IFRS 7 Kickstart sensitivity disclosures

IFRS 7 Kickstart sensitivity disclosures – Management has to disclose a sensitivity analysis for each type of market risk to which the entity is exposed at the reporting date. This should show how profit or loss and equity would have been affected by changes in the relevant risk variable that were reasonably possible at that date [IFRS 7 40(a)]

Case: ‘Worse case scenario’ sensitivity analysis

Not required. IFRS 7 40(a) requires a sensitivity analysis to show the effect on profit or loss and equity of reasonably possible changes in the relevant risk variable. A reasonably possible change is judged relative to the economic environments in which the entity operates; it does not include remote or ‘worst case’ scenarios or ‘stress tests’.

Furthermore, entities are not required to disclose the effect for each change within a range of reasonably possible changes of the relevant risk variable. Disclosure of the effects of the changes at the limits of the reasonably possible range would be sufficient [IFRS 7 B18-19].

Case: IFRS 7 40(a) requires a sensitivity analysis to show the effect on profit or loss and equity of reasonably possible changes in the relevant risk variable. When determining a ‘reasonably possible’ change based on historical data, is there any explicit guidance as to how long the historical period should be?

No guidance in IFRS 7. Each entity should judge what a reasonably possible change is; assessments may differ from entity to entity. However, reasonably possible movements should be assessed based on a period until the entity next presents the disclosures − it is usually the next annual reporting period [IFRS 7 B19 (b)].

When providing such sensitivity information, management will generally be disclosing reasonably possible changes over the next year. It would therefore make sense that historical annual movements over a similar period be considered over as many historical periods as possible in an effort to minimise extremes.

There are inherent weaknesses in using historical data to predict future returns; any changes in the fundamental structure, risk and returns of the relevant markets in the risks that arise should also be considered when basing future movements on historical sensitivities.

Irrespective of what methodology is adopted, it should be consistently applied and sufficiently described so that the user of the financial statements has an understanding of how the sensitivity analysis has been derived [IFRS 7 40(b)].

Case: Fund ABC Ltd invests in five funds (‘the Funds’), all of which invest in global corporate debt markets. ABC Ltd is a fund of funds, focusing on investing in funds with global long/short corporate debt strategies.

While not being actively involved in managing the Funds’ investment portfolios, ABC Ltd’s management utilises information on the underlying portfolios, particularly with respect to risk and return, when deciding to which Funds to allocate resources.

While ABC Ltd is not directly exposed to interest rate and currency risk, it has significant indirect exposures through its equity investment in the Funds. How should management meet the IFRS 7 40 requirement to prepare a sensitivity analysis?

Management should identify the relevant risk variables that reflect best the entity’s exposure to market risk. Management of ABC Ltd views and considers the primary financial exposure of ABC Ltd to be to interest rate and foreign exchange movements, given ABC Ltd’s narrow focus on funds following a global long/short debt strategy.

Management has determined the relevant risk variables to be interest and foreign currency rates. When preparing the sensitivity analysis for ABC Ltd, management should reflect the quantitative impacts of the interest and foreign currency rate sensitivities of the Funds.

Case: Investment entity ABC Ltd (a ‘fund of funds’) invests in a number of other investment entities (‘the Funds’). The Funds invest in a variety of global markets. Management manages the portfolio by allocating and reallocating money to specific investment strategies and specific managers within those strategies after performing comprehensive due diligence.

As at year end, ABC Ltd invested in 37 Funds, which could be categorised into six major strategies with 15 sub-strategies. ABC’s investment in the Funds is evidenced by way of shares or units in those Funds. Management of ABC Ltd considers ABC’s exposure to risk to be to the managers of the underlying Funds they invest and to the respective strategies.

In assessing that risk, management obtains monthly overall performance figures from the respective underlying managers. While management is aware of the types of risk ABC Ltd is exposed to via its investments in the Funds, no information is utilised on the underlying portfolios.

ABC Ltd is directly exposed to equity price risk, being the sensitivity of ABC Ltd to movements in the value of the shares or units issued by the Funds, and indirectly exposed to many risks that influence the value of those shares or units − for example, interest rates, foreign exchange rates, commodity prices, equity prices, etc.

How should management meet the IFRS 7 para 40 requirement to prepare a sensitivity analysis?

Management should identify the relevant risk variable(s) that reflect best the exposure of the entity to market risk.

