IFRS 7 FINANCIAL INSTRUMENTS: DISCLOSURES
HISTORY OF IFRS= 7
Project on bank disclosures carried over from IASC
22 July 2004	= Exposure Draft ED 7 Financial Instruments: Disclosures Click for Press Release on ED (PDF 31k).
18 August 2005	IFRS 7 Financial Instruments: Disclosures issued Click for IASB Press Release (PDF 57k).
1 January 2007	Effective date of IFRS 7
RELATED INTERPRETATIONS
Issues Relating to This Standard that IFRIC Did Not Add to Its Agenda=
AMENDMENTS UNDER CONSIDERATION BY IASB
None

SUMMARY OF IFRS= 7

<= span style=3D'font-size:10.0pt;font-family:Arial'>Special Edition of Deloi= tte's IAS Plus Newsletter on IFRS 7

Clic= k to download a special edition of our IAS Plus Newsle= tter on IFRS 7 (PDF 56k).

IFRS 7 Disclosure Checklist

Click = to download an IFRS 7 Disclosure Checklist (PDF 240k) that supplements our general IFRS presentation and disclosure checklist for 2005.

Overview of IFRS 7<= span style=3D'font-size:9.0pt;font-family:Arial;color:black'>

Adds certain new discl= osures about financial instruments to those currently required by IAS 32;=
Replaces the disclosur= es now required by IAS 30; and
Puts all of those fina= ncial instruments disclosures together in a new standard on Financial Instruments: Disclosures. The remaining parts of IAS 32 deal o= nly with financial instruments presentation matters.

Disclosure Requirements of IFRS= 7:

An entity must group i= ts financial instruments into classes of similar instruments and, when disclosures are required, make disclosures by class. [IFRS 7.6]
The two main categorie= s of disclosures required by IFRS 7 are:

1. Information about the significance of financial instruments.

2. Information about the nature and exte= nt of risks arising from financial instruments.

Information about the significance of financial instruments

Balance Sheet

Disclosure of the significance of financial instruments for an entity's financial position and performance. [IFRS 7.7] This includes disclosures for each of the following categories: [IFRS 7.8]
- Financial assets meas= ured at fair value through profit and loss, showing separately those h= eld for trading and those designated at initial recognition.
- Held-to-maturity inve= stments.
- Loans and receivables= .
- Available-for-sale as= sets.
- Financial liabilities= at fair value through profit and loss, showing separately those held= for trading and those designated at initial recognition. <= /span>
- Financial liabilities measured at amortised cost.
Special disclosures ab= out financial assets and financial liabilities designated to be measur= ed at fair value through profit and loss, including disclosures about credit risk and market risk and changes in fair values [IFRS 7.9-1= 0]
Reclassifications of financial instruments from fair value to amor= tised cost or vice versa [IFRS 7.12]
Disclosures about derecognitions, including transfers of finan= cial assets for which derecogntion accounti= ng is not permitted by IAS 39 [IFRS 7.13]
Information about fina= ncial assets pledged as collateral and about financial or non-financial assets held as collateral [IFRS 7.14-15]
Reconciliation of the allowance account for credit losses (bad debts). [IFRS 7.16] =
Information about comp= ound financial instruments with multiple embedded derivatives. [IFRS 7.= 17]
Breaches of terms of l= oan agreements. [IFRS 7.18-19]

Income Statement and Equity

Items of income, expen= se, gains, and losses, with separate disclosure of gains and losses fr= om: [IFRS 7.20(a)]

Financial assets meas= ured at fair value through profit and loss, showing separately those h= eld for trading and those designated at initial recognition.
Held-to-maturity investments.
Loans and receivables= .
Available-for-sale as= sets.
Financial liabilities measured at fair value through profit and loss, showing separately those held for trading and those designated at initial recognitio= n.
Financial liabilities measured at amortised cost.

