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Document 32006R0108
Commission Regulation (EC) No 108/2006 of 11 January 2006 amending Regulation (EC) No 1725/2003 adopting certain international accounting standards in accordance with Regulation (EC) No 1606/2002 of the European Parliament and of the Council as regards International Financial Reporting Standards (IFRS) 1, 4, 6 and 7, International Accounting Standards (IAS) 1, 14, 17, 32, 33, and 39, International Financial Reporting Interpretations Committee's (IFRIC) Interpretation 6 (Text with EEA relevance)
Commission Regulation (EC) No 108/2006 of 11 January 2006 amending Regulation (EC) No 1725/2003 adopting certain international accounting standards in accordance with Regulation (EC) No 1606/2002 of the European Parliament and of the Council as regards International Financial Reporting Standards (IFRS) 1, 4, 6 and 7, International Accounting Standards (IAS) 1, 14, 17, 32, 33, and 39, International Financial Reporting Interpretations Committee's (IFRIC) Interpretation 6 (Text with EEA relevance)
Commission Regulation (EC) No 108/2006 of 11 January 2006 amending Regulation (EC) No 1725/2003 adopting certain international accounting standards in accordance with Regulation (EC) No 1606/2002 of the European Parliament and of the Council as regards International Financial Reporting Standards (IFRS) 1, 4, 6 and 7, International Accounting Standards (IAS) 1, 14, 17, 32, 33, and 39, International Financial Reporting Interpretations Committee's (IFRIC) Interpretation 6 (Text with EEA relevance)
OJ L 24, 27.1.2006, p. 1–36
(ES, CS, DA, DE, ET, EL, EN, FR, IT, LV, LT, HU, NL, PL, PT, SK, SL, FI, SV) This document has been published in a special edition(s)
(BG, RO)
OJ L 348M, 24.12.2008, p. 464–468
(MT)
No longer in force, Date of end of validity: 01/12/2008; Implicitly repealed by 32008R1126
27.1.2006 |
EN |
Official Journal of the European Union |
L 24/1 |
COMMISSION REGULATION (EC) No 108/2006
of 11 January 2006
amending Regulation (EC) No 1725/2003 adopting certain international accounting standards in accordance with Regulation (EC) No 1606/2002 of the European Parliament and of the Council as regards International Financial Reporting Standards (IFRS) 1, 4, 6 and 7, International Accounting Standards (IAS) 1, 14, 17, 32, 33, and 39, International Financial Reporting Interpretations Committee's (IFRIC) Interpretation 6
(Text with EEA relevance)
THE COMMISSION OF THE EUROPEAN COMMUNITIES,
Having regard to the Treaty establishing the European Community,
Having regard to Regulation (EC) No 1606/2002 of the European Parliament and of the Council of 19 July 2002 on the application of international accounting standards (1), and in particular Article 3(1) thereof,
Whereas:
(1) |
By Commission Regulation (EC) No 1725/2003 (2) certain international standards and interpretations that were extant at 14 September 2002 were adopted. |
(2) |
On 30 June 2005, the International Accounting Standards Board (IASB) issued Amendments to IFRS 1 First-time Adoption of International Financial Reporting Standards and the Basis for Conclusions of IFRS 6 Exploration for and evaluation of mineral resources, to clarify the wording of an exception provided to first-time adopters of IFRSs who choose to adopt IFRS 6 before 1 January 2006. |
(3) |
On 18 August 2005 the IASB published IFRS 7 Financial instruments: Disclosure. It introduces new requirements to improve the information on financial instruments that is given in entities' financial statements. It replaces IAS 30 Disclosures in the Financial Statements of Banks and Similar Financial Institutions and some of the requirements in IAS 32 Financial Instruments: Disclosure and Presentation. |
(4) |
On 18 August 2005 the IASB also issued an Amendment to IAS 1 Presentation of Financial Statements — Capital Disclosures which introduces requirements for disclosures about an entity's capital. |
(5) |
On 18 August 2005 the IASB issued Amendments to IAS 39 Financial Instruments: Recognition and Measurement and IFRS 4 Insurance Contracts — Financial Guarantee Contracts. The amendments are intended to ensure that issuers of financial guarantee contracts include the resulting liabilities in their balance sheet. |
(6) |
On 1 September 2005 the International Financial Reporting Interpretations Committee (IFRIC) published IFRIC Interpretation 6 Liabilities arising from Participating in a Specific Market — Waste Electrical and Electronic Equipment, hereinafter ‘IFRIC 6’. IFRIC 6 clarifies the accounting for liabilities for waste management costs. |
(7) |
The consultation with technical experts in the field confirm that IFRS 1, IFRS 4, IFRS 7, IAS 1, IAS 39 and IFRIC 6 meet the technical criteria for adoption set out in Article 3(2) of Regulation (EC) No 1606/2002. |
(8) |
The adoption of IFRS 7 implies, by way of consequence, amendments to other international accounting standards in order to ensure consistency between international accounting standards. Those consequential amendments are affecting IFRS 1, IFRS 4, IAS 14, IAS 17, IAS 32, IAS 33, and IAS 39. |
(9) |
Regulation (EC) No 1725/2003 should therefore be amended accordingly. |
(10) |
The measures provided for in this Regulation are in accordance with the opinion of the Accounting Regulatory Committee, |
HAS ADOPTED THIS REGULATION:
Article 1
Annex to Regulation (EC) No 1725/2003 is amended as follows:
1. |
International Financial Reporting Standard (IFRS) 1 First-time Adoption of IFRSs is amended in accordance with Amendments to IFRS 1 and the Basis for Conclusions of IFRS 6 Exploration for and evaluation of mineral resources as set out in the Annex to this Regulation; |
2. |
The International Accounting Standard (IAS) 30 Disclosures in the Financial Statements of Banks and Similar Financial Institutions is replaced by IFRS 7 Financial instruments: Disclosure as set out in the Annex to this Regulation; |
3. |
International Accounting Standard (IAS) 1 Presentation of Financial Statements — Capital Disclosures is amended in accordance with the Amendment to IAS 1 as set out in the Annex to this Regulation; |
4. |
IAS 39 Financial Instruments: Recognition and Measurement and IFRS 4 Insurance Contracts are amended in accordance with Amendments to IAS 39 and IFRS 4 as set out in the Annex to this Regulation; |
5. |
International Financial Reporting Interpretations Committee's (IFRIC) Interpretation 6 Liabilities arising from Participating in a Specific Market — Waste Electrical and Electronic Equipment is inserted as set out in the Annex to this Regulation; |
6. |
The adoption of IFRS 7 implies, by way of consequence, amendments to IFRS 1 and 4 and IAS 14, IAS 17, IAS 32, IAS 33 and IAS 39 in accordance with Appendix C of IFRS 7 as set out in the Annex to this Regulation; |
7. |
IAS 32 is amended in accordance with the Amendments to IAS 39 and IFRS 4 as set out in the Annex to this Regulation. |
Article 2
(1) Each company shall apply the Amendment to IFRS 1 and the Amendments to IAS 39 and IFRS 4 as set out in the Annex to this Regulation as from the commencement date of its 2006 financial year at the latest.
