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FINANCIAL
INSTRUMENTS:
DISCLOSURES
TOPICS COVERED ………….
RISK DISCLOSURES
- Credit Risk
- Liquidity Risk
- Market Risk
i- Currency Risk
ii- Interest Rate Risk
iii- Other Price Risk
WAY FORWARD
PricewaterhouseCoopers
FACT OR FICTION ………
IFRS - 7
Only applies to banks and Applies to ALL entities that have financial
other financial institutions FICTION instruments
Only impacts entities that Impacts any entity that holds even simple
use derivative financial FICTION instruments such as borrowings,
instruments accounts payable and receivable, cash
and investments
Requires disclosure of Entities are required to report the metrics
certain management FACT they use internally to manage and
information measure financial risks
ALL Entities
x Interests in subsidiaries,
associates and joint ventures
ALL TYPES of Financial EXCEPT accounted for in
Instruments accordance with IAS 39
Contracts to buy or sell a
non-financial item that are
x Insurance contracts
International Application
Application in Pakistan
►Held-to-maturity investments
Disclosure to be made :
►Available-for-salefinancial assets
► Recognised directly in equity
►Held-to-maturity investments
(B) total interest income and total interest expense (calculated using
the effective interest method) for financial assets or financial
liabilities that are not at fair value through profit or loss
(E) the amount of any impairment loss for each class of financial asset
DISCLOSURES BY CATEGORY
– PROFIT & LOSS & EQUITY -3
DISCLOSURES BY CATEGORY
– HEDGE ACCOUNTING -1
(A) a description of each type of (A) when the cash flows are
hedge expected to occur and when
they are expected to affect
(B) a description of the financial profit or loss
instruments designated as
hedging instruments and (B) amount that was recognised
their fair values at the in equity during the period
reporting date
(C) amount that was re-cycled
through P&L, showing line
(C) the nature of the risks being item
hedged
(D) amount that was taken to the
initial cost of a non-financial
asset or non-financial liability
DISCLOSURES BY CATEGORY
– HEDGE ACCOUNTING -2
FAIR VALUE
As was in IAS 32, IFRS 7 retains: New in IFRS 7:
(A) Disclose the fair value for (A) Disclosure of Day 1 Profit or
each class comparable with Loss
carrying amounts
(B) Accounting Policy in respect
(B) Methods, techniques and of Day 1 Profit or Loss
assumptions used to estimate
fair values (C) Day 1 Profit or Loss
recognised in the Profit or
(C) Extent to which Fair Values Loss in the current period
are based on market quotes, along with opening and
observable variables, and closing cumulative recognised
non-observable variables amount
FAIR VALUE
Fair Value Disclosure NOT required :
(In such cases (b), disclose information to help users make their own judgement
about the extent of possible differences between the carrying amount of those
financial assets or financial liabilities and their fair values)
DISCLOSURES BY CATEGORY
– -3
FAIR VALUE
DISCLOSURES BY CATEGORY
– -4
FAIR VALUE
Tier-Wise Fair Value Disclosure
DISCLOSURES BY CATEGORY
– -5
FAIR VALUE
Day 1 Profit or Loss - Policy
COLLATERALS,
Collaterals Given: DEFAULTS & BREACHES
Defaults & Breaches:
(A) Carrying amounts of pledged (A) If related liability exists at
financial assets reporting date:
(B) Terms and conditions relating i. Details of defaults during
to the pledge the period
ii. the carrying amount of
Collaterals Held: amount in default
iii. Whether default has been
(A) Fair Value of Collateral Held remedied / renegotiated
before date of authorisation
(B) Fair Value of any collateral
(B) Otherwise :
sold or re-pledged
Disclose same information as
(C) Terms and conditions above ONLY IF LENDER
associated with the use of GOT ENTITLED TO
ACCELERATED
collateral
PAYMENTS
RISK DISCLOSURES
THE 11TH COMMANDMENT (AGAIN)
……
Para 31 (Key Principle) ……
QUANTITATIVE
► Credit Risk
► Liquidity Risk
► Market Risk
► …………………
► …………………
RISK DISCLOSURES –
CREDIT RISK -1
► Age analysis of financial assets that are past due but not
impaired
iii. For derivatives to be settled gross, the amounts to be included will be gross
How should my company First, review the current reporting system to identify
source the required requirement. Development of new tools such as
information from internal quantitative models may be needed to range from
systems? simple spreadsheet models to sophisticated
analyzers