460 / 488
39
FINANCIAL INSTRUMENTS: DISCLOSURES
(IFRS 7)
1. INTRODUCTION
1.1 Thi s Standard includes disclosure requirement s about financial instrument s and their associ–
ated risk s, includi ng
• Th e significance of financial instruments for the entity' s financial position and performance,
including certain specified information about
• Balance sheet items
• Income statement and equity items
• Accounting policies
• Hedge accoun ting
• Fair value
The nature and extent of risks arising from financial instruments to which the entity is
exposed, including
• Qualitative disclosures
• Quantitative disclosures (credit risk, liquidity risk, market risk)
1.2 The purpose of IFRS 7 is to require entities to provide disclosures in their financial state–
ments that enable users to evaluate, first, the significance of financial instruments for the entity' s
financial position and performance, and, second, the nature and extent of risks arising from finan–
cial instruments to which the entity is exposed, and how the entity manages those risks.
1.3 The disclosure requirements in IFRS
7
complement the recognition , measurement, and pre–
sentation requirements for financial instruments in lAS 32,
Financial Instruments: Presentation,
and lAS 39,
Financia l Instruments: Recognition and Measurement.
1.4 IFRS 7 is effective for annual periods beginning on or after January 1,2007. The Interna–
tiona l Accounting Standards Board (IASB) encourages entities to apply the Standard early. IFRS
7
includes some of the disclosure requirements that were previously in lAS 30,
Disclosures in the
Financial Statements of Banks and Similar Financial Institutions,
and lAS 32,
Financial Instru–
ments: Disclosure and Presentation.
The remaining disclosure requirements that were in lAS 30
and lAS 32 are replaced by those in IFRS 7. Therefore, lAS 30 will cease to apply when IFRS 7
becomes effective. Additionally, IASB is shortening the title of lAS 32 to
Financial Instruments:
Presentation
to reflect the relocation of its disclosure requirements to IFRS
7.
IASB also has added
disclosure requirements regard ing an entity' s capital to lAS I,
Presentation of Financial State–
ments.
2. SCOPE
2.1 IFRS 7 applies to financial instruments. Refer to Chapter 25 on lAS 32 for a more detailed
discussion of the definition of a financial instrument.
2.2 In addition, IFRS 7, like lAS 32 and lAS 39, also applies to some contracts that do not meet
the definition of a financial instrument but have characteri stics similar to derivative financial in–
struments. This expands the scope of IFRS 7, lAS 32, and lAS 39 to contracts to purchase or sell
nonfinancial items (e.g., gold, electricity, or gas) at a future date when, and only when, a contract
has both of these two characteristics: (a) it can be settled net in cash or some other financial in–
strument, and (b) it is not for receipt or delivery of the nonfinancial item in accordance with the
entity' s expected purchase, sale, or usage requirements . Chapter 26 on lAS 39 provides a more de–
tailed discussion of this scope expansion.