As management considers ABC’s exposure to risk to be to the managers of the underlying Funds they invest in and to the respective strategies, the sensitivity of the portfolio could be disclosed by fund strategy.

If the relevant risk variable is determined to be fund strategy, management should look to provide meaningful disclosure of the sensitivity of ABC Ltd to movements in the respective strategies. In addition, management should disclose qualitative information on the types of risk the Funds within each strategy are directly exposed − that is, the inherent risks of each of the Funds within a strategy.

As an example, management of ABC Ltd could provide the following disclosure in the financial statements:

The table below summarises the impact on ABC’s post-tax profit of reasonably possible changes in the returns of each of the strategies to which ABC is exposed through the 37 Funds in which it invests at year end.

A reasonably possible change is management’s assessment, based on historical data sourced from [add source], of what is a reasonably possible percentage movement in the value of a fund following each respective strategy over the next year in USD terms. The impact on post-tax profit is calculated by applying the reasonably possible movement determined for each strategy to the value of each fund held by ABC Ltd.

The analysis is based on the assumption that the returns on each strategy have increased or decreased as disclosed, with all other variables held constant. The underlying risk disclosures represent the market risks to which the Funds are exposed: I, F, O, representing interest rate, (foreign) currency and other price risks respectively.

In accordance with IFRS 7, currency risk is not considered to arise from financial instruments that are non-monetary items, such as equity investments.”

Strategy

Strategy – tactics

Underlying risk

exposures

Number of funds

Reasonably possible changes

Impact on post-tax profit

(‘000)

Equity long/short

Sector specialists

O

4

5.2%

115

Short bias

O

3

3.0%

157

Opportunistic

O

1

6.7%

155

Fund of funds

Fund of funds

I, F, O

6

7.5%

365

Multi-manager

I, F, O

2

6.6%

113

Directional trading

Global macro

I, F, O

4

8.0%

313

Market timing

I, F, O

1

7.0%

34

Commodity pools

I, F, O

1

5.3%

45

Event driven

Distressed Securities

I, F

2

7.5%

113

Merger arbitrage

O

1

5.6%

56

Emerging markets

I, F, O

2

9.5%

169

Relative value

Convergence arbitrage

I, F, O

2

6.7%

145

Fixed income arbitrage

I, F

1

8.0%

37

Convertible arbitrage

I, F, O

1

5.7%

45

MBS strategy

I, F

1

7.8%

Multi-strategy

I, F, O

5

7.0%

450

Total

37

2,312

Case: ‘Tracking error’ (TE) is a tool that may be used by management to monitor the results of a fund against a benchmark. TE is a measure of how closely a portfolio follows an index. Can TE be used as a form of sensitivity analysis to satisfy the requirements of IFRS 7 40 – 41?

No. IFRS 7 para 40 requires the disclosure of a sensitivity analysis of each type of market risk to which an entity is exposed, showing how profit or loss and equity would be affected by changes in the relevant risk variable that were reasonably possible at the balance sheet date.

In addition, IFRS 7 41 allows an entity that uses a sensitivity analysis (for example, value at risk (VAR)) that reflects inter-dependency between different risk variables to disclose such a sensitivity analysis.

TE does not provide the information required by IFRS 7 40, as it does not show how the profit or loss and equity of a fund will be impacted from a change in a market risk variable. In addition, while the TE figure itself is somewhat based on interdependencies between risk variables, it will also take account of other factors such as fees, rebalancing costs, cash holdings, etc.

The resulting TE figure is not therefore a VAR figure but only an estimate as to how closely the fund will track an index. It does not therefore provide the information required by IFRS 7.

Case: When providing sensitivity analysis in accordance with IFRS 7 40(a), should the impact on profit and loss and equity as a result of changes in the relevant risk variable be net of fees, which may increase or decrease as a result of such changes?

The impact on profit and loss and equity as a result of a change in the relevant risk variable may be disclosed net or gross of fees, provided the methods and assumptions used in preparing the sensitivity analysis are disclosed [IFRS 7 40(b)].

Case: Investment entity ABC Ltd invests in a debt portfolio primarily concentrated in the region of Eurasia. Many of the countries in Eurasia have similar economic environments. However, one country, Utopia, has a more developed economic environment, which is dissimilar to the other countries within the region.

