|
Commission Regulation (EC) No
2237/2004 of 29 December 2004 amending Regulation (EC) No 1725/2003
adopting certain international accounting standards in accordance
with Regulation (EC) No 1606/2002 of the European Parliament and of
the Council, as regards IAS No 32 and IFRIC 1
Content |
|
- |
Disclosure
51. The purpose of
the disclosures required by this Standard is to provide
information to enhance understanding of the significance of
financial instruments to an entity’s financial position,
performance and cash flows, and assist in assessing the
amounts, timing and certainty of future cash flows associated
with those instruments.
52. Transactions in
financial instruments may result in an entity assuming or
transferring to another party one or more of the financial
risks described below. The required disclosures provide
information to assist users of financial statements in
assessing the extent of risk related to financial instruments.
(a) Market risk
includes
three types of risk:
(i) currency
risk—the risk that the value of a financial instrument
will fluctuate because of changes in foreign exchange rates.
(ii) fair value
interest rate risk—the risk that the value of a
financial instrument will fluctuate because of changes in
market interest rates.
(iii) price
risk—the risk that the value of a financial instrument
will fluctuate as a result of changes in market prices,
whether those changes are caused by factors specific to the
individual instrument or its issuer or factors affecting all
instruments traded in the market.
Market risk embodies
not only the potential for loss but also the potential for
gain.
(b) Credit risk—the
risk that one party to a financial instrument will fail to
discharge an obligation and cause the other party to incur a
financial loss.
(c) Liquidity
risk (also referred to as funding risk)—the risk
that an entity will encounter difficulty in raising funds to
meet commitments associated with financial instruments.
Liquidity risk may result from an inability to sell a
financial asset quickly at close to its fair value.
(d) Cash flow
interest rate risk—the risk that the future cash flows
of a financial instrument will fluctuate because of changes in
market interest rates. In the case of a floating rate debt
instrument, for example, such fluctuations result in a change
in the effective interest rate of the financial instrument,
usually without a corresponding change in its fair value.
Format, Location and
Classes of Financial Instruments
53. This Standard
does not prescribe either the format of the information
required to be disclosed or its location within the financial
statements. To the extent that the required information is
presented on the face of the financial statements, it is
unnecessary to repeat it in the notes to the financial
statements. Disclosures may include a combination of narrative
descriptions and quantified data, as appropriate to the nature
of the instruments and their relative significance to the
entity.
54. Determining the
level of detail to be disclosed about particular financial
instruments requires the exercise of judgement taking into
account the relative significance of those instruments. It is
necessary to strike a balance between overburdening financial
statements with excessive detail that may not assist users of
financial statements and obscuring important information as a
result of too much aggregation. For example, when an entity is
party to a large number of financial instruments with similar
characteristics and no single contract is individually
material, a summary by classes of instruments is appropriate.
On the other hand, information about an individual instrument
may be important when it is, for example, a material component
of an entity’s capital structure.
55. The management
of an entity groups financial instruments into classes that
are appropriate to the nature of the information disclosed,
taking into account matters such as the characteristics of the
instruments and the measurement basis that has been applied.
In general, classes distinguish items measured at cost or
amortised cost from items measured at fair value. Sufficient
information is provided to permit a reconciliation to relevant
line items on the balance sheet. When an entity is a party to
financial instruments not within the scope of this Standard,
those instruments constitute a class or classes of financial
assets or financial liabilities separate from those within the
scope of this Standard. Disclosures about those financial
instruments are dealt with by other IFRSs.
Risk Management
Policies and Hedging Activities
56. An entity shall
describe its financial risk management objectives and policies,
including its policy for hedging each main type of forecast
transaction for which hedge accounting is used.
57. In addition to
providing specific information about particular balances and
transactions related to financial instruments, an entity
provides a discussion of the extent to which financial
instruments are used, the associated risks and the business
purposes served. A discussion of management’s policies for
controlling the risks associated with financial instruments
includes policies on matters such as hedging of risk exposures,
avoidance of undue concentrations of risk and requirements for
collateral to mitigate credit risk. Such discussion provides a
valuable additional perspective that is independent of the
specific instruments held or outstanding at a particular time.
58. An entity shall
disclose the following separately for designated fair value
hedges, cash flow hedges and hedges of a net investment in a
foreign operation (as defined in IAS 39):
(a) a description of
the hedge;
(b) a description of
the financial instruments designated as hedging
instruments and their fair values at the balance
sheet
date;
(c) the nature of
the risks being hedged; and
(d) for cash flow
hedges, the periods in which the cash flows are expected
to occur, when they are expected to enter into the
determination
of profit or loss, and a description of any forecast
transaction for which hedge accounting had previously
been used but which is no longer expected to occur.
59. When a gain or
loss on a hedging instrument in a cash flow hedge has
been recognised directly in equity, through the statement of
changes in equity, an entity shall disclose:
(a) the amount that
was so recognised in equity during the period;
(b) the amount that
was removed from equity and included in profit
or loss for the period; and
(c) the amount that
was removed from equity during the period and
included in the initial measurement of the acquisition
cost or other carrying amount of a non-financial asset
or non- financial liability in a hedged highly
probable forecast transaction.
Previous |
Index |
Next
|