(2) Each company shall apply IFRS 7 and the Amendment to IAS 1 as set out in the Annex to this Regulation as from the commencement date of its 2007 financial year at the latest.
(3) Each company shall apply IFRIC 6 as set out in the Annex to this Regulation as from the commencement date of its 2006 financial year at the latest.
However, companies with a December commencement date shall apply IFRIC 6 as from the commencement date of its 2005 financial year at the latest.
Article 3
This Regulation shall enter into force on the third day following that of its publication in the Official Journal of the European Union.
This Regulation shall be binding in its entirety and directly applicable in all Member States.
Done at Brussels, 11 January 2006.
For the Commission
Charlie McCREEVY
Member of the Commission
(1) OJ L 243, 11.9.2002, p. 1.
(2) OJ L 261, 13.10.2003, p. 1. Regulation as last amended by Regulation (EC) No 2106/2005 (OJ L 337, 22.12.2005, p. 16).
ANNEX
INTERNATIONAL FINANCIAL REPORTING STANDARDS
IFRS 1 |
Amendments to IFRS 1 First-time Adoption of IFRSs and the Basis for Conclusions of IFRS 6 Exploration for and evaluation of mineral resources |
IFRS 7 |
IFRS 7 Financial instruments: Disclosure |
IAS 1 |
Amendment to IAS 1 Presentation of Financial Statements — Capital Disclosures |
IAS 39 IFRS 4 |
Amendments to IAS 39 Financial Instruments: Recognition and Measurement and IFRS 4 Insurance Contracts — Financial Guarantee Contracts |
IFRIC 6 |
IFRIC Interpretation 6 Liabilities arising from Participating in a Specific Market — Waste Electrical and Electronic Equipment |
Reproduction allowed within the European Economic Area. All existing rights reserved outside the EEA, with the exception of the right to reproduce for the purposes of personal use or other fair dealing. Further information can be obtained from the IASB at www.iasb.org
Amendments to IFRS 1 First-time Adoption of International Financial Reporting Standards
This document sets out amendments to IFRS 1 First-time Adoption of International Financial Reporting Standards. The amendments finalise proposals that were contained in an Exposure Draft of Proposed Amendments to this IFRS that was published on 29 April 2005.
Amendment to IFRS 1
Paragraph 36B and the preceding heading are amended as follows.
Exemption from the requirement to present comparative information for IFRS 6
36B |
An entity that adopts IFRSs before 1 January 2006 and chooses to adopt IFRS 6 Exploration for and Evaluation of Mineral Resources before 1 January 2006 need not apply the requirements of IFRS 6 to comparative information presented in its first IFRS financial statements. |
INTERNATIONAL FINANCIAL REPORTING STANDARD 7
Financial Instruments: Disclosures
OBJECTIVE
1. |
The objective of this IFRS is to require entities to provide disclosures in their financial statements that enable users to evaluate:
|
2. |
The principles in this IFRS complement the principles for recognising, measuring and presenting financial assets and financial liabilities in IAS 32 Financial Instruments: Presentation and IAS 39 Financial Instruments: Recognition and Measurement. |
SCOPE
3. |
This IFRS shall be applied by all entities to all types of financial instruments, except:
|
4. |
This IFRS applies to recognised and unrecognised financial instruments. Recognised financial instruments include financial assets and financial liabilities that are within the scope of IAS 39. Unrecognised financial instruments include some financial instruments that, although outside the scope of IAS 39, are within the scope of this IFRS (such as some loan commitments). |
5. |
This IFRS applies to contracts to buy or sell a non-financial item that are within the scope of IAS 39 (see paragraphs 5-7 of IAS 39). |
CLASSES OF FINANCIAL INSTRUMENTS AND LEVEL OF DISCLOSURE
6. |
When this IFRS requires disclosures by class of financial instrument, an entity shall group financial instruments into classes that are appropriate to the nature of the information disclosed and that take into account the characteristics of those financial instruments. An entity shall provide sufficient information to permit reconciliation to the line items presented in the balance sheet. |
SIGNIFICANCE OF FINANCIAL INSTRUMENTS FOR FINANCIAL POSITION AND PERFORMANCE
7. |
An entity shall disclose information that enables users of its financial statements to evaluate the significance of financial instruments for its financial position and performance. |
Balance sheet
Categories of financial assets and financial liabilities
8. |
The carrying amounts of each of the following categories, as defined in IAS 39, shall be disclosed either on the face of the balance sheet or in the notes:
|
Financial assets or financial liabilities at fair value through profit or loss
9. |
If the entity has designated a loan or receivable (or group of loans or receivables) as at fair value through profit or loss, it shall disclose:
|
10. |
If the entity has designated a financial liability as at fair value through profit or loss in accordance with paragraph 9 of IAS 39, it shall disclose:
|
11. |
The entity shall disclose:
|
Reclassification
12. |
If the entity has reclassified a financial asset as one measured:
it shall disclose the amount reclassified into and out of each category and the reason for that reclassification (see paragraphs 51-54 of IAS 39). |
Derecognition
13. |
An entity may have transferred financial assets in such a way that part or all of the financial assets do not qualify for derecognition (see paragraphs 15-37 of IAS 39). The entity shall disclose for each class of such financial assets:
|
Collateral
14. |
An entity shall disclose:
|
15. |
When an entity holds collateral (of financial or non-financial assets) and is permitted to sell or repledge the collateral in the absence of default by the owner of the collateral, it shall disclose:
|
Allowance account for credit losses
16. |
When financial assets are impaired by credit losses and the entity records the impairment in a separate account (eg an allowance account used to record individual impairments or a similar account used to record a collective impairment of assets) rather than directly reducing the carrying amount of the asset, it shall disclose a reconciliation of changes in that account during the period for each class of financial assets. |