When providing a sensitivity analysis for interest rate risk, should ABC Ltd provide disaggregated information showing the sensitivity of ABC Ltd to reasonably possible movements in interest rates in all the countries it invests?

It depends. The management of ABC Ltd decides how it aggregates information to display the overall picture without combining information with different characteristics about exposures to risks from significantly different economic environments [IFRS 7 B3, IFRS 7 B17].

Because many of the countries in Eurasia have similar economic environments, it could be possible to aggregate the information providing it is not unreasonable to assume a reasonably possible change in interest rates would be the same in these countries – for example, a 50 basis point move.

However, it would never be appropriate to aggregate these countries with Utopia due to differences in the economic environments.

Case: IFRS 7 requires the disclosure of a sensitivity analysis for each type of market risk to which the entity is exposed at the reporting date [IFRS 7 40(a)] or a sensitivity analysis that reflects interdependencies between risk variables if that is how the entity manages its financial risks [IFRS 7 41].

The investment fund uses a VAR methodology that reflects interdependencies between risk types for its equity portfolio but manages its bond portfolio using a methodology that reflects each type of market risk.

Can the fund disclose its VAR figures for the equity portfolio and a sensitivity analysis for each type of market risk for its bond portfolio?

Yes. The investment fund may provide different types of sensitivity analysis for different classes of financial instrument [IFRS 7 B21] or may chose to applying the sensitivity analysis outlined in IFRS 7 40(a) for the whole of the fund. However, it is not permitted to disclose VAR figures for the whole (see next case).

Case: Investment entity ABC does not use VAR to manage risk. However, it wishes to use VAR to satisfy the IFRS 7 requirement to provide a market sensitivity analysis. Is this acceptable?

No. In order to use to VAR, or any sensitivity analysis that reflects interdependencies between risk variables, IFRS 7 41 states that the entity should use such analysis to ‘manage financial risks’. If the entity does not use VAR to manage its financial risks, it cannot use VAR to satisfy IFRS 7 41. The entity should disclose a sensitivity analysis in accordance with IFRS 7 40.

Case: If an entity uses VAR to manage financial risk and chooses to disclose VAR in the financial statements in accordance with IFRS 7 41, is there any explicit guidance on what confidence interval to use, what the holding periods are and whether to disclose VAR solely at year end versus maximum, minimum and average VAR?

No. There is no explicit guidance. An entity should disclose the sensitivity analysis it actually uses to manage/monitor risk. An explanation of the method used in preparing the analysis and main parameters and assumptions underlying the data should be disclosed, along with an explanation of the objectives of the method used and of any limitations that may result in the information not fully reflecting the fair value of the assets and liabilities involved [IFRS 7 41(a) and (b)].

Case: The IFRS 7 para 40 sensitivity analysis determined as at year end for investment entity ABC Ltd would vary if events occurring after year end were considered when determining what is a ‘reasonably possible’ change in the relevant risk variables. Should these events after year end be considered when determining what is a ‘reasonably possible’ movement as at year end?

It depends. Management should consider the economic environment in which it operates when determining what a ‘reasonably possible’ change in the relevant risk variable is [IFRS 7 B19(a)].

Management should consider historical movements, future expectations and economic forecasts at the balance sheet date. This would include consideration of events occurring subsequent to year end that provide evidence of the economic environment that existed at year end.

Events occurring subsequent to year end that are indicative of the economic environment subsequent to year end should not be considered when determining what is a ’reasonably possible’ change at the balance sheet date.

Case: Investment entity ABC Ltd, with a functional currency of New Zealand dollars, invests in a global debt portfolio and as a result has significant exposure to the yen, euro and US dollar. When preparing a sensitivity analysis for foreign currency risk, in accordance with IFRS 7 40, should ABC disaggregate the information by significant currency exposure?

Yes. Even though the management of ABC Ltd has some discretion over what it aggregates and disaggregates [IFRS 7 B3], aggregation in this instance would obscure the risk that each currency exposure represents. For the purpose of IFRS 7, no currency risk is deemed to arise from financial instruments that are non-monetary items – for example, equity investments. In accordance with IFRS 7 40(b), the methods used in preparing the sensitivity analysis needs to be very clear and should state specifically that the foreign currency sensitivity analysis reflects only the sensitivity of monetary items.

