International Financial Reporting Standards

The views expressed in this presentation are those of the

presenter, not necessarily those of the IASB or IFRS Foundation.
IFRS Foundation | 30 Cannon Street | London EC4M 6XH | UK. www.ifrs.org
IFRS 7 Financial
Instruments Disclosures
Joint World Bank and IFRS Foundation train the
trainers workshop hosted by the ECCB
30 April to 4 May 2012
IFRS 7 sets out disclosures of financial instruments
The presentation, recognition and measurement of
financial instruments are the subjects of
IAS 32 Financial Instruments: Presentation
IAS 39 Financial Instruments: Recognition and
Measurement
IFRS 9 Financial Instruments (being developed in
phases) is intended to ultimately replace IAS 39.
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Introduction
IFRS Foundation | 30 Cannon Street | London EC4M 6XH | UK. www.ifrs.org
Information that enables users to evaluate the
significance of financial instruments for the entitys
financial position and financial performance.
Information (qualitative and quantitative) that enables
users to evaluate
the nature and extent of risks arising from financial
instruments to which the entity is exposed at the
end of the reporting period.
including information about how the entity manages
its exposure to those financial risks.
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Disclosure principles
IFRS Foundation | 30 Cannon Street | London EC4M 6XH | UK. www.ifrs.org
Qualitative information about exposure to risks arising
from financial instruments.
The disclosures describe managements objectives,
policies and processes for managing those risks
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Disclosure requirements
IFRS Foundation | 30 Cannon Street | London EC4M 6XH | UK. www.ifrs.org
Quantitative information about exposure to risks arising
from financial instruments, including specified minimum
disclosures about
credit risk,
liquidity risk and
market risk.
These disclosures provide information about the extent
to which the entity is exposed to risk, based on
information provided internally to the entitys key
management personnel.
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Disclosure requirements continued
IFRS Foundation | 30 Cannon Street | London EC4M 6XH | UK. www.ifrs.org
The IFRS for SMEs requires less detailed
disclosure of financial instruments.
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Comparison to the IFRS for SMEs
IFRS Foundation | 30 Cannon Street | London EC4M 6XH | UK. www.ifrs.org
Qualitative and quantitative information to evaluate the
nature and extent of the entitys exposure to and
management of risks arising from financial instruments,
including:
amounts that best represent maximum exposure to
credit risk.
sensitivity analysis for each type of market risk
showing how profit or loss and equity would have
been affected by changes in relevant variables that
are reasonably possible.
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Judgements and estimates
IFRS Foundation | 30 Cannon Street | London EC4M 6XH | UK. www.ifrs.org
Fair value information is required to be provided for all
financial assets and liabilities (with limited exceptions)
irrespective of whether they are carried at FV.
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Judgements and estimates continued
IFRS Foundation | 30 Cannon Street | London EC4M 6XH | UK. www.ifrs.org
International Financial Reporting Standards
The views expressed in this presentation are those of the
presenter, not necessarily those of the IASB or IFRS Foundation
Offsetting
Financial Assets and
Financial Liabilities

IFRS Foundation | 30 Cannon Street | London EC4M 6XH | UK. www.ifrs.org
Disclosure requirements
Respond to comments:
preparers: Cost-benefit scope, class vs.
counterparty, existing disclosure requirements
investors: Need for information about gross and net
exposures
Provide information about exposures in normal course
and in times of stress
Dont reconcile IFRSs and US GAAP but allow entities
to be compared on a like basis
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IFRS Foundation | 30 Cannon Street | London EC4M 6XH | UK. www.ifrs.org
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Gross
amounts
before
offsetting

(A)
Gross amounts
set off


(B)
Net amounts
presented
in balance
sheet
(C)
Other amounts
in scope but
not set off in
balance sheet
(D)
Net amounts



(E)
[same for
all preparers]
[depends on
offsetting
model]
[depends on
offsetting model]
[depends on
offsetting model]
[same for
all preparers]
Disclosure requirements continued
Proposed disclosure:
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a. b. c. d. e.
Financial assets Gross carrying
amounts (before
offsetting)
Gross
amounts
offset
Net amount presented in
statement of financial
position
(a-b)
Amounts available to be offset (but
not set off in stmt of financial
position)
(ie in bankruptcy or default)
Net exposure
(c-d)
Category Financial
instruments
Cash collateral
Derivatives 100 (80) 20 (10) 10 -
Assume an entity has a recognised derivative asset with a fair
value of 100 and a recognised derivative liability with a fair value
of 80 that meet the criteria for offsetting. The entity has another
derivative liability with a fair value of 10 and cash collateral of 20
that do not meet the criteria for offsetting.
The financial assets would be disclosed as follows:
Example:
Disclosure
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Same example Assume an entity has a recognised derivative
asset with a fair value of 100 and a recognised derivative liability
with a fair value of 80 that meet the criteria for offsetting. The
entity has another derivative liability with a fair value of 10 and
cash collateral of 20 that do not meet the criteria for offsetting.
The financial liabilities would be disclosed as follows:
Example:
Disclosure continued
a. b. c. d. e.
Financial
liabilities
Gross carrying
amounts (before
offsetting)
Gross
amounts
offset
Net amount presented in
statement of financial
position
(a-b)
Amounts available to be offset (but
not set off in stmt of financial
position)
(ie in bankruptcy or default)
Net exposure
(c-d)
Category Financial
instruments
Cash collateral
Derivatives 90 (80) 10 - 10 -
IFRS Foundation | 30 Cannon Street | London EC4M 6XH | UK. www.ifrs.org
Application guidance to IAS 32
Comments received highlighted inconsistencies in the
application of the offsetting requirements in IAS 32
In December 2011, the IASB separately clarified the
application of the offsetting criteria in IAS 32:
Legally enforceable right of set-off:
The normal course of business;
The event of default; and
The event of insolvency or bankruptcy
Some gross settlement systems are considered
equivalent to net settlement if they eliminate or result in
insignificant credit and liquidity risk and process
receivables and payables in a single settlement process
or cycle.

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IFRS Foundation | 30 Cannon Street | London EC4M 6XH | UK. www.ifrs.org
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Questions or comments?
Expressions of individual
views by members of the
IASB and its staff are
encouraged. The views
expressed in this
presentation are those of the
presenter.

Official positions of the IASB
on accounting matters are
determined only after
extensive due process and
deliberation.
IFRS Foundation | 30 Cannon Street | London EC4M 6XH | UK. www.ifrs.org
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The requirements are set out in International Financial
Reporting Standards (IFRSs), as issued by the IASB at
1 January 2012 with an effective date after 1 January
2012 but not the IFRSs they will replace.
The IFRS Foundation, the authors, the presenters and
the publishers do not accept responsibility for loss
caused to any person who acts or refrains from acting
in reliance on the material in this PowerPoint
presentation, whether such loss is caused by
negligence or otherwise.
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IFRS Foundation | 30 Cannon Street | London EC4M 6XH | UK. www.ifrs.org