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IAS Disclosure Checklist November 2000 IAS 32

IAS 32 Financial Instruments: Disclosure and Presentation


The purpose of the disclosures required is to provide information that will enhance understanding of the significance of on-balance sheet and off-balance sheet financial instruments to an enterprises financial position, performance and cash flows and assist in assessing the amounts, timing and certainty of future cash flows associated with those instruments. In addition to give information about particular financial instrument balances and transactions, enterprises are encouraged to provide a discussion of the extent to which financial instruments are used, the associated risks and the business purposes served. A discussion of managements policies for controlling the risks associated with financial instruments, including policies on matters such as hedging of risk exposures, avoidance of undue concentrations of risk and requirements for collateral to mitigate credit risks, provides a valuable additional perspective that is independent of the specific instruments outstanding at a particular time. Some enterprises provide such information in a commentary that accompanies their financial statements rather than as part of the financial statements. The standards do not prescribe either the format of the information required to be disclosed or its location within the financial statements. With regard to recognised financial instruments, to the extent that the required information is presented on the face of the balance sheet, it is not necessary for it to be repeated in the notes. With regard to unrecognised financial instruments, however, information in notes or supplementary schedules is the primary means of disclosure. Disclosures may include a combination of narrative descriptions and specific quantified data, as appropriate to the nature of the instruments and their relative significance to the enterprise. Determination of the level of detail to be disclosed about particular financial instruments is a matter for judgement. Terms, conditions and accounting policies 32.47 For each class of financial asset, financial liability and equity instrument, both recognised and unrecognised, disclose: a) information about the extent and nature of the financial instruments, including significant terms and conditions that may affect the amount, timing and certainty of future cash flows; and the accounting policies and methods adopted, including the criteria for recognition and the basis of measurement applied.

b)

32.49

When financial instruments held or issued by an enterprise, either individually or as a class, create a potentially significant exposure to the risks described in 32.43 (price, credit, liquidity and cash flow risks), terms and conditions that may warrant disclosure include: a) the principal, stated, face or other similar amount which, for some derivative instruments, such as interest rate swaps, may be the amount (referred to as the notional amount) on which future payments are based; the date of maturity, expiry or execution; early settlement options held by either party to the instrument, including the period in which, or date at which, the options may be exercised and the exercise price or range of prices; options held by either party to the instrument to convert the instrument into, or exchange it for, another financial instrument or some other asset or liability, including the period in which, or date at which, the options may be exercised and the conversion or exchange ratio(s); the amount and timing of scheduled future cash receipts or payments of the principal amount of the instrument, including instalment repayments and any sinking fund or similar requirements;

b) c) d)

e)

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IAS Disclosure Checklist November 2000 IAS 32

f) g) h) i) j)

stated rate or amount of interest, dividend or other periodic return on principal and the timing of payments; collateral held, in the case of a financial asset, or pledged, in the case of a financial liability; in the case of an instrument for which cash flows are denominated in a currency other than the enterprises reporting currency, the currency in which receipts or payments are required; in the case of an instrument that provides for an exchange, information described in items a) to h) for the instrument to be acquired in the exchange; and any condition of the instrument or an associated covenant that, if contravened, would significantly alter any of the other terms (for example, a maximum debt-to-equity ratio in a bond covenant that, if contravened, would make the full principal amount of the bond due and payable immediately).

32.50

When the balance sheet presentation of a financial instrument differs from its legal form, it is desirable to disclose the nature of the instrument in the notes. The accounting policies should disclose: a) b) c) the criteria applied in determining when to recognise a financial instrument on the balance sheet and when to cease to recognise it; the basis of measurement applied to financial instruments on initial recognition and subsequently; and the basis on which income and expense arising from financial instruments is recognised and measured.

