IFRS 7 Financial Instruments: Disclosures

Technical Summary
This extract has been prepared by IASC Foundation staff and has not been approved by the IASB.For the requirements reference must be made to International Financial Reporting Standards.

IFRS 7 Financial Instruments: Disclosures

OBJECTIVE OF IFRS 7:

To require entities to provide disclosures in their financial statements that enable users to evaluate:

(a) the significance of financial instruments for the entity’s financial position and performance; and

(b) the nature and extent of risks arising from financial instruments to which the entity is exposed during the period and at the end of the reporting period, and how the entity manages those risks. The qualitative disclosures describe management’s objectives, policies and processes for managing those risks. 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. Together, these disclosures provide an overview of the entity's use of financial instruments and the exposures to risks they create.

The IFRS applies to all entities, including entities that have few financial instruments (eg a manufacturer whose only financial instruments are accounts receivable and accounts payable) and those that have many financial instruments (eg a financial institution most of whose assets and liabilities are financial instruments).

When this IFRS requires disclosures by class of financial instrument, an entity shall group financial instruments into classes that are appropriate to the nature of the information disclosed and that take into account the characteristics of those financial instruments. An entity shall provide sufficient information to permit reconciliation to the line items presented in the statement of financial position.

The principles in this IFRS complement the principles for recognising, measuring and presenting financial assets and financial liabilities in IAS 32 Financial
Instruments: Presentation and IAS 39 Financial Instruments: Recognition and Measurement.

SOURCE: International Accounting Standards Board