IFRS 7, titled ''Financial Instruments: Disclosures'', is an

International Financial Reporting Standard International Financial Reporting Standards, commonly called IFRS, are accounting standards issued by the IFRS Foundation and the International Accounting Standards Board (IASB). They constitute a standardised way of describing the company's fina ...

(IFRS) published by the International Accounting Standards Board (IASB). It requires entities to provide certain disclosures regarding financial instruments in their financial statements. The standard was originally issued in August 2005 and became applicable on 1 January 2007, superseding the earlier standard IAS 30, ''Disclosures in the Financial Statements of Banks and Similar Financial Institutions'', and replacing the disclosure requirements of IAS 32, previously titled ''Financial Instruments: Disclosure and Presentation''.

Disclosure requirements

IFRS 7 requires entities to provide disclosures about: *The significance of financial instruments for the entity's financial position and performance. *The carrying amount of each class of financial instrument on the statement of financial position or within the notes. *Items of income, expense, gains and losses for each class of financial instrument, either in the statement of profit or loss and other comprehensive income or within the notes. *The nature and extent of risks (

credit risk A credit risk is risk of default on a debt that may arise from a borrower failing to make required payments. In the first resort, the risk is that of the lender and includes lost principal and interest, disruption to cash flows, and increased ...

, liquidity risk,

market risk Market risk is the risk of losses in positions arising from movements in market variables like prices and volatility. There is no unique classification as each classification may refer to different aspects of market risk. Nevertheless, the most ...

) faced by the entity due to the financial instruments. This must cover the entity's exposure to risk, management's objectives and policies for managing those risks, and any changes in the year. *Accounting policies that the entity adopts regarding financial instruments. *Qualitative and quantitative information about hedges and

hedge accounting Hedge accounting is an accountancy practice, the aim of which is to provide an offset to the mark-to-market movement of the derivative in the profit and loss account. There are two types of hedge recognized. For a fair value hedge, the offset ...

Fair value measurement

The three-level "fair value hierarchy" is used to measure the

fair value In accounting and in most schools of economic thought, fair value is a rational and unbiased estimate of the potential market price of a good, service, or asset. The derivation takes into account such objective factors as the costs associated wi ...

s of each class of financial instruments with as little involvement of judgement as possible. ; Level 1 : The preferred inputs to valuation methods are unadjusted quoted prices of identical instruments in active markets. However, such quoted prices are often unavailable and assumptions have to be made in determining the fair values. ; Level 2 : If the inputs to valuation techniques include directly observable data from less active markets or of instruments that are similar but not the same as the entity's instruments, such a fair value estimate is classified as level 2. ; Level 3 : These inputs are not based on observable market data from independent sources, and include the entity's own data. Disclosure of fair value is not required if the carrying amount of a financial instrument is a reasonable approximation of fair value or if the fair value cannot be reliably ascertained.

References

External links

IFRS 7 Financial Instruments: Disclosures
on IFRS Foundation {{International Financial Reporting Standards International Financial Reporting Standards

Disclosure requirements

Fair value measurement

See also

References

External links