IFRS 7

Financial Instruments: Disclosures

1Objective and scope

IFRS 7 requires entities to provide disclosures in their financial statements that enable users to evaluate the significance of financial instruments for the entity's financial position and performance, and the nature and extent of risks arising from financial instruments to which the entity is exposed, and how the entity manages those risks.

2Key definitions

3What must be disclosed

• Carrying amounts of each category of financial asset and financial liability under IFRS 9's classification categories, either on the face of the statement of financial position or in the notes
• Items of income, expense, gains and losses arising from financial instruments, including interest income/expense and any impairment losses recognised
• Fair value information, categorised by the fair value hierarchy defined in IFRS 13 (Level 1, 2 and 3)
• Qualitative disclosures for each type of risk: the exposures and how they arise, the entity's objectives, policies and processes for managing the risk, and the methods used to measure it
• Quantitative disclosures for each type of risk: summary data based on information provided internally to key management personnel, and concentrations of risk

Specific, more detailed requirements apply to credit risk (maximum exposure to credit risk, collateral held, an ageing analysis of past-due assets, and a reconciliation of the expected credit loss allowance under IFRS 9), liquidity risk (a maturity analysis for financial liabilities, showing the remaining contractual undiscounted cash flows), and market risk (a sensitivity analysis showing the effect on profit or loss and equity of a reasonably possible change in each relevant market risk variable).

4Presentation and disclosure

IFRS 7 is itself entirely a disclosure standard - it adds no recognition or measurement requirements of its own; those come from IFRS 9. It is best studied alongside IFRS 9 and IAS 32, which between them cover measurement, presentation and disclosure of financial instruments as a complete package.

5Examinable focus