Case: Fund ABC Ltd invests in a long/short equity portfolio with a focus on S&P 500 stocks. It measures its performance against the S&P 500.

However, management manages ABC Ltd so that the beta (sensitivity to movements in the market) of the overall portfolio (including long and short positions) to the S&P 500 is as close to zero as possible – that is, the portfolio has no or little sensitivity to the movement in market prices (in this case the S&P 500).

How should this be reflected in the sensitivity analysis when showing equity price risk?

IFRS 7 defines market risks as including ‘other price risk’. Other price risk is defined as ‘The risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market prices (other than those arising from interest rate risk or currency risk), whether those changes are caused by factors specific to the individual financial instrument or its issuer, or factors affecting all similar financial instruments traded in the market’.

Therefore, while the sensitivity of ABC to movements in the market (represented by the S&P 500 in this instance) may be close to neutral, ABC remains sensitive to movements in the price of the portfolio it invests.

Management should make quantitative disclosure of the sensitivity of ABC Ltd to movements in the S&P 500, even if the sensitivity is very minor, and qualitative disclosure of how it manages exposure to the index.

It should also disclose that the entity is exposed to movements in the price of the securities in which it invests and that movements in those prices will have a proportional impact on the net income and equity of the entity.

Case: Fund ABC Ltd invests in a long-only equity portfolio focusing on S&P 500 stocks. The management of ABC Ltd does not measure performance or manage risk against the S&P 500; it focuses instead on providing returns 4%-5% above a risk-free rate of return. When disclosing the sensitivity analysis in accordance with IFRS 7 para 40, how should ABC Ltd show its sensitivity to equity price movements?

Even though ABC Ltd does not measure or manage risk against the S&P 500, management is still required to identify a relevant risk variable on which to base the sensitivity analysis. Compliance with IFRS 7 para 40 is not based on how management manages or measures risk; it is based on the identification of a relevant risk variable on which to determine reasonably possible changes.

There is no specific guidance in IFRS 7 para 40 as to what is a ‘relevant’ risk variable. However, when determining a risk variable, management should consider what index or benchmark best reflects the risk of the markets in which they invest. In this instance, the S&P 500 would appear to be the most relevant risk variable. Management should therefore provide a sensitivity analysis using the S&P 500 as the risk variable.

Case: Fund ABC Ltd invests in a global equity portfolio. The management of ABC Ltd does not measure performance or manage risk against any specific benchmark or index; it focuses instead on providing returns 4%-5% above a risk-free rate of return. When disclosing the sensitivity analysis in accordance with IFRS 7 40, how should ABC Ltd show its sensitivity to equity price movements?

Even though ABC Ltd does not measure or manage risk against a specific benchmark or index, management is still required to identify a relevant risk variable on which to base the sensitivity analysis.

There is no one index that reflects the risk of the markets in which ABC Ltd invests, given its global focus. Management should therefore identify the most relevant risk variable on which to base the sensitivity analysis. This could be by country allocation or sectors, or any other relevant variable.

For example, if management considers the most appropriate risk variable to be allocation by country, other price risk should be analysed by country with an appropriate index of each country being the risk variable.

Management should then determine for each index what a reasonably possible shift would be and calculate the sensitivities based on the historical correlation of ABC Ltd’s equity instruments to the index. For example:

The table below summarises the impact of increases in the major equity indexes of countries in which the fund invests on the fund’s post-tax profit for the year. The analysis is based on the assumption that the equity indexes have increased/decreased as disclosed, with all other variables held constant and all the Funds equity investments moved according to historical correlations with the index.”

Index

Reasonably possible change

Impact on post-tax profit

(‘000)

DAX

6%

109

Dow Jones

6%

250

FTSE

6%

67

All Ords

8%

45

NZX 50

8%

15

Hang Seng

10%

25

Total

511

Case: IFRS 7 40 requires management, when providing a sensitivity analysis, to disclose the effect on profit and loss and equity from reasonably possible changes in the relevant risk variable. If there is no effect on equity other than the effect the change in profit and loss has on retained earnings, should the effect on equity be disclosed separately?

No. IFRS 7 40 requires management to disclose the effect on the profit and loss and other components of equity if any (for example, effects from categorising some investments as available for sale). If the only effect on equity is the effect an increase or decrease in profit or loss has on retained earnings, no effect on equity needs to be disclosed [IFRS 7 B27 and IFRS 7 IG 34-36].

