Q1: What is IFRS 7?
IFRS 7 is an International Financial Reporting Standard that provides guidance on disclosure requirements for financial instruments. Financial instruments include items such as derivatives, equity instruments, debt instruments, and investments in other entities.
Q2: What are the objectives of IFRS 7?
The objectives of IFRS 7 are to provide users of financial statements with information that:
- Helps them to evaluate the significance of financial instruments for the entity's financial position and performance.
- Assists them in assessing the risks associated with financial instruments.
- Provides information about how the entity manages its financial instruments and the related risks.
Q3: What Are The Disclosure Requirements Under IFRS 7?
The disclosure requirements under IFRS 7 include:
- Information about the significance of financial instruments for the entity's financial position and performance, including the nature and extent of the entity's exposure to risks arising from financial instruments.
- Information about the objectives, policies, and processes for managing financial risks.
- Information about the fair values of financial instruments, including methods used to determine fair value and the sensitivity of fair values to changes in market conditions.
- Information about the credit risk associated with financial instruments, including the credit quality of counterparties and the amount of collateral held as security.
- Information about the liquidity risk associated with financial instruments, including the availability of funding sources and the maturity profiles of financial liabilities.
- Information about the market risk associated with financial instruments, including sensitivity analysis of market risk exposures and how those exposures are managed.
- Information about the nature and extent of hedging activities undertaken by the entity, including the objectives, policies, and strategies for hedging and the effect of hedging on the entity's financial position and performance.
Q4: Who is responsible for ensuring compliance with IFRS 7 disclosure requirements?
The entity's management is responsible for ensuring compliance with the disclosure requirements of IFRS 7. Auditors are responsible for auditing the entity's compliance with those requirements and reporting on any identified deficiencies.
Q5: Are there any exemptions or exceptions to the requirements of IFRS 7?
IFRS 7 provides certain exemptions or exceptions for disclosure requirements in certain circumstances. For example, entities may be exempted from providing disclosures about the fair value of financial instruments that are measured at amortized cost, such as certain types of loans and receivables. However, entities must still provide disclosures about the credit risk associated with those instruments. Additionally, IFRS 7 provides limited exemptions for small and medium-sized entities that meet certain criteria.