IASB proposes new disclosure standards

The new standards would replace the disclosures required by IAS 30 and IAS 32, and propose to remove those that are unnecessarily onerous or duplicative. This includes simplifying the disclosures now required by IAS 32 about concentrations of risk, credit risk, liquidity risk and market risk, and deleting disclosures required by IAS 30 about contingencies and commitments and general banking risks.

"The IASB believes users of financial statements need information about an entity's exposure to risks and how those risks are managed. Greater transparency allows users to make more informed judgements about risk and return," said the IASB. It added that the move reflects changing techniques used for measuring and managing exposure to risks arising from financial instruments, as well as proposals from many public and private sector initiatives for improvements to the disclosure framework for risks arising from financial instruments.

If adopted, the proposed standards would apply to all entities, but the extent of disclosure required would depend on the extent of the entity's use of financial instruments and its exposure to risk.

The proposed standards ED 7 Financial Instruments: Disclosures would require firms to provide disclosures in their financial statements that would 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 was exposed during the period, and at the reporting date, and the entity's capital.

They would replace IAS 30 Disclosures in the Financial Statements and Similar Financial Institutions and the disclosure requirements in IAS 32 Financial Instruments: Disclosure and Presentation.

"The proposals in ED 7 will improve financial reporting by helping users understand the significance of financial instruments in financial statements, by giving information about companies' capital and by revealing more clearly the risks attached to holding financial instruments," said David Tweedie, IASB chairman.

ED 7 would require both qualitative disclosures, including management's objectives, policies and processes for managing risks associated with financial instruments, and quantitative disclosures including the extent to which the entity is exposed to risk, based on information provided internally to the entity's key management personnel, incorporating specified minimum disclosures about credit risk, liquidity risk and market risk (including interest rate risk).