What Financial Statements Must Have to Expose Risks: ASB’s Proposals
The Accounting Standards Board (ASB) has amended the old disclosure requirements in FRS 29 International Financial Reporting Standard (IFRS) 7 to enable users of financial statements to gauge the level of risks that stem from the transfers of financial assets and how they impact financial positions.
The first exposure draft on the said requirements for financial instruments disclosure was released on December 2005 and has since kicked off to implement the (IFRS) 7 among UK entities that use these financial statements reporting standards.
The amendments came after the International Accounting Standards Board (IASB) has revised on October 2010 the requirements for financial statements as stipulated in International Financial Reporting Standard (IFRS) 7 ‘Financial Instruments: Disclosures’.
The IASB aimed to enhance the existing practices of providing information in financial statements in a way that risks arising from the transfers of financial instruments by entities are exposed.
The ASB’s proposals seek to align the FRS 29 with the IFRS 7, necessarily coinciding with IASB’s amendments, thus converging the two standards on financial statements disclosure of the transfers of assets.
Furthermore, the standards will enhance transparency in the reporting of transfer transactions in general, including securitisation of ﬁnancial assets, according to ASB.
However, the ASB emphasizes that the proposed amendments do not signiﬁcantly impose additional costs in preparing financial statements, only the inclusion of the necessary information that will benefit their users.
Meanwhile, the ASB opens the proposals to the public for comments on whether the new standards outweigh any costs involved. In addition, ASB said the European Union is yet to adopt the proposals, which, when finalized, final amendments will be issued by the ASB.
Comments on the new financial statements reporting standards are welcome until April 30.