IFRS 7IG Disclosures

Last Updated on 21/04/2021 by 75385885

IFRS 7 Financial Instruments: DisclosuresIFRS 7IG Disclosures

IFRS 7IG Disclosures

Disclosures (paragraphs 13A–13F and B40–B53)

IG40D The following examples illustrate ways in which an entity might provide the quantitative disclosures required by paragraph 13C. However, these illustrations do not address all possible ways of applying the disclosure requirements as set out in paragraphs 13B–13E.

Background

An entity has entered into transactions subject to an enforceable master netting arrangement or similar agreement with the following counterparties. The entity has the following recognised financial assets and financial liabilities resulting from those transactions that meet the scope of the disclosure requirements in paragraph 13A.

Counterparty A:

The entity has a derivative asset (fair value of CU100 million) and a derivative liability (fair value of CU80 million) with Counterparty A that meet the offsetting criteria in paragraph 42 of IAS 32. Consequently, the gross derivative liability is set off against the gross derivative asset, resulting in the presentation of a net derivative asset of CU20 million in the entity’s statement of financial position.

Cash collateral has also been received from Counterparty A for a portion of the net derivative asset (CU10 million). The cash collateral of CU10 million does not meet the offsetting criteria in paragraph 42 of IAS 32, but it can be set off against the net amount of the derivative asset and derivative liability in the case of default and insolvency or bankruptcy, in accordance with an associated collateral arrangement.

Counterparty B:

The entity has a derivative asset (fair value of CU100 million) and a derivative liability (fair value of CU80 million) with Counterparty B that do not meet the offsetting criteria in paragraph 42 of IAS 32, but which the entity has the right to set off in the case of default and insolvency or bankruptcy.

Consequently, the gross amount of the derivative asset (CU100 million) and the gross amount of the derivative liability (CU80 million) are presented separately in the entity’s statement of financial position. Cash collateral has also been received from Counterparty B for the net amount of the derivative asset and derivative liability (CU20 million).

The cash collateral of CU20 million does not meet the offsetting criteria in paragraph 42 of IAS 32, but it can be set off against the net amount of the derivative asset and derivative liability in the case of default and insolvency or bankruptcy, in accordance with an associated collateral arrangement.

Counterparty C:

The entity has entered into a sale and repurchase agreement with Counterparty C that is accounted for as a collateralised borrowing. The carrying amount of the financial assets (bonds) used as collateral and posted by the entity for the transaction is CU79 million and their fair value is CU85 million. The carrying amount of the collateralised borrowing (repo payable) is CU80 million.

The entity has also entered into a reverse sale and repurchase agreement with Counterparty C that is accounted for as a collateralised lending. The fair value of the financial assets (bonds) received as collateral (and not recognised in the entity’s statement of financial position) is CU105 million. The carrying amount of the collateralised lending (reverse repo receivable) is CU90 million.

The transactions are subject to a global master repurchase agreement with a right of set-off only in default and insolvency or bankruptcy and therefore do not meet the offsetting criteria in paragraph 42 of IAS 32. Consequently, the related repo payable and repo receivable are presented separately in the entity’s statement of financial position.

Illustrating the application of paragraph 13C(a)–(e) by type of financial instrument

Financial assets subject to offsetting, enforceable master netting arrangements and similar agreements

IFRS 7 IG40D 1e examples illustrate ways in which an entity might provide the quantitative disclosures required

Financial assets subject to offsetting, enforceable master netting arrangements and similar agreements

IFRS 7 IG40D 2e examples illustrate ways in which an entity might provide the quantitative disclosures required

Illustrating the application of paragraph 13C(a)–(c) by type of financial instrument and paragraph 13C(c)–(e) by counterparty

Financial assets subject to offsetting, enforceable master netting arrangements and similar agreements

IFRS 7 IG40D 3e examples illustrate ways in which an entity might provide the quantitative disclosures

Net financial assets subject to enforceable master netting arrangements and similar agreements, by counterparty

IFRS 7 IG40D 5e examples illustrate ways in which an entity might provide the quantitative disclosures

Financial liabilities subject to offsetting, enforceable master netting arrangements and similar agreements

IFRS 7 IG40D 6e examples illustrate ways in which an entity might provide the quantitative disclosures required

Net financial liabilities subject to enforceable master netting arrangements and similar agreements, by counterparty

IFRS 7 IG40D 7e illustrate ways in which an entity might provide the quantitative disclosures required

Previous: IFRS 7IG Transferred financial assets and derecognition

END of IFRS 7

 

Source EU rules on financial information disclosed by companies

 

Last Updated on 21/04/2021 by 75385885

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