Compound financial instruments with multiple embedded derivatives
17. |
If an entity has issued an instrument that contains both a liability and an equity component (see paragraph 28 of IAS 32) 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. |
Defaults and breaches
18. |
For loans payable recognised at the reporting date, an entity shall disclose:
|
19. |
If, during the period, there were breaches of loan agreement terms other than those described in paragraph 18, an entity shall disclose the same information as required by paragraph 18 if those breaches permitted the lender to demand accelerated repayment (unless the breaches were remedied, or the terms of the loan were renegotiated, on or before the reporting date). |
Income statement and equity
Items of income, expense, gains or losses
20. |
An entity shall disclose the following items of income, expense, gains or losses either on the face of the financial statements or in the notes:
|
Other disclosures
Accounting policies
21. |
In accordance with paragraph 108 of IAS 1 Presentation of Financial Statements, an entity discloses, in the summary of significant accounting policies, the measurement basis (or bases) used in preparing the financial statements and the other accounting policies used that are relevant to an understanding of the financial statements. |
Hedge accounting
22. |
An entity shall disclose the following separately for each type of hedge described in IAS 39 (ie fair value hedges, cash flow hedges, and hedges of net investments in foreign operations):
|
23. |
For cash flow hedges, an entity shall disclose:
|
24. |
An entity shall disclose separately:
|
Fair value
25. |
Except as set out in paragraph 29, for each class of financial assets and financial liabilities (see paragraph 6), an entity shall disclose the fair value of that class of assets and liabilities in a way that permits it to be compared with its carrying amount. |
26. |
In disclosing fair values, an entity shall group financial assets and financial liabilities into classes, but shall offset them only to the extent that their carrying amounts are offset in the balance sheet. |
27. |
An entity shall disclose:
|
28. |
If the market for a financial instrument is not active, an entity establishes its fair value using a valuation technique (see paragraphs AG74-AG79 of IAS 39). Nevertheless, the best evidence of fair value at initial recognition is the transaction price (ie the fair value of the consideration given or received), unless conditions described in paragraph AG76 of IAS 39 are met. It follows that there could be a difference between the fair value at initial recognition and the amount that would be determined at that date using the valuation technique. If such a difference exists, an entity shall disclose, by class of financial instrument:
|
29. |
Disclosures of fair value are not required:
|
30. |
In the cases described in paragraph 29(b) and (c), an entity shall disclose information to help users of the financial statements make their own judgements about the extent of possible differences between the carrying amount of those financial assets or financial liabilities and their fair value, including:
|
NATURE AND EXTENT OF RISKS ARISING FROM FINANCIAL INSTRUMENTS
31. |
An entity shall disclose information that enables users of its financial statements to evaluate the nature and extent of risks arising from financial instruments to which the entity is exposed at the reporting date. |
32. |
The disclosures required by paragraphs 33-42 focus on the risks that arise from financial instruments and how they have been managed. These risks typically include, but are not limited to, credit risk, liquidity risk and market risk. |
Qualitative disclosures
33. |
For each type of risk arising from financial instruments, an entity shall disclose:
|
Quantitative disclosures
34. |
For each type of risk arising from financial instruments, an entity shall disclose:
|
35. |
If the quantitative data disclosed as at the reporting date are unrepresentative of an entity’s exposure to risk during the period, an entity shall provide further information that is representative. |
Credit risk
36. |
An entity shall disclose by class of financial instrument:
|
Financial assets that are either past due or impaired
37. |
An entity shall disclose by class of financial asset:
|
Collateral and other credit enhancements obtained
38. |
When an entity obtains financial or non-financial assets during the period by taking possession of collateral it holds as security or calling on other credit enhancements (eg guarantees), and such assets meet the recognition criteria in other Standards, an entity shall disclose:
|
Liquidity risk
39. |
An entity shall disclose:
|
Market risk
Sensitivity analysis
40. |
Unless an entity complies with paragraph 41, it shall disclose:
|
41. |
If an entity prepares a sensitivity analysis, such as value-at-risk, that reflects interdependencies between risk variables (eg interest rates and exchange rates) and uses it to manage financial risks, it may use that sensitivity analysis in place of the analysis specified in paragraph 40. The entity shall also disclose:
|
Other market risk disclosures
42. |
When the sensitivity analyses disclosed in accordance with paragraph 40 or 41 are unrepresentative of a risk inherent in a financial instrument (for example because the year-end exposure does not reflect the exposure during the year), the entity shall disclose that fact and the reason it believes the sensitivity analyses are unrepresentative. |
EFFECTIVE DATE AND TRANSITION
43. |
An entity shall apply this IFRS for annual periods beginning on or after 1 January 2007. Earlier application is encouraged. If an entity applies this IFRS for an earlier period, it shall disclose that fact. |
44. |
If an entity applies this IFRS for annual periods beginning before 1 January 2006, it need not present comparative information for the disclosures required by paragraphs 31-42 about the nature and extent of risks arising from financial instruments. |
WITHDRAWAL OF IAS 30
45. |
This IFRS supersedes IAS 30 Disclosures in the Financial Statements of Banks and Similar Financial Institutions. |
APPENDIX A
Defined terms
This appendix is an integral part of the IFRS.