32.52

32.53

Types of transactions for which it may be necessary to disclose the accounting policies include: a) transfers of financial assets when there is a continuing interest in, or involvement with, the assets by the transferor, such as securitisations of financial assets, repurchase agreements and reverse repurchase agreements; transfers of financial assets to a trust for the purpose of satisfying liabilities when they mature without the obligation of the transferor being discharged at the time of the transfer, such as an in-substance defeasance trust; acquisition or issue of separate financial instruments as part of a series of transactions designed to synthesise the effect of acquiring or issuing a single instrument; acquisition or issue of financial instruments as hedges of risk exposures; and acquisition or issue of monetary financial instruments bearing a stated interest rate that differs from the prevailing market rate at the date of issue.

b)

c) d) e)

32.54

For financial instruments carried on the cost basis, disclosure of the method of accounting for the following may be necessary: a) b) c) d) e) f) costs of acquisition or issue; premiums and discounts on monetary financial assets and financial liabilities; changes in the estimated amount of determinable future cash flows associated with a monetary financial instrument such as a bond indexed to a commodity price; changes in circumstances that result in significant uncertainty about the timely collection of all contractual amounts due from monetary financial assets; declines in the fair value of financial assets below their carrying amount; and restructured financial liabilities.

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IAS Disclosure Checklist November 2000 IAS 32

For financial instruments carried at fair value, disclose whether carrying amounts are determined from quoted market prices, independent appraisals, discounted cash flow analysis or another appropriate method, and any significant assumptions made in applying those methods. 32.55 Disclose the basis for reporting in the income statement realised and unrealised gains and losses, interest and other items of income and expense associated with financial assets and financial liabilities. This includes information about the basis on which income and expense arising from financial instruments held for hedging purposes are recognised. When income and expense items are presented on a net basis, even though the corresponding financial assets and financial liabilities on the balance sheet have not been offset, disclose the reason for that presentation if the effect is significant. Interest rate risk 32.56 For each class of financial asset and financial liability, both recognised and unrecognised, disclose information about exposure to interest rate risk, including: a) b) 32.60 contractual repricing or maturity dates, whichever dates are earlier; and effective interest rates, when applicable.

Indicate which financial instruments are exposed to interest rate price risk, which are exposed to interest rate cash flow risk, and which are not exposed to interest rate risk. Disclose the effect on interest rate risk exposure of hedging or conversion transactions (such as interest rate swaps); Disclose the nature and extent of exposure to interest rate risks associated with: a) b) financial assets removed from the balance sheet as a result of a transaction, such as a securitisation; and a transaction in which no financial asset or financial liability is recognised on the balance sheet, such as commitment to lend funds at a fixed interest rate.

32.62

32.63

In the case of a securitisation, the above disclosure normally includes: a) b) c) d) the nature of the assets transferred; their stated principal; the interest rate and term to maturity; and the terms of the transaction.

In the case of a commitment to lend funds, the above disclosure normally includes: a) b) c) 32.64 the stated principal; the interest rate and term to maturity; and the significant terms of the transaction.

Information about interest rate risk may be presented in one or more of the following recommended to satisfy 32.56 above: a) Carrying amounts of financial instruments exposed to interest rate risk are presented in tabular form, grouped by those that are contracted to mature or be repriced: i) within one year of balance sheet date;

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IAS Disclosure Checklist November 2000 IAS 32

ii) iii) b)

more than one year and less than five years from balance sheet date; and five years or more from balance sheet date.

When the performance of an enterprise is significantly affected by the level of its exposure to interest rate price risk or changes in that exposure (eg, banks), more detailed information is desirable such as separate groupings of the carrying amounts of financial instruments contracted to mature or be repriced: i) within one month of balance sheet date; ii) iii) more than one and less than three months from balance sheet date; and more than three and less than twelve months from balance sheet date.

c) d)

A table indicating the aggregate carrying amount of groups of floating rate financial assets and financial liabilities maturing within various future time periods. Disclosure of interest rate information for individual financial instruments or weighted average rates or a range of rates for each class of financial instrument.

