IFRS 7 Complete Maturity analysis disclosure

IFRS 7 Complete Maturity analysis disclosure – IFRS 7 requires certain disclosures to be presented by category of an instrument based on the IFRS 9 recognition and measurement categories of financial instruments.

Certain other disclosures are required by class of financial instrument. For those disclosures an entity must group its financial instruments into classes of similar instruments as appropriate to the nature of the information presented. [IFRS 7 6]

The two main categories of disclosures required by IFRS 7 are:

  1. information about the significance of financial instruments [IFRS 7 7 – 30]
  2. information about the nature and extent of risks arising from financial instruments [IFRS 7 31 – 42]

So IFRS 7 bets … Read more

Financing activities

Financing activities - Activities that result in changes in the size and composition of the contributed capital and borrowings of the entity.

Financial assets example

Financial assets example are a.o. loans and receivables, financial assets at fair value through profit or loss, derivatives designated as hedging instruments

Cash and cash equivalents

Cash and cash equivalents - Cash is defined as 'Cash on hand and demand deposits'. Cash equivalents is defined as 'Short-term, highly liquid investments.....

Changes in liquidity and risk of cash equivalents

Changes in liquidity and risk of cash equivalents – Cash equivalents are short-term, highly liquid investments with a maturity date that was 3 months or less at the time of purchase. In other words, there is very little risk of collecting the full amount being reported. So if a corporate bond matures within three months, but the company that issued it may not be able to settle the debt, one would not be able to include that as a cash equivalent.

Other investments and securities that are not cash equivalents include postage stamps, IOUs, and notes receivable because these are not readily converted to cash.

Cash equivalents are not just the amount of currency that a business has in its … Read more

Group cash pooling and company accounts

Group cash pooling and company accounts – Cash pooling arrangements arise where one group entity (which may be the ultimate group parent, or a fellow subsidiary) acts as the treasury function for the rest of the group. Under these arrangements, one entity within a group holds and maintains all cash balances with an external financial institution(s) and advances funds to group entities. Group cash pooling and company accounts

Often, a group treasury function is used in order to make the most efficient use of cash resources within a group, and to enable hedge accounting transactions to be entered into at group-level at the lowest overall cost. Typically, the group entities that act as a treasury function are not financial institutions. … Read more

Financial crises and excessive leverage

Financial crises and excessive leverage – Contrary to popular opinion, stock markets generally continue to reflect companies’ intrinsic value during financial crises. For instance, after the 2007 crisis had started in the credit markets, equity markets too came in for criticism.

In October 2008, a New York Times editorial thundered, “What’s been going on in the stock market hardly fits canonical notions of rationality. In the last month or so, shares in Bank of America plunged to $26, bounced to $37, slid to $30, rebounded to $38, plummeted to $20, sprung above $26 and skidded back to almost $24. Evidently, people don’t have a clue what Bank of America is worth.”

Far from showing that the equity market was broken, … Read more

The Statement of Cash Flows

A Historical Perspective on the Statement of Cash Flows

In 1987, the Financial Accounting Standards Board (FASB) issued an accounting standard, FASB Statement no. 95, requiring that the statement of cash flows be presented as one of the three primary financial statements. Previously, companies had been required to present a statement of changes in financial position, often called the funds statement. In 1971, APC Opinion no. 19 made the funds statement a required financial statement although many companies had begun reporting funds flow information several years earlier.

The funds statement provided useful information, but it had several limitations. First, APB Opinion no. 19 allowed considerable flexibility in how funds could be defined and how they were reported on the statement. Read more