Interest income and in= terest expense for those financial instruments that are not measured at f= air value through profit and loss [IFRS 7.20(b)]
Fee income and expense= [IFRS 7.20(c)]
Amount of impairment l= osses on financial assets [IFRS 7.20(d)]
Interest income on imp= aired financial assets [IFRS 7.20(e)]

Other Disclosures

Accounting policies for financial instruments [IFRS 7.21]
Information about hedge accounting, including: [IFRS 7.22]

Description of each h= edge, hedging instrument, and fair values of those instruments, and nat= ure of risks being hedged.
f= or cash flow hedges, the periods in which the cash flows are expected to occur, when they = are expected to enter into the determination of profit or loss, and a description of any forecast transaction for which hedge accounting had previously been used but which is no longer expected to occur= .
If a gain or loss on a hedging instrument in a cash flow hedge has been recognised directly in equity, an entity should disclose the following: [IAS 7.23]

The amount that was = so recognised in equity during the period.
The amount that was removed from equity and included in profit or loss for the perio= d.
The amount that was removed from equity during the period and included in the initial measurement of the acquisition cost or other carrying amount of a non-financial asset or non- financial liability in a hedged high= ly probable forecast transaction.

For fair value hedges, information about the fair value changes of the hedging instrument and the hedged item. [IFRS 7.24]
Hedge ineffectiveness= recognised in profit and loss (separately f= or cash flow hedges and hedges of a net investment in a foreign operation). [IFRS 7.24]

Information about the = fair values of each class of financial asset and financial liability, a= long with: [IFRS 7.25-30]

Comparable carrying amounts.
Description of how fa= ir value was determined.
Detailed information = if fair value cannot be reliably measured.

Note that disclosure of fair values is not required when t= he carrying amount is a reasonable approximation of fair value, such as short-term trade receivables and payables, or for instruments whose fair value cannot be measured reliably. [IFRS 7.29]

Nature and extent of exposure to risks arising from financial instruments

Qualitative disclosures [IFRS 7.33]

The qualitative disclo= sures describe:

Risk exposures for ea= ch type of financial instrument.
Management's objectiv= es, policies, and processes for managing those risks.
Changes from the prior period.

Quantitative disclosures

The quantitative discl= osures provide information about the extent to which the entity is expose= d to risk, based on information provided internally to the entity's key management personnel. These disclosures include: [IFRS 7.34] =

Summary quantitative = data about exposure to each risk at the reporting date.
Disclosures about cre= dit risk, liquidity risk, and market risk as further described below.=
Concentrations of ris= k.

Credit Risk

Disclosures about cred= it risk include: [IFRS 7.36-38]

Maximum amount of exp= osure (before deducting the value of collateral), description of collateral, information about credit quality of financial assets = that are neither past due nor impaired, and information about credit quality of financial assets whose terms have been renegotiated. [= IFRS 7.36]
For financial assets = that are past due or impaired, analytical disclosures are required. [I= FRS 7.37]
Information about collateral or other credit enhancements obtained or called. [IFRS 7.38]

Liquidity Risk

Disclosures about liqu= idity risk include: [IFRS 7.39]

A maturity analysis of financial liabilities.
Description of approa= ch to risk management.

Market Risk [IFRS 7.40-42]

Market risk is the ris= k that the fair value or cash flows of a financial instrument will fluctu= ate due to changes in market prices. Market risk reflects interest rate risk, currency risk, and other price risks.
Disclosures about mark= et risk include:

A sensitivity analysi= s of each type of market risk to which the entity is exposed.
IFRS 7 provides that = if an entity prepares a sensitivity analysis for management purposes th= at reflects interdependencies of more than one component of market r= isk (for instance, interest risk and foreign currency risk combined),= it may disclose that analysis instead of a separate sensitivity anal= ysis for each type of market risk.

Application Guidance

An app= endix of mandatory application guidance is part of the standard. <= /span>

There = is also an appendix of non-mandatory implementation guidance that describes how an entity might provide the disclosures required by IFRS 7.

Effective Date

IFRS 7= is effective for annual periods beginning on or after 1 January 2007, with earlier application encouraged. Early appliers are given some relief wi= th respect to comparative prior period disclosures.

Withdrawn and Amended Pronounce= ments

IFRS 7 supersedes:

IAS 30 Disclosures in = the Financial Statements of Banks and Similar Financial Institutions <= o:p>

The disclosure require= ments of IAS 32 Financial Instruments: Presentation and Disclosure. Howe= ver the presentation requirements of IAS 32 remain unchanged.

Concurrent Amendments to IAS 1 = about Capital Disclosures

As par= t of its project to develop IFRS 7, the IASB concluded also to amend IAS 1 to add requirements for disclosures about an entity's capital. Click for More Info= rmation.