IFRS 7 Financial Instrument Disclosures

Summary
IFRS 7 specifies disclosure for financial instruments. The presentation and recognition and measurement of financial instruments are the subject of IAS 32 Financial Instruments: Presentation and IAS 39 Financial Instruments: Recognition and Measurement respectively.

The standard applies to all risks arising from all financial instruments of all entities.However, the extent of disclosure required depends on the extent of the entity’s use of financial instruments and of its exposure to risk.

The standard requires disclosure of:

• the significance of financial instruments for an entity’s financial position and performance.
• qualitative information about exposure to risks arising from financial instruments. The disclosures describe management’s objectives, policies and processes for managing those risks.
• quantitative information about exposure to risks arising from financial instruments, including specified minimum disclosures about credit risk, liquidity risk and market risk. These 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.

The required disclosures provide an overview of the entity’s use of financial instruments and its exposure to the risks they create.

Such information can influence a user’s assessment of the financial position and financial performance of an entity or of the amount, timing and uncertainty of its future cash flows.

Greater transparency regarding those risks allows users to make more informed judgements about risk and return