Case: Investment entity X is a fund of fund structure and invests in other private equity funds (the ‘underlying funds’). The underlying funds, which are managed by a third-party manager not related to X, are invested directly in private equity investments (the ‘underlying investments’). X receives periodically the NAVs of the underlying funds. The NAV normally represents the fair value at which transactions could be entered into.

All underlying investments are reported at fair value, which is derived from the NAV of the underlying fund. The historic volatility of the fund was 10%.

What method should be applied to present the other price risk?

IFRS 7 requires management to present a sensitivity analysis for all financial instruments. Fund investments qualify as financial instruments; a sensitivity analysis should therefore be disclosed. The sensitivity can be directly derived from the balance sheet value. If the fair value of the investments increased/decreased by 10%, the profit would increase/decrease by C1 million.

Case: A private equity fund (ABC) invests in a number of other funds (‘Fund of funds’). The underlying funds invest in a variety of quoted and unquoted portfolio companies spanning multiple industry sectors and geographies.

Management manages the portfolio by allocating and reallocating money to specific investment strategies. It specifically manages within those strategies after performing comprehensive due diligence. As at year end, ABC invested in 25 funds that could be categorised into four major strategies.

ABC’s investment in the funds is evidenced by way of limited partnership interests. ABC’s management considers ABC’s exposure to risk to be to the managers of the underlying funds they invest and to the respective strategies. In assessing that risk, management obtains quarterly overall investment updates and performance figures from the underlying managers.

While management is aware of the types of risk ABC is exposed to via its investments in the underlying funds, no information, apart from the quarterly investor updates, is requested or obtained in respect of the underlying portfolios.

ABC is directly exposed to equity price risk. This is the sensitivity of ABC to movements in the value of the limited partnership interests in the underlying funds and indirectly exposed to equity price risk and other risks that influence the value of their interests (for example, interest rates, FX rates, commodity prices and equity prices).

What information should ABC disclose in the financial statements of ABC to satisfy the requirements of IFRS 7 para 40 (sensitivity analysis with respect to market risk variables), in order to provide a meaningful representation of the risks inherent in the portfolio and the sensitivity of ABC to movements in the respective strategies?

Management should identify the relevant risk variable/s that best reflect the exposure of the entity to market risk.

As management considers ABC’s exposure to risk to be to the managers of the underlying funds they invest and to the respective strategies, the sensitivity of the portfolio could be disclosed by fund strategy.

If the relevant risk variable is determined to be fund strategy, management should look to provide meaningful disclosure of the sensitivity of ABC to movements in the respective strategies. We would also expect management to disclose qualitative information on the types of risk the funds, within each strategy, are directly exposed to – that is, the inherent risks of each of the funds within a strategy.

The following is an example of disclosure that may be suitable in the above circumstances:

The table below summarises the impact on ABC’s profit of reasonably possible changes in returns of each of the strategies to which ABC is exposed through the 25 funds in which it invests over the year. A reasonably possible change is management’s assessment, based on historical data sourced from [add source], of what is a reasonably possible percentage movement in the value of a fund following each respective strategy over the next year.

The impact on profit is determined by applying the reasonably possible movement of the respective strategy to each fund’s individual fair value. The analysis is based on the assumption that the relevant financial variables have increased or decreased as disclosed, with all other variables held constant. The underlying risk disclosures represent the direct market risks to which the funds are exposed. I, F, O represent interest rate, (foreign) currency and other price risks”.

Strategy

Underlying risk exposure

Number of funds

Reasonable possible change (+/-)

Impact on post tax profit

(“000)

Pan-European buyout funds

I, F, O

10

5%

900

UK buyout funds

I, O

8

5%

600

US buyout funds

I, O

4

3%

500

UK venture capital, small cap funds

O

3

2%

300

Total

25

2,300

There is no one risk variable that reflects the risk of the markets in which ABC is exposed, given ABC’s large number of investments in other funds and diverse strategies that it follows. As a result, ABC should identify what management considers to be the most relevant risk variable (strategy) on which to base the sensitivity analysis.

The level of disclosure reflects the sensitivity to risk ABC that is exposed to and also the inherent risk of the instruments in which it invests.

Case: A private equity fund invests in unlisted securities. The fair value of unlisted securities is determined by using valuation techniques. IFRS 7 40(a) requires entities to provide sensitivity analysis showing how profit or loss and equity would have been affected by changes in relevant risk variable that were reasonably possible at the reporting date.

