ind as 107 financial instruments: disclosure · investments in equity instruments designated at...

Ind AS 107 Financial Instruments: Disclosure

1

To enable users to evaluate:

a) the significance of financial instruments for the

entity’s financial position and performance; and

b) 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

Objective

2

This standard is applicable to all financial instruments

except: Interest in Subsidiaries, joint ventures, associates etc.

(110/27/28) Rights and Obligation under Employees’ benefit plans

(19) Insurance contracts. (104) Instruments where share based payments are involved

(102) Puttable intruments disclosed as Equity Instruments

(Para 16A of Ind As 32)

SCOPE

3

The carrying amounts of each of the following

categories: (FVTPL) Financial assets and Financial liabilities

measured at fair value through profit or loss. Separate disclosure for designated as such and others.

Financial assets and Financial liabilities measured at amortized cost.

Financial assets measured at fair value through other comprehensive I ncome (FVTOCI).

Eg.Slide No 4\slide 4_Volks.pdf, Slide No 4\DHS Para 40 on Pg 134---Slide no 4.pdf

Disclosure-Balance sheet

4

For Designated Financial assets at fair value

through profit or loss (FVTPL)

a) the maximum exposure to credit risk of the financial asset at the end of the reporting period.

b) the amount by which any related credit derivatives or similar instruments ( Like collaterals) mitigate that maximum exposure to credit risk.

c) Slide No 5\DHS Pg 132 para 40.2.1.pdf


5

For Designated (FVTPL)….Cont….

© The amount of change, during the period and cumulatively, in the fair value of :

(i) the financial asset (or group of financial assets) that is attributable to changes in the credit risk of the financial asset.

(ii) related credit derivatives or similar instruments like collaterals


6

Financial liabilities (FVTPL) at fair value

through profit or loss, it shall disclose-

a) (For Designated & Others) the amount of change, during the period and cumulatively, in the fair value attributable to changes in the credit risk and

b) (For Designated & Others)the difference between the financial liability’s carrying amount and the amount payable on maturity

Eg. Slide No 7\DHS Pg 133 para 40.2.3.pdf


7

Financial liabilities (FVTPL) …..Cont…..

c) (For Designated) any transfers of the cumulative gain or loss within equity during the period including the reason for such transfers.( Change in fair value due to credit risk is taken to OCI which may be transferred to other reserves once liability is extinguished.)

c) (For Designated) amount (if any) presented in other

comprehensive income that was realised at derecognition.


8

Investments in equity instruments designated at

FVTOCI Required to disclose: (a) Details of such investments in equity instruments.

(Name /Amount etc) (b) the reasons for using this presentation alternative. (c) the fair value of each such investment at the end of the

reporting period. (d) dividends recognized during the period, (showing

separately on de-recognized and on hold investments ). (e) any transfers of the cumulative gain or loss within

equity during the period including the reason for such transfers. ( Para B5.7.1 of 109 restrict trf to P&L)


9

If an entity de-recognized investments in equity

instruments measured at FVTOCI, it shall disclose:

(a) the reasons for disposing of the investments. (b) the fair value of the investments at the date of de-

recognition. (c) the cumulative gain or loss on disposal.


10

Reclassification of Financial Assets – For reclassified financial assets in current or previous

reporting periods, an entity shall disclose: (a) the date of reclassification. (b) a detailed explanation of the change in business

model and a qualitative description of its effect on the entity’s financial statements.

(c) the amount reclassified into and out of each category.


11

Reclassification of Financial Assets – For each reporting period following reclassification

until de-recognition FVTPL to Amortised Cost or FVTOCI :

(a) the effective interest rate determined on the date of reclassification; and

(b) the interest revenue recognized.


12

Reclassification of Financial Assets – For reclassification after last annual reporting date

FVTOCI to Amortised Cost or FVTPL :

(a) the fair value of the financial assets at the end of the reporting period; and

(b) the fair value gain or loss that would have been recognised in P&L or OCI if the financial assets had not been reclassified.


13

Offsetting financial assets and financial liabilities: a) Gross amounts of those recognized financial assets

and recognized financial liabilities; b) the amounts that are set-off c) the net amounts presented in the balance sheet; d) amounts related to financial collateral (including

cash collateral); and e) the net amount after deducting collateral


14

Collateral Provided : (a) the carrying amount of financial assets pledged and (b) its terms and conditions Collateral Received : (a) the fair value of the collateral held; (b) the fair value of any such collateral sold or re-

pledged, and whether the entity has an obligation to return it; and

(c) its terms and conditions (d) Slide No 15\DHS Pg 139 para 40.9.1.pdf


15

Compound financial instruments with multiple

embedded derivatives If an entity has issued an instrument that contains

both a liability and an equity component and the instrument has multiple embedded derivatives whose values are interdependent (such as a callable convertible debt instrument), it shall disclose the existence of those features.

