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12. • IFRS 7 sets out disclosures of financial instruments
• The presentation, recognition and measurement of
financial instruments are the subjects of
• IAS 32 Financial Instruments: Presentation
• IAS 39 Financial Instruments: Recognition and
Measurement
• IFRS 9 Financial Instruments (being developed in
phases) is intended to ultimately replace IAS 39.
© IFRS Foundation | 30 Cannon Street | London EC4M 6XH | UK. www.ifrs.org
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13. Information that enables users to evaluate the
significance of financial instruments for the entity’s
financial position and financial performance.
• Information (qualitative and quantitative) that enables
users 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.
• including information about how the entity
manages its exposure to those financial risks.
© IFRS Foundation | 30 Cannon Street | London EC4M 6XH | UK. www.ifrs.org
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14. • Qualitative information about exposure to risks
arising from financial instruments.
• The disclosures describe management’s
objectives, policies and processes for managing those
risks
© IFRS Foundation | 30 Cannon Street | London EC4M 6XH | UK. www.ifrs.org
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15. • Quantitative information about exposure to risks
arising from financial instruments, including specified
minimum disclosures about
• credit risk,
• liquidity risk and
• market risk.
• These 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.
© IFRS Foundation | 30 Cannon Street | London EC4M 6XH | UK. www.ifrs.org
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16.  The IFRS for SMEs requires less detailed
disclosure of financial instruments.
© IFRS Foundation | 30 Cannon Street | London EC4M 6XH | UK. www.ifrs.org
16

17. • Qualitative and quantitative information to evaluate
the nature and extent of the entity’s exposure to and
management of risks arising from financial
instruments, including:
• amounts that best represent maximum exposure
to credit risk.
• sensitivity analysis for each type of market risk
showing how profit or loss and equity would have
been affected by changes in relevant variables that
are reasonably possible.
© IFRS Foundation | 30 Cannon Street | London EC4M 6XH | UK. www.ifrs.org
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18. • Fair value information is required to be provided for
all financial assets and liabilities (with limited
exceptions) irrespective of whether they are carried at
FV.
© IFRS Foundation | 30 Cannon Street | London EC4M 6XH | UK. www.ifrs.org
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19. International Financial Reporting Standards
The views expressed in this presentation are those of the
presenter, not necessarily those of the IASB or IFRS Foundation
© IFRS Foundation | 30 Cannon Street | London EC4M 6XH | UK. www.ifrs.org

20. • Respond to comments:
• preparers: Cost-benefit – scope, class vs. counterparty,
existing disclosure requirements
• investors: Need for information about gross and net
exposures
• Provide information about exposures in normal course and in
times of stress
• Don’t reconcile IFRSs and US GAAP but allow entities to be
compared on a like basis
© IFRS Foundation | 30 Cannon Street | London EC4M 6XH | UK. www.ifrs.org
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21. • Proposed disclosure:
Gross amounts Gross amounts Net amounts Other amounts Net amounts
before set off presented in scope but
offsetting in balance not set off in
sheet balance sheet
(A) (B) (C) (D) (E)
[same for [depends on [depends on [depends on [same for
all preparers] offsetting model] offsetting model] offsetting model] all preparers]
© IFRS Foundation | 30 Cannon Street | London EC4M 6XH | UK. www.ifrs.org
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22. Assume an entity has a recognised derivative asset with a fair
value of 100 and a recognised derivative liability with a fair
value of 80 that meet the criteria for offsetting. The entity has
another derivative liability with a fair value of 10 and cash
collateral of 20 that do not meet the criteria for offsetting.
The financial assets would be disclosed as follows:
a. b. c. d. e.
Financial assets Gross carrying Gross Net amount presented in Amounts available to be offset (but Net exposure
amounts (before amounts statement of financial not set off in stmt of financial (c-d)
offsetting) offset position position)
(a-b) (ie in bankruptcy or default)
Category Financial Cash collateral
instruments
Derivatives 100 (80) 20 (10) 10 -
© IFRS Foundation | 30 Cannon Street | London EC4M 6XH | UK. www.ifrs.org
22

23. Same example Assume an entity has a recognised derivative
asset with a fair value of 100 and a recognised derivative liability
with a fair value of 80 that meet the criteria for offsetting. The
entity has another derivative liability with a fair value of 10 and
cash collateral of 20 that do not meet the criteria for offsetting.
The financial liabilities would be disclosed as follows:
a. b. c. d. e.
Financial Gross carrying Gross Net amount presented in Amounts available to be offset (but Net exposure
liabilities amounts (before amounts statement of financial not set off in stmt of financial (c-d)
offsetting) offset position position)
(a-b) (ie in bankruptcy or default)
Category Financial Cash collateral
instruments
Derivatives 90 (80) 10 - 10 -
© IFRS Foundation | 30 Cannon Street | London EC4M 6XH | UK. www.ifrs.org
23

24.  Comments received highlighted inconsistencies in
the application of the offsetting requirements in IAS
32
 In December 2011, the IASB separately clarified the
application of the offsetting criteria in IAS 32:
 Legally enforceable right of set-off:
 The normal course of business;
 The event of default; and
 The event of insolvency or bankruptcy
 Some gross settlement systems are considered
equivalent to net settlement if they eliminate or result
in insignificant credit and liquidity risk and process
receivables and payables in a single settlement process
or cycle.
© IFRS Foundation | 30 Cannon Street | London EC4M 6XH | UK. www.ifrs.org
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25. Expressions of individual
views by members of the IASB
and its staff are encouraged.
The views expressed in this
presentation are those of the
presenter.
Official positions of the IASB
on accounting matters are
determined only after
extensive due process and
deliberation.
© IFRS Foundation | 30 Cannon Street | London EC4M 6XH | UK. www.ifrs.org
25

26. 26
The requirements are set out in International
Financial Reporting Standards (IFRSs), as issued
by the IASB at 1 January 2012 with an effective
date after 1 January 2012 but not the IFRSs they
will replace.
The IFRS Foundation, the authors, the presenters
and the publishers do not accept responsibility for
loss caused to any person who acts or refrains
from acting in reliance on the material in this
PowerPoint presentation, whether such loss is
caused by negligence or otherwise.
© IFRS Foundation | 30 Cannon Street | London EC4M 6XH | UK. www.ifrs.org