A private equity fund typically determines fair value of unlisted securities by using valuation techniques, such as earnings multiples, and sometimes other discounted cash flow and net asset based techniques. These valuation methodologies incorporate a variety of variables, inputs and assumptions.

What factors should be considered by a private equity fund investing in unlisted securities when presenting sensitivity analyses for market risk?

Management should determine the key risk variables and inputs used in the valuation methodologies and provide sensitivity analysis for reasonably possible changes in these variables. IFRS 7 requires information about financial risks only, not operating or business risks. Earnings multiples, interest rates and currency rates are considered market risk variables. However, entity-specific asset values and earnings are not considered risk variables for IFRS 7 purposes.

If management expects the key risk variable for a valuation methodology to be the discount rate (with reference to risk-free rates of return) or earnings multiple used (with reference to published private equity multiples), a sensitivity analysis should be disclosed for reasonably possible changes in the discount rate or the earnings multiple.

For example, European Fund LP (EF) invests in management buy-outs across a number of industry sectors in Western Europe. It manages its portfolio of investee companies according to the industries in which they operate, being consumer goods, transportation and technology.

EF values these investments on an earnings-multiple basis, with valuation changes disclosed in the income statement. EF also invests in a number of infrastructure projects, which are valued on a DCF basis.

  • Buyouts: on the basis that earnings multiples are the key market risk variable impacting the fair value, EF should divide its portfolio into the three industries, determine what a reasonable possible shift of PE multiples would be, by sector, and work out the impact for each investment of applying this variation.
  • Infrastructure: on the basis that interest rates are the key market risk variable impacting the fair value, EF should consider past variability in the appropriate interest rate and determine a reasonable change, and apply to its DCF calculations.

Industry

Market risk variable

Number of investee companies

Reasonable possible change

Impact on post-tax profit

(“000)

Consumer goods

PE multiple

10

2.0%

500

Transportation

PE multiple

4

1.5%

350

Technology

PE multiple

8

4.0%

600

Infrastructure

Interest rates

2

1.0%

200

Total

24

1,650

This Case focuses only on the market risk disclosures required by IFRS 7 40.

Additional disclosures may be required with respect to discounted cash flow calculations. When a valuation technique is used, IFRS 7 27 requires disclosure of the assumptions used. If there has been a change in valuation technique, the entity should disclose that change and the reasons for making it.

For fair value measurement in Level 3 of the fair value hierarchy, the entity should disclose if a change of one or more of the inputs to reasonably possible alternative assumptions would change fair value significantly. Disclosure of the effect of those changes is required [IFRS 7 27B(e)].

Case: An investment entity is required to show in a sensitivity analysis the impact of a reasonably possible shift in market risks on profit or loss and equity.

Should a private equity fund that has AFS equity investments take into consideration its impairment policy to distinguish between impacts on equity (if a reasonably possible decrease in share prices results in an amount below the impairment threshold) and impacts on profit or loss (if a reasonably possible decrease in share prices results in an amount above the impairment threshold)?

Yes. In cases where the fair value of a non-monetary AFS instrument is close to the impairment threshold, the entity should distinguish between profit or loss and equity effects, taking into consideration its impairment policy.

In cases where a non-monetary AFS financial asset is already impaired, the downwards shift should be shown as affecting profit or loss; the upwards shift should be shown affecting equity.

Case: A private equity fund has a large holding of listed securities of a company. If the securities of that company are sold in its entirety by the private equity fund, the securities would be sold at a discount to the price for a small holding. Should the private equity fund disclose the effect of the discount?

A ‘blockage factor’ is not recorded for measurement purposes; hence no disclosures are required with reference to market risks. However, certain disclosures may be necessary with reference to market risk sensitivity analysis, disclosing the quoted security price as the market risk variable that is flexed.

The private equity fund also considers disclosure of risk concentration and/or liquidity risks. IFRS 7 34 requires disclosure of quantitative data about concentrations of risk [IFRS 7 IG18]. IFRS 7 39(c) requires the entity to describe how it manages the liquidity risk inherent in the maturity analysis of financial liabilities. The following additional disclosures might be considered:

  • The nature of security;
  • The extent of holding; and
  • The effect on profit or loss.

 

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