Eg1Slide No 16\DHS Page 120.pdf Eg2Slide No 16\Vedanta pg 143 & 171.pdf


16

This image cannot currently be displayed.

This image cannot currently be displayed.

Defaults and breaches For loans payable recognized at the end of the reporting

period, an entity shall disclose: (a) details of any defaults during the period of principal,

interest or redemption terms of those loans payable; (b) the carrying amount of the loans payable in default at

the end of the reporting period; and (c) whether the default was remedied, or the terms of the

loans payable were renegotiated, before the financial statements were approved for issue. Eg.Slide No 17\DHS Page no 119.pdf


17

Items of income, expense, gains or losses (a) net gains or net losses on: financial assets or financial liabilities measured at

FVTPL financial assets & financial liabilities measured at

amortized cost. Further, an analysis of gains and losses on financial assets at amortised cost derecognised along with reasons for derecognition.

Designated Investments in equity instruments & Financial assets at FVTOCI

Disclosure-Statement of profit and loss

18

Items of income, expense, gains or losses …cont (b) Total interest revenue and total interest expense

(calculated using the effective interest method) for Amortised Cost & FVTOCI categories.


19

Items of income, expense, gains or losses…cont

(c) fee income and expense (other than amounts

included in determining the effective interest rate) arising from:

(i) financial assets and financial liabilities that are not at FVTPL; and

(ii) trust and other fiduciary activities that result in the holding or investing of assets on behalf of individuals, trusts, retirement benefit plans, and other institutions.


20

Hedge accounting Fair value

Other disclosures

21

Hedge accounting: Hedge accounting disclosures shall provide information

about: (a) an entity’s risk management strategy and how it is

applied to manage risk; (b) how the entity’s hedging activities may affect the

amount, timing and uncertainty of its future cash flows; and

(c) the effect that hedge accounting has had on the entity’s balance sheet, statement of profit and loss and statement of changes in equity.

EgSlide No 22\DHS Page 136.pdf

Other disclosures

22

Risk Management Strategy (RMS): Risk management strategy should enable users of

financial statements to evaluate (for example): (a) how each risk arises. (b) how the entity manages each risk; this includes

whether the entity hedges an item in its entirety for all risks or hedges a risk component (or components) of an item and why.

(c) the extent of risk exposures that the entity manages. EgSlide No 23\Bayer 317.pdf and Slide No 23\DHS Page 136.pdf

Other disclosures- Hedge accounting

23

To meet the above requirements , the information on

RMS should include a description of: (a) the hedging instruments that are used (and how

they are used) to hedge risk exposures; (b) how the entity determines the economic

relationship between the hedged item and the hedging instrument for the purpose of assessing hedge effectiveness; and

(c) how the entity establishes the hedge ratio and what are the sources of hedge ineffectiveness.

Eg Slide No 24\Bayer Page no 317.pdf Slide No 24\DHS Pg 135. para 40.6.2.pdf


24

Risk category quantitative information to assess the

amount, timing and uncertainty of future cash flows of the entity. It includes:

a) a profile of the timing of the nominal amount of the hedging instrument; and

b) if applicable, the average price or rate (for example strike or forward prices etc) of the hedging instrument.

Eg Slide No 25\shell pg 136 to 137.pdf


25

Disclosure of hedging instruments separately

by risk category for each type of hedge (fair value hedge, cash flow hedge or hedge of a net investment in a foreign operation) in a tabular format:

a) the carrying amount b) the line item in the balance sheet that includes the

hedging instrument; c) the change in fair value of the hedging instrument d) the nominal amounts ( including quantities such as

tonnes or cubic meters) of the hedging instruments. e) EgSlide No 26\Bayer Page no 317.pdf

Effect of Hedge accounting on Financial Position & Performance

26

Disclosure of hedged items separately by risk

category for each type of hedge in a tabular format : (a) for fair value hedges: (i) the carrying amount of the hedged item (ii) the accumulated amount of fair value hedge

adjustments on the hedged item included in the carrying amount of the hedged item recognised in the balance sheet (presenting assets separately from liabilities); (Inventory Hedge)

(iii) the line item in the balance sheet that includes the hedged item;


27

Disclosure of hedged items …….Cont (b) for cash flow hedges and hedges of a net

investment in a foreign operation: (i) the change in value of the hedged item used as the basis for

recognising hedge ineffectiveness for the period (ie for cash flow hedges the change in value used to determine the recognised hedge ineffectiveness ).