credit risk |
The risk that one party to a financial instrument will cause a financial loss for the other party by failing to discharge an obligation. |
currency risk |
The risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in foreign exchange rates. |
interest rate risk |
The risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market interest rates. |
liquidity risk |
The risk that an entity will encounter difficulty in meeting obligations associated with financial liabilities. |
loans payable |
Loans payable are financial liabilities, other than short-term trade payables on normal credit terms. |
market risk |
The risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market prices. Market risk comprises three types of risk: currency risk, interest rate risk and other price risk. |
other price risk |
The risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market prices (other than those arising from interest rate risk or currency risk), whether those changes are caused by factors specific to the individual financial instrument or its issuer, or factors affecting all similar financial instruments traded in the market. |
past due |
A financial asset is past due when a counterparty has failed to make a payment when contractually due. |
The following terms are defined in paragraph 11 of IAS 32 or paragraph 9 of IAS 39 and are used in the IFRS with the meaning specified in IAS 32 and IAS 39.
— |
amortised cost of a financial asset or financial liability |
— |
available-for-sale financial assets |
— |
derecognition |
— |
derivative |
— |
effective interest method |
— |
equity instrument |
— |
fair value |
— |
financial asset |
— |
financial instrument |
— |
financial liability |
— |
financial asset or financial liability at fair value through profit or loss |
— |
financial asset or financial liability held for trading |
— |
forecast transaction |
— |
hedging instrument |
— |
held-to-maturity investments |
— |
loans and receivables |
— |
regular way purchase or sale |
APPENDIX B
Application guidance
This appendix is an integral part of the IFRS.
CLASSES OF FINANCIAL INSTRUMENTS AND LEVEL OF DISCLOSURE (PARAGRAPH 6)
B1 |
Paragraph 6 requires an entity to group financial instruments into classes that are appropriate to the nature of the information disclosed and that take into account the characteristics of those financial instruments. The classes described in paragraph 6 are determined by the entity and are, thus, distinct from the categories of financial instruments specified in IAS 39 (which determine how financial instruments are measured and where changes in fair value are recognised). |
B2 |
In determining classes of financial instrument, an entity shall, at a minimum:
|
B3 |
An entity decides, in the light of its circumstances, how much detail it provides to satisfy the requirements of this IFRS, how much emphasis it places on different aspects of the requirements and how it aggregates information to display the overall picture without combining information with different characteristics. It is necessary to strike a balance between overburdening financial statements with excessive detail that may not assist users of financial statements and obscuring important information as a result of too much aggregation. For example, an entity shall not obscure important information by including it among a large amount of insignificant detail. Similarly, an entity shall not disclose information that is so aggregated that it obscures important differences between individual transactions or associated risks. |
SIGNIFICANCE OF FINANCIAL INSTRUMENTS FOR FINANCIAL POSITION AND PERFORMANCE
Financial liabilities at fair value through profit or loss (paragraphs 10 and 11)
B4 |
If an entity designates a financial liability as at fair value through profit or loss, paragraph 10(a) requires it to disclose the amount of change in the fair value of the financial liability that is attributable to changes in the liability’s credit risk. Paragraph 10(a)(i) permits an entity to determine this amount as the amount of change in the liability’s fair value that is not attributable to changes in market conditions that give rise to market risk. If the only relevant changes in market conditions for a liability are changes in an observed (benchmark) interest rate, this amount can be estimated as follows:
This example assumes that changes in fair value arising from factors other than changes in the instrument’s credit risk or changes in interest rates are not significant. If the instrument in the example contains an embedded derivative, the change in fair value of the embedded derivative is excluded in determining the amount to be disclosed in accordance with paragraph 10(a). |
Other disclosure — accounting policies (paragraph 21)
B5 |
Paragraph 21 requires disclosure of the measurement basis (or bases) used in preparing the financial statements and the other accounting policies used that are relevant to an understanding of the financial statements. For financial instruments, such disclosure may include:
Paragraph 113 of IAS 1 also requires entities to disclose, in the summary of significant accounting policies or other notes, the judgements, apart from those involving estimations, that management has made in the process of applying the entity’s accounting policies and that have the most significant effect on the amounts recognised in the financial statements. |
NATURE AND EXTENT OF RISKS ARISING FROM FINANCIAL INSTRUMENTS (PARAGRAPHS 31-42)
B6 |
The disclosures required by paragraphs 31-42 shall be either given in the financial statements or incorporated by cross-reference from the financial statements to some other statement, such as a management commentary or risk report, that is available to users of the financial statements on the same terms as the financial statements and at the same time. Without the information incorporated by cross-reference, the financial statements are incomplete. |
Quantitative disclosures (paragraph 34)
B7 |
Paragraph 34(a) requires disclosures of summary quantitative data about an entity’s exposure to risks based on the information provided internally to key management personnel of the entity. When an entity uses several methods to manage a risk exposure, the entity shall disclose information using the method or methods that provide the most relevant and reliable information. IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors discusses relevance and reliability. |
B8 |
Paragraph 34(c) requires disclosures about concentrations of risk. Concentrations of risk arise from financial instruments that have similar characteristics and are affected similarly by changes in economic or other conditions. The identification of concentrations of risk requires judgement taking into account the circumstances of the entity. Disclosure of concentrations of risk shall include:
|
Maximum credit risk exposure (paragraph 36(a))
B9 |
Paragraph 36(a) requires disclosure of the amount that best represents the entity’s maximum exposure to credit risk. For a financial asset, this is typically the gross carrying amount, net of:
