Disclosure financial assets and liabilities

Disclosure financial assets and liabilities

– provides a narrative providing guidance on users of financial statements’ needs to present financial disclosures in the notes to the financial statements grouped in more logical orders. But there is and never will be a one-size fits all.

Here it has been decided to separately disclose financial assets and liabilities and non-financial assets and liabilities, because of the distinct different nature of these classes of assets and liabilities and the resulting different types of disclosures, risks and tabulations.

Disclosure financial assets and liabilities guidance

Disclosing financial assets and liabilities (financial instruments) in one note

Users of financial reports have indicated that they would like to be able to quickly access all of the information about the entity’s financial assets and liabilities in one location in the financial report. The notes are therefore structured such that financial items and non-financial items are discussed separately. However, this is not a mandatory requirement in the accounting standards.

Accounting policies, estimates and judgements

For readers of Financial Statements it is helpful if information about accounting policies that are specific to the entityDisclosure financial assets and liabilitiesand about significant estimates and judgements is disclosed with the relevant line items, rather than in separate notes. However, this format is also not mandatory. For general commentary regarding the disclosures of accounting policies refer to note 25. Commentary about the disclosure of significant estimates and judgements is provided in note 11.

Scope of accounting standard for disclosure of financial instruments


IFRS 7 does not apply to the following items as they are not financial instruments as defined in paragraph 11 of IAS 32:

  1. prepayments made (right to receive future good or service, not cash or a financial asset)
  2. tax receivables and payables and similar items (statutory rights or obligations, not contractual), or
  3. contract liabilities (obligation to deliver good or service, not cash or financial asset).

While contract assets are also not financial assets, they are explicitly included in the scope of IFRS 7 for the purpose of the credit risk disclosures. Liabilities for sales returns and volume discounts (see note 7(f)) may be considered financial liabilities on the basis that they require payments to the customer. However, they should be excluded from financial liabilities if the arrangement is executory. the Reporting entity Plc determined this to be the case. [IFRS 7.5A]

Classification of preference shares

Preference shares must be analysed carefully to determine if they contain features that cause the instrument not to meet the definition of an equity instrument. If such shares meet the definition of equity, the entity may elect to carry them at FVOCI without recycling to profit or loss if not held for trading.

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1 Best complete read – Fixed income Accounting for ECL

Fixed income Accounting for ECL

The ability to delay the recognition of credit losses on loans until there is evidence of a trigger event has been identified as one of the weaknesses in the incurred loss model outlined in Fixed income Accounting for ECLIAS 39 for Fixed income Accounting for ECL (expected credit losses).

To tighten up the credit loss rules, a forward-looking impairment model has been built into IFRS 9 that is applicable for bonds classified as amortized cost or FVOCI (see ‘Classification of financial assets‘). Reporting entities are required to make Expected Credit Losses (ECL) calculations for these bonds.

Generally, the loss allowance shall be calculated at an amount equal to the 12-month ECL unless there has been a Read more

Contractually linked instruments

Contractually linked instruments - IFRS 9 provides guidance when an entity prioritises payments for linked instruments that create concentrations of credit risk

Refinancing of bank debt

Refinancing of bank debt is a case of different intercompany financing arrangements at arm’s length investment terms and at (more of) intercompany investment terms or at (third party) bank finance terms. As a result it includes quite a lot of special explanations of issues faced in such less standard financing terms.

Assume Parent A advances a €200k unsecured loan to Subsidiary B on 1 January 2018. The loan is interest-free and is repayable in 5 years. At the same time, Bank X advances a €800k secured loan to Subsidiary B. The loan carries market rate of interest of 5% and is repayable in 5 years.

At initial recognition Parent A concluded that the loan to Subsidiary B met the criteria Read more

Presentation Insurance contracts

Presentation Insurance contractsPresentation Insurance contracts – IFRS 17 specifies minimum amounts of information that need to be presented on the face of the statement of financial position and statement of financial performance. These are supplemented by disclosures to explain the amounts recognized on the face of the primary financial statements (see ‘Disclosure of Insurance contracts’).

IFRS 17 requires separate presentation of amounts relating to insurance contracts issued and reinsurance contracts held in the primary statements. There is nothing to prevent an entity from providing further sub-analysis of the required line items (which may make the relationship of the reconciliations to the face of the statement of financial position more understandable).

Indeed, IAS 1 Presentation of Financial Statements requires presentation of additional line Read more

Business model assessment

A business model assessment is needed for financial assets that meet the SPPI criterion, to determine whether they classify at amortised cost or FVOCI.

IFRS 7 Market risk disclosures

Market risk - The risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market prices.

Loan commitments

Loan commitments are firm commitments to provide credit under pre-specified terms and conditions. This one of the major tools to finance corporations