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IASB issues ED 7 on financial instruments disclosures

  • IASB Exposure Draft (original) Image

22 Jul 2004

The IASB has issued an exposure draft that would add certain new disclosures about financial instruments to those currently required by IAS 32, would replace the disclosures now required by IAS 30, and would put all of those financial instruments disclosures together in a new standard.

IAS 32 would then deal only with financial instruments presentation matters. ED 7 Financial Instruments: Disclosures would require disclosures in the following areas, among others:

  • Disclosure of the significance of financial instruments for an entity's financial position and performance (this would incorporate many of the requirements previously in IAS 32)
  • Qualitative and quantitative disclosures about exposure to risks arising from financial instruments. The qualitative disclosures describe management's objectives, policies, and processes for managing those risks. The quantitative disclosures provide information about the extent to which the entity is exposed to risk, based on information provided internally to the entity's key management personnel. Together, these disclosures provide an overview of the entity's use of financial instruments and the exposures to risks they create
  • Disclosures about credit risk, including credit enhancements and the fair value of and other information about collateral received
  • Disclosures about interest rate risk, which would include both cash flow interest rate risk and fair value interest rate risk. Sensitivity analyses for interest rate and foreign exchange rate risks would be required
  • Disclosures about market risk, including information about asset quality and the liquidity of the markets in which a financial asset might be disposed.
  • Disclosures about other risks, sometimes called residual value risks, that underlie financial instruments and that are not captured by the other disclosures
  • Details about an entity's own equity; qualitative information about the entity's objectives, policies, and processes for managing capital; whether during the period it complied with any capital targets set by management and any externally imposed capital requirements; and if it has not complied, the consequences of such non-compliance.
ED 7 would delete the current IAS 30 disclosures about contingencies, commitments, and general banking risks.

Click for the IASB Press Release (PDF 31k). ED 7 will be available for public download from www.iasb.org starting 2 August 2004.

Comment deadline is 22 October 2004. The Board expects to issue a final standard in early 2005. It would be mandatory for financial periods beginning on or after 1 January 2007. Early adoption will be encouraged, and therefore that standard could be applied by 2005 first time adopters.

 

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