IASB Decides on Enhanced De-recognition Disclosure Requirements

Jack Humphrey, Regulatory journalist
October 07, 2010 /

As part of IASB’s (The International Accounting Standards Board), comprehensive review of off balance sheet activities, it has issued amendments to IFRS 7 Financial Instruments: Disclosure.

The amendments have been designed in such a way so as to allow users of financial statements improve their understanding of transfer transactions of financial assets. This includes that the users must understand that possible risks remain with an entity that has transferred the assets.

The amendments will also require additional disclosures in case around the end of a reporting period, a disproportionate amount of transfer transactions are undertaken by a company.

The amendments have been designed in a way so that they broadly align with the disclosure requirements of the IFRS (International Financial Reporting Standards). Another point that has been considered has to do with the US GAAP (Generally Accepted Accounting Principles).

Previously, the IFRS had published proposals for replacing the existing de-recognition model in IAS 39, the associated disclosure requirements in IFRS 7 and the Financial Instruments: Recognition and Measurement. The proposals were made available to the public for comments.

But responding to the responses the IFRS received from the public, it decided to retain the existing de-recognition requirements.

These requirements are to be incorporated into the IFRS 9 Financial Instruments).

The IFRS also wanted to finalize an improved form of the disclosure requirements. The new requirements are at present contained in Disclosures—Transfers of Financial Assets (Amendments to IFRS 7).

Sir David Tweedie, who is the Chairman of the IASB, said in a statement that the disclosure requirements “will help investors to better understand off-balance sheet risks, and to alert them to the possibility of so-called ‘window dressing’ transactions occurring at the end of a reporting period.”
The IASB and the FASB (Financial Accounting Standards Board) will be conducting more research and analysis on the subject.

 

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