|
B10 |
Activities that give rise to credit risk and the associated maximum exposure to credit risk include, but are not limited to:
|
Contractual maturity analysis (paragraph 39(a))
B11 |
In preparing the contractual maturity analysis for financial liabilities required by paragraph 39(a), an entity uses its judgement to determine an appropriate number of time bands. For example, an entity might determine that the following time bands are appropriate:
|
B12 |
When a counterparty has a choice of when an amount is paid, the liability is included on the basis of the earliest date on which the entity can be required to pay. For example, financial liabilities that an entity can be required to repay on demand (eg demand deposits) are included in the earliest time band. |
B13 |
When an entity is committed to make amounts available in instalments, each instalment is allocated to the earliest period in which the entity can be required to pay. For example, an undrawn loan commitment is included in the time band containing the earliest date it can be drawn down. |
B14 |
The amounts disclosed in the maturity analysis are the contractual undiscounted cash flows, for example:
Such undiscounted cash flows differ from the amount included in the balance sheet because the balance sheet amount is based on discounted cash flows. |
B15 |
If appropriate, an entity shall disclose the analysis of derivative financial instruments separately from that of non-derivative financial instruments in the contractual maturity analysis for financial liabilities required by paragraph 39(a). For example, it would be appropriate to distinguish cash flows from derivative financial instruments and non-derivative financial instruments if the cash flows arising from the derivative financial instruments are settled gross. This is because the gross cash outflow may be accompanied by a related inflow. |
B16 |
When the amount payable is not fixed, the amount disclosed is determined by reference to the conditions existing at the reporting date. For example, when the amount payable varies with changes in an index, the amount disclosed may be based on the level of the index at the reporting date. |
Market risk — sensitivity analysis (paragraphs 40 and 41)
B17 |
Paragraph 40(a) requires a sensitivity analysis for each type of market risk to which the entity is exposed. In accordance with paragraph B3, an entity decides how it aggregates information to display the overall picture without combining information with different characteristics about exposures to risks from significantly different economic environments. For example:
If an entity has exposure to only one type of market risk in only one economic environment, it would not show disaggregated information. |
B18 |
Paragraph 40(a) requires the sensitivity analysis to show the effect on profit or loss and equity of reasonably possible changes in the relevant risk variable (eg prevailing market interest rates, currency rates, equity prices or commodity prices). For this purpose:
|
B19 |
In determining what a reasonably possible change in the relevant risk variable is, an entity should consider:
|
B20 |
Paragraph 41 permits an entity to use a sensitivity analysis that reflects interdependencies between risk variables, such as a value-at-risk methodology, if it uses this analysis to manage its exposure to financial risks. This applies even if such a methodology measures only the potential for loss and does not measure the potential for gain. Such an entity might comply with paragraph 41(a) by disclosing the type of value-at-risk model used (eg whether the model relies on Monte Carlo simulations), an explanation about how the model works and the main assumptions (eg the holding period and confidence level). Entities might also disclose the historical observation period and weightings applied to observations within that period, an explanation of how options are dealt with in the calculations, and which volatilities and correlations (or, alternatively, Monte Carlo probability distribution simulations) are used. |
B21 |
An entity shall provide sensitivity analyses for the whole of its business, but may provide different types of sensitivity analysis for different classes of financial instruments. |
Interest rate risk
B22 |
Interest rate risk arises on interest-bearing financial instruments recognised in the balance sheet (eg loans and receivables and debt instruments issued) and on some financial instruments not recognised in the balance sheet (eg some loan commitments). |
Currency risk
B23 |
Currency risk (or foreign exchange risk) arises on financial instruments that are denominated in a foreign currency, ie in a currency other than the functional currency in which they are measured. For the purpose of this IFRS, currency risk does not arise from financial instruments that are non-monetary items or from financial instruments denominated in the functional currency. |
B24 |
A sensitivity analysis is disclosed for each currency to which an entity has significant exposure. |
Other price risk
B25 |
Other price risk arises on financial instruments because of changes in, for example, commodity prices or equity prices. To comply with paragraph 40, an entity might disclose the effect of a decrease in a specified stock market index, commodity price, or other risk variable. For example, if an entity gives residual value guarantees that are financial instruments, the entity discloses an increase or decrease in the value of the assets to which the guarantee applies. |
B26 |
Two examples of financial instruments that give rise to equity price risk are a holding of equities in another entity, and an investment in a trust, which in turn holds investments in equity instruments. Other examples include forward contracts and options to buy or sell specified quantities of an equity instrument and swaps that are indexed to equity prices. The fair values of such financial instruments are affected by changes in the market price of the underlying equity instruments. |
B27 |
In accordance with paragraph 40(a), the sensitivity of profit or loss (that arises, for example, from instruments classified as at fair value through profit or loss and impairments of available-for-sale financial assets) is disclosed separately from the sensitivity of equity (that arises, for example, from instruments classified as available for sale). |
B28 |
Financial instruments that an entity classifies as equity instruments are not remeasured. Neither profit or loss nor equity will be affected by the equity price risk of those instruments. Accordingly, no sensitivity analysis is required. |
APPENDIX C
Amendments to other IFRSs
The amendments in this appendix shall be applied for annual periods beginning on or after 1 January 2007. If an entity applies the IFRS for an earlier period, these amendments shall be applied for that earlier period. In the amended paragraphs, new text is underlined and deleted text is struck through.
