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

• Adds certain new disclosures about financial instruments to those currently required by IAS 32;
• Replaces the disclosures now required by IAS 30; and
• Puts all of those financial instruments disclosures together in a new standard on Financial Instruments: Disclosures. The remaining parts of IAS 32 deal only with financial instruments presentation matters.

Disclosure Requirements of IFRS 7:

• An entity must group its financial instruments into classes of similar instruments and, when disclosures are required, make disclosures by class. [IFRS 7.6]

• The two main categories of disclosures required by IFRS 7 are:
  1. Information about the significance of financial instruments.
  2. Information about the nature and extent of risks arising from financial insturments.
  

  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 measured at fair value through profit and loss, showing separately those held for trading and those designated at initial recognition.
  • Held-to-maturity investments.
  • Loans and receivables.
  • Available-for-sale assets.
  • Financial liabilities at fair value through profit and loss, showing separately those held for trading and those designated at initial recognition.
  • Financial liabilities measured at amortised cost.

• Special disclosures about financial assets and financial liabilities designated to be measured at fair value through profit and loss, including disclosures about credit risk and market risk and changes in fair values [IFRS 7.9-10]
• Reclassifications of financial instruments from fair value to amortised cost or vice versa [IFRS 7.12]
• Disclosures about derecognitions, including transfers of financial assets for which derecogntion accounting is not permitted by IAS 39 [IFRS 7.13]
• Information about financial assets pledged as collateral and about financial or non-financial assets held as collatersl [IFRS 7.14-15]
• Reconciliation of the allowance account for credit losses (bad debts). [IFRS 7.16]
• Information about compound financial instruments with multiple embedded derivatives. [IFRS 7.17]
• Breaches of terms of loan agreements. [IFRS 7.18-19]

  Income Statement and Equity

• Items of income, expense, gains, and losses, with separate disclosure of gains and losses from: [IFRS 7.20(a)]
  • Financial assets measured at fair value through profit and loss, showing separately those held for trading and those designated at initial recognition.
  • Held-to-maturity investments.
  • Loans and receivables.
  • Available-for-sale assets.
  • Financial liabilities measured at fair value through profit and loss, showing separately those held for trading and those designated at initial recognition.
  • Financial liabilities measured at amortised cost.

• Interest income and interest expense for those financial instruments that are not measured at fair value through profit and loss [IFRS 7.20(b)]
• Fee income and expense [IFRS 7.20(c)]
• Amount of impairment losses on financial assets [IFRS 7.20(d)]
• Interest income on impaired 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 hedge, hedging instrument, and fair values of those instruments, and nature of risks being hedged.
  • for 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 period.
    • 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 highly 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 for 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, along with: [IFRS 7.25-30]
  • Comparable carrying amounts.
  • Description of how fair value was determined.
  • Detailed information if fair value cannot be reliably measured.

  Note that disclosure of fair values is not required when the 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 insturments

  Qualitative disclosures [IFRS 7.33]

• The qualitative disclosures describe:
  • Risk exposures for each type of financial instrument.
  • Management's objectives, policies, and processes for managing those risks.
  • Changes from the prior period.

  Quantitative disclosures

• 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. These disclosures include: [IFRS 7.34]
  • Summary quantitative data about exposure to each risk at the reporting date.
  • Disclosures about credit risk, liquidity risk, and market risk as further described below.
  • Concentrations of risk.

  Credit Risk

• Disclosures about credit risk include: [IFRS 7.36-38]
  • Maximum amount of exposure (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. [IFRS 7.37]
  • Information about collateral or other credit enhancements obtained or called. [IFRS 7.38]

  Liquidity Risk

• Disclosures about liquidity risk include: [IFRS 7.39]
  • A maturity analysis of financial liabilities.
  • Description of approach to risk management.

  Market Risk [IFRS 7.40-42]

• Market risk is the risk that the fair value or cash flows of a financial instrument will fluctuate due to changes in market prices. Market risk reflects interest rate risk, currency risk, and other price risks.
• Disclosures about market risk include:
  • A sensitivity analysis 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 that reflects interdependencies of more than one component of market risk (for instance, interest risk and foreign currency risk combined), it may disclose that analysis instead of a separate sensitity analysis for each type of market risk.

Application Guidance

An appendix of mandatory application guidance is part of the standard.

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 with respect to comparative prior period disclosures.

Withdrawn and Amended Pronouncements

IFRS 7 supersedes:

• IAS 30 Disclosures in the Financial Statements of Banks and Similar Financial Institutions
• The disclosure requirements of IAS 32 Financial Instruments: Presentation and Disclosure. However the presentation requirements of IAS 32 remain unchanged.

Concurrent Amendments to IAS 1 re Capital Disclosures

As part 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.