Financial Instrument Disclosures and Capital Disclosures

Status: Final standards and Background Information and Basis for Conclusions issued.

The AcSB has issued three new standards, two of which relate to the disclosure and presentation of financial instruments, and one to disclosures about capital.

Background
Activities to Date
Contact Information

Background

In August 2005, the International Accounting Standards Board (IASB) issued International Financial Reporting Standard IFRS 7, Financial Instruments: Disclosures, to replace the disclosure provisions of International Financial Reporting Standard IAS 32, Financial Instruments: Disclosure and Presentation. The presentation requirements of IAS 32 remain in effect.

When exposing its proposals for financial instrument disclosures for public comment, the IASB also exposed proposals relating to capital disclosures, and, in August 2005, issued amendments to International Financial Reporting Standard IAS 1, Presentation of Financial Statements, giving effect to the capital disclosures proposals. 

In view of these international developments, the AcSB proposed to issue three new Handbook Sections. The first would replace the disclosure requirements of Section 3861, Financial Instruments — Disclosure and Presentation, and would converge with IFRS 7. The second would carry forward unchanged the presentation requirements of Section 3861 (which was based on IAS 32). The third new Section would require disclosures about capital, and would converge with the recent amendment to IAS 1 for capital disclosures. It would apply to all entities, regardless of whether they have financial instruments.

Activities to Date

In April 2006 the AcSB issued an Exposure Draft, Financial Instrument Disclosures and Capital Disclosures, with comments due by June 30, 2006. A Background Information and Basis for Conclusions was issued in June 2006.

The AcSB redeliberated its proposals based on comments received and, on December 1, 2006, issued the following new Handbook Sections:

• Section 3862, Financial Instruments — Disclosures;
• Section 3863, Financial Instruments — Presentation; and
• Section 1535, Capital Disclosures.

All three Sections are effective for interim and annual financial statements relating to fiscal years beginning on or after October 1, 2007. Together, Sections 3862 and 3863 may be adopted in place of Section 3861, Financial Instruments — Disclosure and Presentation, before that date.

The new Section on financial instrument disclosures, consistent with Section 3861, is based on the fundamental principle that entities should provide disclosures in their financial statements that enable users to evaluate the significance of financial instruments for the entity’s financial position and performance. However, the new Section, like IFRS 7, places an increased emphasis on disclosures about risks associated with both recognized and unrecognized financial instruments and how these risks are managed. It is also intended to remove any duplicative disclosures and simplify the disclosures about concentrations of risk, credit risk, liquidity risk and price risk currently found in Section 3861.

The new Section on the presentation of financial instruments carries forward unchanged the presentation requirements of Section 3861.

The new Section on capital disclosures requires the disclosure of information about an entity’s objectives, policies and processes for managing capital.

A Background Information and Basis for Conclusions relating to all three Sections was issued in July 2007.

Contact Information

Questions or comments on this project should be directed to:

Karen Jones, CA
Principal, Accounting Standards
Telephone:  +1 (416) 204-3463
Fax:  +1 (416) 204-3412

Canadian Accounting Standards Board
277 Wellington Street West
Toronto ON  M5V 3H2  Canada