The ‘OBJECTIVE’ of IFRS 7 is to Require 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 during the period and at the end of the reporting period, and how the entity Manages those risks.
Table of Contents
IFRS 7 Effective Date
An entity shall apply this IFRS for annual periods beginning on or after 1 January 2007.
Earlier application is ‘ENCOURAGED’.
If an entity applies this IFRS for an earlier period, it shall disclose that fact.
IFRS 7 – Scope
This IFRS shall be applied by all entities to all types of ‘Financial Instruments‘, EXCEPT:
- Those Interests in Subsidiaries, Associates or Joint Ventures that are accounted for in accordance with IFRS 10, IAS 27 or IAS 28.
- Employer’s rights and obligations arising from employee benefit plans, to which IAS 19 applies.
- Insurance Contracts as defined in IFRS 17 or Investment Contracts with discretionary participation features.
- Financial Instruments, Contracts and Obligations under share‑based payment transactions to which IFRS 2 applies.
- Instruments that are Required to be classified as ‘Equity Instruments‘.
Classes of Financial Instruments and Level of Disclosure
When IFRS 7 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.
An entity shall PROVIDE sufficient information to Permit Reconciliation to the line items presented in the ‘Statement of Financial Position‘.
Significance of Financial Instruments for Financial Position and Performance
An entity shall DISCLOSE information that enables users of its ‘Financial Statements’ to evaluate the significance of financial instruments for its ‘Financial Position and Performance’.
Nature and Extent of Risks Arising from Financial Instruments
An entity shall DISCLOSE information that enables users of its financial statements to evaluate the nature and extent of risks arising from financial instruments to which the entity is exposed at the end of the reporting period.
Transfer of Financial Assets
For the purposes of applying the disclosure Requirements, an entity transfers all or a part of a Financial Asset (the ‘transferred financial asset’) if, and only if, it EITHER:
- transfers the contractual rights to receive the cash flows of that financial asset; OR
- retains the contractual rights to receive the cash-flows of that financial asset, but assumes a contractual obligation to pay the cash flows to one or More recipients in an arrangement.
| An Entity shall Disclose Information that Enables Users of its Financial Statements: |
|---|
| (a) to understand the relationship between transferred financial assets that are not de-recognized in their entirety and the associated liabilities; AND |
| (b) to evaluate the nature of, and risks associated with, the entity’s continuing involvement in de-recognized financial assets. |
Withdrawal of IAS 30
IFRS 7 ‘supersedes‘ IAS 30 (Disclosures in the Financial Statements of Banks and Similar Financial Institutions).
Chartered Accountant (Institute of Chartered Accountants of Pakistan)
Bachelor of Accounting Honours (Asia e University, Malaysia)