C1 |
In International Financial Reporting Standards, including International Accounting Standards and Interpretations, references to IAS 32 Financial Instruments: Disclosure and Presentation are replaced by references to IAS 32 Financial Instruments: Presentation, unless otherwise stated below. |
C2 |
IAS 32 Financial Instruments: Disclosure and Presentation (as revised in 2003) is amended as described below. The title is amended to ‘IAS 32 Financial Instruments: Presentation ’. Paragraph 1 is deleted and paragraphs 2-4(a) are amended as follows:
SCOPE
Paragraphs 5 and 7 are deleted. The second sentence of paragraph 40 is amended as follows:
The last sentence of paragraph 47 is amended as follows:
The last sentence of paragraph 50 is amended as follows:
Paragraphs 51-95 are deleted. Paragraph 98 is footnoted as follows:
In the Appendix (Application Guidance), paragraphs AG24 and AG40 and the last sentence of paragraph AG39 are deleted. |
C3 |
IAS 1 Presentation of Financial Statements is amended as described below. Paragraph 4 is deleted. In paragraph 56, ‘IAS 32’ is replaced by ‘IFRS 7 Financial Instruments: Disclosures ’, and in paragraphs 105(d)(ii) and 124, ‘IAS 32’ is replaced by ‘IFRS 7’. The last sentence of paragraph 71(b) is amended as follows:
The fourth sentence of paragraph 84 is amended as follows:
|
C4 |
IAS 14 Segment Reporting is amended as described below. In paragraphs 27(a) and (b), 31, 32, 46 and 74, the phrase ‘the board of directors and [to] [the] chief executive officer’ is replaced by ‘key management personnel’. In paragraphs 27(b), 30 and 32 the phrase ‘the directors and management’ is replaced by ‘key management personnel’. The first sentence of paragraph 27 is amended as follows:
The third sentence of paragraph 28 is amended as follows:
The first sentence of paragraph 33 is amended as follows:
|
C5 |
In paragraph 31 of IAS 17 Leases, ‘IAS 32 Financial Instruments: Disclosure and Presentation’ is replaced by ‘IFRS 7 Financial Instruments: Disclosures’, and in paragraphs 35, 47 and 56, ‘IAS 32’ is replaced by ‘IFRS 7’. |
C6 |
In paragraph 72 of IAS 33 Earnings per Share, ‘IAS 32’ is replaced by ‘IFRS 7 Financial Instruments: Disclosures’. |
C7 |
IAS 39 Financial Instruments: Recognition and Measurement (as amended in April 2005) is amended as described below. Paragraph 1 is amended as follows:
In paragraph 45, ‘IAS 32’ is replaced by ‘IFRS 7’. Paragraph 48 is amended as follows:
|
C8 |
IAS 39 Financial Instruments: Recognition and Measurement (as amended in June 2005) is amended as described below. In paragraph 9, the definition of a financial asset or financial liability at fair value through profit or loss is amended as follows:
|
C9 |
In IFRS 1 First-time Adoption of International Financial Reporting Standards, paragraph 36A is amended, and a heading and paragraph 36C are added as follows:
Exemption from the requirement to provide comparative disclosures for IFRS 7
|
C10 |
IFRS 4 Insurance Contracts is amended as described below. Paragraph 2(b) is amended as follows:
Paragraph 35(d) is added as follows:
After paragraph 37, the heading and paragraphs 38 and 39 are amended and paragraph 39A is added as follows: Nature and extent of risks arising from insurance contracts
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APPENDIX D
Amendments to IFRS 7 if the Amendments to IAS 39 Financial Instruments: Recognition and Measurement — The Fair Value Option have not been applied
In June 2005 the Board issued Amendments to IAS 39: Financial Instruments: Recognition and Measurement — The Fair Value Option, to be applied for annual periods beginning on or after 1 January 2006. If an entity applies IFRS 7 for annual periods beginning before 1 January 2006 and it does not apply these amendments to IAS 39, it shall amend IFRS 7 for that period, as follows. In the amended paragraphs, new text is underlined and deleted text is struck through.
D1 |
The heading above paragraph 9 and paragraph 11 are amended as follows, and paragraph 9 is deleted. Financial liabilities at fair value through profit or loss
Paragraph B5(a) is amended as follows:
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Amendments to IAS 1 Presentation of Financial Statements
This document sets out amendments to IAS 1 Presentation of Financial Statements. The amendments finalise some of the proposals that were contained in Exposure Draft 7 Financial Instruments: Disclosures (ED 7) published in July 2004. The remaining proposals in ED 7 were finalised in IFRS 7 Financial Instruments: Disclosures.
