An Executive Guide to IFRS: Content, Costs and Benefits to Business

Disclosures about financial instruments

It is worth mentioning that the IASB has a separate standard on disclosures related to financial instruments. IFRS 7 was issued in 2005 to replace IAS 30 that addressed the financial statements of banks, and the disclosure requirements of IAS 32 which was the first standard to address financial instruments (see below). The standard requires an entity to discuss its exposure to risks arising from financial instruments. It applies to all entities that apply IFRS and all financial instruments, so a manufacturer with no derivatives contracts would still need to discuss the risks associated with receivables and payables. However, the standard is mostly aimed at financial institutions and ensuring that they provide adequate disclosures of risk. According to feedback reported by staff during the financial crisis, the standard was perceived by users to have stood up to the test of that crisis and only a little tweaking was done.

The IASB sums up the standard as follows (IFRS 7.IN5):

The IFRS requires disclosure of:

(a) The significance of financial instruments for an entity’s financial position and performance.

(b) Qualitative and quantitative information about exposure to risks arising from financial instruments, including specified minimum disclosures about credit risk, liquidity risk and market risk. The qualitative disclosures describe management’s objectives, policies and processes for managing those risks. The quantitative disclosures provide ...