IFRS 7 — Financial Instruments: Disclosures

About

IFRS 7 requires entities to provide disclosures in their financial statements that enable users to evaluate:

• the significance of financial instruments for the entity’s financial position and performance.
• the nature and extent of risks arising from financial instruments to which the entity is exposed during the period and at the end of the reporting period, and how the entity manages those risks. The qualitative disclosures describe management’s objectives, policies and processes for managing those risks. The quantitative 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. Together, these disclosures provide an overview of the entity’s use of financial instruments and the exposures to risks they create.

IFRS 7 applies to all entities, including entities that have few financial instruments (for example, a manufacturer whose only financial instruments are cash, accounts receivable and accounts payable) and those that have many financial instruments (for example, a financial institution most of whose assets and liabilities are financial instruments).

What you should know

• Know and apply the disclosure requirements for financial instruments.
• Explain the significance of financial instruments for an entity’s financial position and performance.
• Disclose the nature and extent of risks arising from financial instruments.
• Distinguish between credit risk, liquidity risk and market risk disclosures.
• Explain how management identifies, measures and manages risks arising from financial instruments.
• Present and disclose qualitative and quantitative information about financial instruments.