Entities shall apply the amendments in this document for annual periods beginning on or after 1 January 2007. Earlier application is encouraged.
In the Standard, a heading and paragraphs 124A-124C are added, as follows.
Capital
124A |
An entity shall disclose information that enables users of its financial statements to evaluate the entity's objectives, policies and processes for managing capital. |
124B |
To comply with paragraph 124A, the entity discloses the following:
These disclosures shall be based on the information provided internally to the entity's key management personnel. |
124C |
An entity may manage capital in a number of ways and be subject to a number of different capital requirements. For example, a conglomerate may include entities that undertake insurance activities and banking activities, and those entities may also operate in several jurisdictions. When an aggregate disclosure of capital requirements and how capital is managed would not provide useful information or distorts a financial statement user's understanding of an entity's capital resources, the entity shall disclose separate information for each capital requirement to which the entity is subject. |
Amendments to International Financial Reporting Standards
IAS 39 Financial Instruments: Recognition and Measurement
IFRS 4 Insurance Contracts
Financial Guarantee Contracts
AMENDMENTS TO STANDARDS
This document sets out amendments to IAS 39 Financial Instruments: Recognition and Measurement and IFRS 4 Insurance Contracts and consequential amendments to IAS 32 Financial Instruments: Disclosure and Presentation and IFRS 7 Financial Instruments: Disclosures. This document also contains amendments to the Basis for Conclusions on IAS 39 and IFRS 4, the Guidance on Implementing IFRS 4, and Appendix C accompanying IAS 37 Provisions, Contingent Liabilities and Contingent Assets. The amendments result from proposals that were contained in an Exposure Draft of Proposed Amendments to IAS 39 and IFRS 4 — Financial Guarantee Contracts and Credit Insurance published in July 2004.
Entities shall apply these amendments for annual periods beginning on or after 1 January 2006. Earlier application is encouraged. If entities adopt these amendments for an earlier period, they shall disclose that fact.
AMENDMENTS TO IAS 39
In the Standard, paragraph 3 is deleted and paragraphs 2(e), 2(h), 4 and 47 are amended. In paragraph 9, the definition of a financial liability at fair value through profit or loss is amended, and a new definition is added immediately after the definition of available-for-sale financial assets. Paragraph AG4 is renumbered as AG3A, and paragraph AG4A is amended and renumbered as AG4. New paragraphs AG4A and 103B are added.
Paragraph 43 is presented below for convenience, but is not amended.
The amendments to paragraphs 2(h) and 47(d) transfer measurement requirements for some loan commitments from the scope section of the Standard to the measurement section, but do not change those requirements.
2. |
This Standard shall be applied by all entities to all types of financial instruments except: …
…
|
4. |
The following loan commitments are within the scope of this Standard:
|
9. |
… Definitions of four categories of financial instruments A financial asset or financial liability at fair value through profit or loss is a financial asset or financial liability that meets either of the following conditions.
… Definition of a financial guarantee contract A financial guarantee contract is a contract that requires the issuer to make specified payments to reimburse the holder for a loss it incurs because a specified debtor fails to make payment when due in accordance with the original or modified terms of a debt instrument. … |
Initial measurement of financial assets and financial liabilities
43. |
When a financial asset or financial liability is recognised initially, an entity shall measure it at its fair value plus, in the case of a financial asset or financial liability not at fair value through profit or loss, transaction costs that are directly attributable to the acquisition or issue of the financial asset or financial liability. |
Subsequent measurement of financial liabilities
47. |
After initial recognition, an entity shall measure all financial liabilities at amortised cost using the effective interest method, except for:
Financial liabilities that are designated as hedged items are subject to the hedge accounting requirements in paragraphs 89-102. |
AG4 |
Financial guarantee contracts may have various legal forms, such as a guarantee, some types of letter of credit, a credit default contract or an insurance contract. Their accounting treatment does not depend on their legal form. The following are examples of the appropriate treatment (see paragraph 2(e)):
|
AG4A |
Assertions that an issuer regards contracts as insurance contracts are typically found throughout the issuer’s communications with customers and regulators, contracts, business documentation and financial statements. Furthermore, insurance contracts are often subject to accounting requirements that are distinct from the requirements for other types of transaction, such as contracts issued by banks or commercial companies. In such cases, an issuer’s financial statements typically include a statement that the issuer has used those accounting requirements. |
103B |
Financial Guarantee Contracts (Amendments to IAS 39 and IFRS 4), issued in August 2005, amended paragraphs 2(e) and (h), 4, 47 and AG4, added paragraph AG4A, added a new definition of financial guarantee contracts in paragraph 9, and deleted paragraph 3. An entity shall apply those amendments for annual periods beginning on or after 1 January 2006. Earlier application is encouraged. If an entity applies these changes for an earlier period, it shall disclose that fact and apply the related amendments to IAS 32 and IFRS 4 at the same time. |
AMENDMENTS TO IFRS 4
Paragraphs 4(d), B18(g) and B19(f) are amended, paragraph 41A is inserted and a definition of a financial guarantee contract is inserted in Appendix A after the definition of fair value and before the definition of financial risk, as follows.
