... on financial instruments in the notes to the financial statements
With it being applicable from 1 January 2018, IFRS 9 has kept many companies busy over the past weeks and months. Projects have involved analysing and adapting the changed classification for financial assets using the business model and the SPPI criterion, developing impairment models for financial receivables with regard to anticipated credit losses and analysing and adjusting hedging relationships with respect to the revised requirements. These changes to the recognition of financial assets and liabilities are accompanied by extensive changes to the disclosures in the notes. In addition to the amendments and revision of IFRS 7, in the year of the first-time adoption of IFRS 9, there are additional disclosures according to IAS 8 intended to allow users of the financial statements to compare the financial statements with those of prior years pursuant to IAS 39. The requirements of IAS 8 are specified further by IFRS 7/9.
The revised and expanded disclosures on financial instruments in the notes to the financial statements will become relevant not just from the end of the 2018 financial year. These disclosures are necessary in the quarterly and half-year financial reports according to IAS 34, even though there have been no modifications to IAS 34. According to IAS 34, (at least) the significant changes due to IFRS 9 are to be reported in the condensed financial statements and their effects on the statement of financial position and the statement of profit and loss illustrated. These include events and transactions that are significant according to IAS 34.15 et seqq., e.g. allowances for financial assets or changes to such allowances. This is relevant to most entities due to the expected credit loss model under IFRS 9. The data should be reconcilable with the prior year so that the changes to the financial assets and liabilities are clear to the users of the financial statements. To this end, changes to the accounting policies and any resulting (quantitative) effects on the entity's financial position, financial performance and cash flows are to be disclosed. Changes in estimates relating to figures reported in prior periods are also to be included in the interim reports according to IAS 34.16A. Of course, irrespective of the transition from IAS 39 to IFRS 9, the disclosures related to IFRS 13 91–93(h), 94–96, 98 and 99 as well as IFRS 7 25, 26 and 28–30 are required according to IAS 34.16A (j). Specifically, this means that a large amount of new disclosures are already required in the notes to the first interim statements applying IFRS 9.
The expected effects of the transition from IAS 39 to IFRS 9 are to be reported in the 2017 financial statements, as was already required in the 2016 financial statements. This presentation is to be more detailed in the 2017 financial statements and will reflect the current status of the projects. ESMA expects that the actually expected effects on the entity can be explained and quantitative estimates of these effects can be provided. Accordingly, ESMA – and thus also FREP – have established the disclosures on the expected transition effects relating to IFRS 9 as a main focus area for their review of financial statements for 2017. For this reason, entities should appropriately consider the preparation and presentation of these additional disclosures when planning the preparation of the financial statements.
In summary, it should be pointed out that the projects will not be finished once IFRS 9 has been implemented for the statement of financial position, as preparation of the disclosures in the notes must also be borne in mind. As well as the qualitative alignment, new or revised data is to be collected in order to meet the quantitative requirements. As such disclosures in the notes are relevant for most entities not just with the first full financial statements according to IFRS 9, the necessary preparations should start soon, if they have not already.
Source: KPMG Corporate Treasury News, Edition 74, December 2017
Author: Andrea Monthofer, Manager, Finance Advisory, firstname.lastname@example.org
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