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FRSC Issues fro Comment Proposed Improvement to Financial Instruments Disclosures

The Financial Reporting Standards Council (FRSC) has issued an Invitation to Comment on an exposure draft issued by the International Accounting Standards Board (IASB) of proposed amendments to IFRS 7: Improving Disclosures about Financial Instruments

 

The proposals aim to improve the information available to investors and others about fair value measurements of financial instruments and liquidity risk, and are part of the IASB’s response to the credit crisis. The proposed effective date for the amendments is July 1, 2009.

 

The proposed amendments are based on a three-level fair value hierarchy (similar to that used in U.S. SFAS 157) and would require disclosures about:

 
  • the level of the fair value hierarchy into which fair value measurements are categorized in their entirety.
  • the fair value measurements resulting from the use of significant unobservable inputs to valuations techniques, and a reconciliation of balances from the beginning balances to the ending balances.
  • the movements between different levels of the fair value hierarchy and the reasons for those movements.
 

The proposed amendments to IFRS 7 would:

 
  • clarify that liquidity risk disclosures are required only for financial liabilities that will result in the outflow of cash or another financial asset.
  • require entities to provide quantitative disclosures based on how they manage liquidity risk fro derivative financial liabilities
  • require entities to disclose the remaining expected maturities of non-derivative financial liabilities if they manage liquidity risk on the basis of expected maturities
  • strengthen the relationship between qualitative and quantitative disclosures about liquidity risk.
 

The FRSC Invitation to Comment and the exposure draft may be downloaded from the Philippine Financial Reporting Standards (PFRS) website, within the PICPA website (www.picpa.com.ph). The exposure draft may also be downloaded from the IASB website (www.iasb.org).

 

The FRSC invites comments on the exposure draft by December 1, 2008 to enable the Council to consider and include comments from Philippine respondents in its response to the IASB.