4 |
An entity shall not apply this IFRS to: …
|
41A |
Financial Guarantee Contracts (Amendments to IAS 39 and IFRS 4), issued in August 2005, amended paragraphs 4(d), B18(g) and B19(f). An entity shall apply those amendments for annual periods beginning on or after 1 January 2006. Earlier application is encouraged. If an entity applies those amendments for an earlier period, it shall disclose that fact and apply the related amendments to IAS 39 and IAS 32 at the same time. |
APPENDIX A
Defined terms
Financial guarantee contract |
A contract that requires the issuer to make specified payments to reimburse the holder for a loss it incurs because a specified debtor fails to make payment when due in accordance with the original or modified terms of a debt instrument. |
APPENDIX B
B18 |
The following are examples of contracts that are insurance contracts, if the transfer of insurance risk is significant: …
|
B19 |
The following are examples of items that are not insurance contracts: …
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AMENDMENTS TO OTHER STANDARDS
Entities shall apply the following consequential amendments to IAS 32 (and IFRS 7, if they already apply IFRS 7) when they apply the related amendments to IAS 39 and IFRS 4.
IAS 32 Financial Instruments: Disclosure and Presentation
Paragraphs 4(d) and 12 are amended as follows.
4. |
This Standard shall be applied by all entities to all types of financial instruments except: …
|
12. |
The following terms are defined in paragraph 9 of IAS 39 and are used in this Standard with the meaning specified in IAS 39. …
… |
IFRS 7 Financial Instruments: Disclosures
Paragraph 3(d) of IFRS 7 and the list of defined terms in Appendix A of IFRS 7 are amended in the same way as IAS 32, as follows.
3. |
This IFRS shall be applied by all entities to all types of financial instruments, except: …
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APPENDIX A
Defined terms
…
The following terms are defined in paragraph 11 of IAS 32 or paragraph 9 of IAS 39 and are used in the IFRS with the meaning specified in IAS 32 and IAS 39.
…
— |
financial asset or financial liability at fair value through profit or loss |
— |
financial guarantee contract |
— |
financial asset or financial liability held for trading |
…
References to be updated when an entity adopts IFRS 7
When an entity applies IFRS 7, references to IAS 32 are replaced by references to IFRS 7 in the following paragraphs that were added or amended by this document:
— |
IAS 39, paragraph 103B |
— |
IFRS 4, paragraphs 4(d) and 41A, and paragraph B18(g) of Appendix B (two references) |
IFRIC INTERPRETATION 6
Liabilities arising from Participating in a Specific Market — Waste Electrical and Electronic Equipment
REFERENCES
— |
IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors |
— |
IAS 37 Provisions, Contingent Liabilities and Contingent Assets |
BACKGROUND
1. |
Paragraph 17 of IAS 37 specifies that an obligating event is a past event that leads to a present obligation that an entity has no realistic alternative to settling. |
2. |
Paragraph 19 of IAS 37 states that provisions are recognised only for ‘obligations arising from past events existing independently of an entity’s future actions’. |
3. |
The European Union’s Directive on Waste Electrical and Electronic Equipment (WE&EE), which regulates the collection, treatment, recovery and environmentally sound disposal of waste equipment, has given rise to questions about when the liability for the decommissioning of WE&EE should be recognised. The Directive distinguishes between ‘new’ and ‘historical’ waste and between waste from private households and waste from sources other than private households. New waste relates to products sold after 13 August 2005. All household equipment sold before that date is deemed to give rise to historical waste for the purposes of the Directive. |
4. |
The Directive states that the cost of waste management for historical household equipment should be borne by producers of that type of equipment that are in the market during a period to be specified in the applicable legislation of each Member State (the measurement period). The Directive states that each Member State shall establish a mechanism to have producers contribute to costs proportionately ‘e.g. in proportion to their respective share of the market by type of equipment.’ |
5. |
Several terms used in the Interpretation such as ‘market share’ and ‘measurement period’ may be defined very differently in the applicable legislation of individual Member States. For example, the length of the measurement period might be a year or only one month. Similarly, the measurement of market share and the formulae for computing the obligation may differ in the various national legislations. However, all of these examples affect only the measurement of the liability, which is not within the scope of the Interpretation. |
SCOPE
6. |
This Interpretation provides guidance on the recognition, in the financial statements of producers, of liabilities for waste management under the EU Directive on WE&EE in respect of sales of historical household equipment. |
7. |
The Interpretation addresses neither new waste nor historical waste from sources other than private households. The liability for such waste management is adequately covered in IAS 37. However, if, in national legislation, new waste from private households is treated in a similar manner to historical waste from private households, the principles of the Interpretation apply by reference to the hierarchy in paragraphs 10–12 of IAS 8. The IAS 8 hierarchy is also relevant for other regulations that impose obligations in a way that is similar to the cost attribution model specified in the EU Directive. |
ISSUE
8. |
The IFRIC was asked to determine in the context of the decommissioning of WE&EE what constitutes the obligating event in accordance with paragraph 14(a) of IAS 37 for the recognition of a provision for waste management costs:
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CONSENSUS
9. |
Participation in the market during the measurement period is the obligating event in accordance with paragraph 14(a) of IAS 37. As a consequence, a liability for waste management costs for historical household equipment does not arise as the products are manufactured or sold. Because the obligation for historical household equipment is linked to participation in the market during the measurement period, rather than to production or sale of the items to be disposed of, there is no obligation unless and until a market share exists during the measurement period. The timing of the obligating event may also be independent of the particular period in which the activities to perform the waste management are undertaken and the related costs incurred. |
EFFECTIVE DATE
10. |
An entity shall apply this Interpretation for annual periods beginning on or after 1 December 2005. Earlier application is encouraged. If an entity applies the Interpretation for a period beginning before 1 December 2005, it shall disclose that fact. |
TRANSITION
11. |
Changes in accounting policies shall be accounted for in accordance with IAS 8. |