(ii) the balances in reserves (cash flow hedge reserve and the foreign currency translation reserve) for continuing hedges.

(iii) the balances remaining in the reserves (CFHR & FCTR) from any hedging relationships for which hedge accounting is no longer applied.


28

Following amounts separately by Risk Category

for the type of Hedges:

(i) amount of hedge ineffectiveness

(ii) the line item in the statement of profit and loss that includes the recognised hedge ineffectiveness.

(iii)hedging gains or losses of the reporting period that were recognised in OCI


29

Following amounts separately by Risk Category for

the type of Hedges……….Cont iv. the amount reclassified from Reserve (cash flow

hedge reserve or the foreign currency translation reserve) into profit or loss as a reclassification adjustment .

v. the line item in the statement of profit and loss that includes the reclassification adjustment.

vi. for hedges of net positions, the hedging gains or losses recognised in statement of profit and loss


30

Disclose the fair values of each class of financial

assets/liabilities in such a way to allow them to be compared with carrying values.

Offset fair values only to the extent that their carrying amounts are offset in the balance sheet.

Disclosures of fair value are not required when the carrying amount is a reasonable approximation of fair value, for example for financial instruments such as short-term trade receivables and payables;

Eg slide No 31\Vokswagen.pdf and slide No 31\DHS pg 133.pdf

Other disclosures- Fair Value

31

Qualitative Disclosures -- Risk

(a) Exposures to each type of risks and how they arise

(b) Objectives, policies, and processes for managing risks and methods used to measure them and

(c) Any changes in (a) & (b) above from the previous period

Eg. Slide No 32\Shell pg 133 to 134.pdf and Slide No 32\DHS Pg 133.pdf

Other disclosures- Nature and Extent of Risks

Arising from Financial Instruments

32

Quantitative Disclosures –Risk Summary quantitative data about the exposures at

the end of the reporting period (based on information provided internally to management), and

If the end-of-period exposures are not representative of exposures during the period, additional disclosures should be given

Other disclosures- Nature and Extent of Risks Arising from Financial

Instruments

33

Credit Risk : (a) information about an entity’s credit risk management

practices: i) How to determine the increase in the credit risk of Financial

instrument ii) Definition of default iii) Grouping of instruments for assessing expected credit losses. iv) Write-off policy

(b) quantitative and qualitative information about the amounts in the financial statements arising from expected credit losses, ( For e.g details about Loss Allowance). Eg-Slide No 34\DHS pg 139.pdf


Instruments

34

Credit Risk ……Cont: ( c) information about an entity’s credit risk exposure

(i.e. the credit risk inherent in an entity’s financial assets and commitments to extend credit) including significant credit risk concentrations ,that includes: (i) The maximum exposure to credit risk (ii) A description of collateral held (iii)Information about credit quality of financial assets, For e.g.

Credit Risk Rating grade disclosure of Financial assets.



35

Liquidity Risk The entity should disclose: (Undiscounted Cash flow)

a) A maturity analysis for Non derivative financial liabilities ( including Financial Gaurantee contracts)that shows the remaining contractual maturities,

b) A maturity analysis for derivative financial liabilities that shows the remaining contractual maturities,

EgSlide No 36\DHS Pg 140.pdf and Slide No 36\Shell pg 137 to 138.pdf


Instruments

36

Liquidity Risk..... Cont.....

c) A description of how it manages the liquidity risk inherent in (a) & (b) above, which may include following:

i. committed borrowing facilities ii. deposits at central banks to meet liquidity needs; iii. internal control processes and contingency plans for

managing liquidity risk; iv. has terms that can call for collateral (eg margin calls for

derivatives); v. Power to choose settlement (cash or another financial

asset or by delivering its own shares; vi. has instruments that are subject to master netting

agreements Slide No 37\DHS pg 140 Para 40.10.pdf



37

Market Risk: a) Sensitivity analysis for each type of market

risk, For e.g. Value at risk analysis b) methods and assumptions in preparing the

sensitivity analysis c) Any changes from the previous period in

methods and assumptions used. EgSlide No 38\DHS Pg 133.pdf


Instruments

38

ind as 107 financial instruments: disclosure · investments in equity instruments designated at...

Documents