS
7
IFRS 7 emerged from a project principally focused on revising IAS 30 – Disclosures in
the Financial Statements of Banks and Similar Financial Institutions – a standard which,
at the time, set out additional disclosure requirements for banks and similar entities. It
was published in August 2005 and superseded IAS 30.
The standard has been subject to significant amendment since its original publication, in
particular to address concerns raised during the financial crisis. These amendments aimed
to improve the disclosures entities provide in a number of areas including liquidity risk,
transfers of financial assets, offsetting and fair values (most of the disclosures for which
are now included in IFRS 13 – Fair Value Measurement – see Chapter 14).
4170 Chapter 50
In July 2014, the IASB published a substantially final version of IFRS 9 – Financial
Instruments – its replacement for IAS 39 – Financial Instruments: Recognition and
Measurement. The new standard changed the framework for classifying and measuring
financial assets and financial liabilities; introduced an expected loss approach for
determining impairment losses on financial assets and amended the requirements for
applying hedge accounting. It also made a number of consequential amendments to IFRS 7,
introducing extensive new disclosures in respect of impairment (see 5.3 below) and hedge
accounting (see 4.3 below) as well as making other changes. IFRS 9 and its consequential
amendments to IFRS 7 are effective for periods beginning on or after 1 January 2018.
The objective of IFRS 7 is to require entities to provide disclosures in their financial
statements that enable users to evaluate: [IFRS 7.1]
• the significance of financial instruments for the entity’s financial position and
performance; and
• the nature and extent of risks arising from financial instruments to which the entity
is exposed during the period and at the reporting date, and how the entity manages
those risks.
These objectives manifest themselves in two disclosure principles (see 4 and 5 below)
which are designed to complement those for recognising, measuring and presenting
financial assets and financial liabilities in IAS 32 and IFRS 9. [IFRS 7.2].
/> 2
SCOPE OF IFRS 7
2.1
Entities required to comply with IFRS 7
Although IFRS 7 evolved from a project to update IAS 30 (which applied only to banks
and similar financial institutions) it applies to all entities preparing their financial
statements in accordance with IFRS that have financial instruments. [IFRS 7.BC6]. The
IASB considered exempting certain entities, including insurers, subsidiaries and those
that are small or medium-sized (SMEs), but decided that IFRS 7 should apply to all
entities applying IFRS. [IFRS 7.BC9, BC10, BC11]. Entities applying the IFRS for SMEs are
required to provide only reduced disclosures about financial instruments.
2.2
Financial instruments within the scope of IFRS 7
Chapter 41 at 3 and 4 contains a detailed explanation of the scope of IFRS 7. It is
important to recognise that the scope of IFRS 7 is generally somewhat wider than that
of IFRS 9. Therefore IFRS 7 can apply to instruments that are not subject to the
recognition and measurement provisions of IFRS 9. [IFRS 7.4]. For example, lease
liabilities and certain loan commitments are within the scope of IFRS 7 even though
they are not, or not wholly, within the scope of IFRS 9. Conversely, some financial
instruments within the scope of IFRS 9, particularly those held in disposal groups or as
part of discontinued operations, are not subject to all of the requirements in IFRS 7.
2.3 Interim
reports
IAS 34 – Interim Financial Reporting – sets out the minimum content of an interim financial
report. When an event or transaction is significant to an understanding of the changes in an
Financial
instruments:
Presentation and disclosure 4171
entity’s financial position or performance since the last annual financial period, IAS 34
requires the report to provide an explanation of, and update to, the information included in
the last annual financial statements. [IAS 34.15]. The standard emphasises that relatively
insignificant updates need not be provided. [IAS 34.15A]. The following disclosures which
relate to financial instruments are required if significant: [IAS 34.15B]
• losses recognised from the impairment of financial assets;
• changes in the business or economic circumstances that affect the fair value of the
entity’s financial assets and financial liabilities, whether recognised at fair value or
amortised cost;
International GAAP® 2019: Generally Accepted Accounting Practice under International Financial Reporting Standards Page 826