32.65

Interest rate sensitivity information (ie, information about an enterprises exposure to interest rate risks by indicating the effect of a hypothetical change in the prevailing level of market interest rates on the fair value of its financial instruments and future earnings and cash flows), including the basis of preparation and any significant assumptions may be useful disclosure. Credit risk

32.66

For each class of financial asset, both recognised and unrecognised, disclose information about exposure to credit risk, including: a) the amount that best represents its maximum credit risk exposure at the balance sheet date, without taking account of the fair value of any collateral, in the event other parties fail to perform their obligations under financial instruments; and significant concentrations of credit risk.

b) 32.70 32.71

Disclose information about the existence and the effect of legal rights of set-off. Where an enterprise has entered into one or more master netting arrangements that serve to mitigate its exposure to credit loss but do not meet the criteria for offsetting, disclose the terms of the master netting arrangements that determine the extent of the reduction in credit risk. Disclose the maximum loss that could be incurred in respect of unrecognised financial assets when it differs substantially from the principal, stated, face or other similar contractual amount of the instrument. Where a securitisation transaction in which an enterprise remains exposed to credit risk associated with financial assets have been removed from its balance sheet, disclose the nature of assets removed, the amount and timing of the future cash flows contractually due from the assets, the terms of the recourse obligation and the maximum loss that could arise under that obligation. Disclose concentrations of credit risk when they are not apparent from other disclosures about the nature and financial position of the business and they result in a significant exposure to loss in the event of default by other parties. Disclosure includes a description of the shared characteristic that identifies each concentration and the amount of the maximum credit risk exposure associated with all recognised and unrecognised financial assets sharing that characteristic.

32.72

32.73

32.74, 76

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IAS Disclosure Checklist November 2000 IAS 32

Fair value 32.77 For each class of financial asset and financial liability, both recognised and unrecognised, disclose: a) b) information about fair value; or when it is not practicable within constraints of timeliness or cost to determine the fair value of a financial asset or financial liability with sufficient reliability, disclose that fact together with information about the principal characteristics of the underlying financial instrument that are pertinent to its fair value.

32.79

Disclose the method adopted to determine fair value and any significant assumptions made in its application. When disclosure of fair value information is omitted because it is not practicable to determine fair value with sufficient reliability, information is provided to assist users in making their own judgements about the extent of possible differences between the carrying amount of financial assets and financial liabilities and their fair value. In addition to the above, information is provided about the market for the instruments. Financial assets carried at an amount in excess of fair value

32.85

32.88

When an enterprise carries one or more financial assets at an amount in excess of their fair value, disclose: a) b) the carrying amount and the fair value of either the individual assets or appropriate groupings of those individual assets; and the reasons for not reducing the carrying amount, including the nature of the evidence that provides the basis for managements belief that the carrying amount will be recovered.

Hedges of anticipated future transactions 32.91 When an enterprise has accounted for a financial instrument as a hedge of risks associated with anticipated future transactions, disclose: a) b) c) a description of the anticipated transactions, including the period of time until they are expected to occur; a description of the hedging instruments; and the amount of any deferred or unrecognised gain or loss and the expected timing of recognition as income or expense.

32.93

To satisfy 32.91 above disclose all accrued gains and losses on financial instruments designated as hedges of anticipated future transactions, without regard to whether those gains and losses have been recognised in the financial statements. Other disclosures

32.94

Additional disclosures are encouraged when they are likely to enhance users understanding of financial instruments. It may be desirable to disclose: a) the total amount of the change in the fair value of financial assets and financial liabilities that has been recognised as income or expense for the period;

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IAS Disclosure Checklist November 2000 IAS 32

b) c)

the total amount of deferred or unrecognised gain or loss on hedging instruments other than those relating to hedges of anticipated future transactions; and the average aggregate carrying amount during the year of recognised financial assets and financial liabilities, the average aggregate principal, stated, notional or other similar amount during the year of unrecognised financial assets and financial liabilities and the average aggregate fair value during the year of all financial assets and financial liabilities, particularly when the amounts on hand at the balance sheet date are unrepresentative of amounts on hand during the year.

Treasury shares SIC 16.6 SIC 16.7 Disclose separately the amounts of reductions to equity for treasury shares held, either on the face of the balance sheet or in the notes. If the enterprise or any of its subsidiaries re-acquires its own shares from parties able to control or exercise significant influence over the enterprise, provide disclosure in accordance with IAS 24.22 (the nature of the related party relationships; the types of transactions; and the elements of the transactions necessary for an understanding of the financial statements). Costs of an equity transaction Interpretation effective for annual financial periods beginning on or after 30 January 2000; earlier adoption is encouraged. SIC 17.9 Disclose separately the amount of transaction costs accounted for as a deduction from equity in the period.

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