{
  "url": "https://openlegislation.uk/eu-regulation-2006-108/annex/appendix-INTERNATIONAL",
  "json_url": "https://openlegislation.uk/eu-regulation-2006-108/annex/appendix-INTERNATIONAL.json",
  "legislation": "eur/2006/108",
  "legislation_title": "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)",
  "legislation_url": "https://openlegislation.uk/eu-regulation-2006-108",
  "path": "annex/appendix/INTERNATIONAL",
  "kind": "appendix",
  "number": "INTERNATIONAL FINANCIAL REPORTING STANDARD 7",
  "heading": "Financial Instruments: Disclosures",
  "text": "OBJECTIVE\n1.. The objective of this IFRS is to require entities to provide disclosures in their financial statements that enable users to evaluate:\n(a) the significance of financial instruments for the entity’s financial position and performance;\nand\n(b) the nature and extent of risks arising from financial instruments to which the entity is exposed during the period and at the reporting date, and how the entity manages those risks.\n2.. 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.\nSCOPE\n3.. This IFRS shall be applied by all entities to all types of financial instruments, except:\n(a) those interests in subsidiaries, associates and joint ventures that are accounted for in accordance with IAS 27 Consolidated and Separate Financial Statements, IAS 28 Investments in Associates or IAS 31 Interests in Joint Ventures. However, in some cases, IAS 27, IAS 28 or IAS 31 permits an entity to account for an interest in a subsidiary, associate or joint venture using IAS 39; in those cases, entities shall apply the disclosure requirements in IAS 27, IAS 28 or IAS 31 in addition to those in this IFRS. Entities shall also apply this IFRS to all derivatives linked to interests in subsidiaries, associates or joint ventures unless the derivative meets the definition of an equity instrument in IAS 32.\n(b) employers’ rights and obligations arising from employee benefit plans, to which IAS 19 Employee Benefits applies.\n(c) contracts for contingent consideration in a business combination (see IFRS 3 Business Combinations). This exemption applies only to the acquirer.\n(d) insurance contracts as defined in IFRS 4 Insurance Contracts. However, this IFRS applies to derivatives that are embedded in insurance contracts if IAS 39 requires the entity to account for them separately.\n(e) financial instruments, contracts and obligations under share-based payment transactions to which IFRS 2 Share-based Payment applies, except that this IFRS applies to contracts within the scope of paragraphs 5-7 of IAS 39.\n4.. 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).\n5.. 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).\nCLASSES OF FINANCIAL INSTRUMENTS AND LEVEL OF DISCLOSURE\n6.. 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.\nSIGNIFICANCE OF FINANCIAL INSTRUMENTS FOR FINANCIAL POSITION AND PERFORMANCE\n7.. 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.\nBalance sheet\nCategories of financial assets and financial liabilities\n8.. 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:\n(a) financial assets at fair value through profit or loss, showing separately (i) those designated as such upon initial recognition and (ii) those classified as held for trading in accordance with IAS 39;\n(b) held-to-maturity investments;\n(c) loans and receivables;\n(d) available-for-sale financial assets;\n(e) financial liabilities at fair value through profit or loss, showing separately (i) those designated as such upon initial recognition and (ii) those classified as held for trading in accordance with IAS 39;\nand\n(f) financial liabilities measured at amortised cost.\nFinancial assets or financial liabilities at fair value through profit or loss\n9.. 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:\n(a) the maximum exposure to credit risk (see paragraph 36(a)) of the loan or receivable (or group of loans or receivables) at the reporting date.\n(b) the amount by which any related credit derivatives or similar instruments mitigate that maximum exposure to credit risk.\n(c) the amount of change, during the period and cumulatively, in the fair value of the loan or receivable (or group of loans or receivables) that is attributable to changes in the credit risk of the financial asset determined either:\n(i) as the amount of change in its fair value that is not attributable to changes in market conditions that give rise to market risk;\nor\n(ii) using an alternative method the entity believes more faithfully represents the amount of change in its fair value that is attributable to changes in the credit risk of the asset.\nChanges in market conditions that give rise to market risk include changes in an observed (benchmark) interest rate, commodity price, foreign exchange rate or index of prices or rates.\n(d) the amount of the change in the fair value of any related credit derivatives or similar instruments that has occurred during the period and cumulatively since the loan or receivable was designated.\n10.. 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:\n(a) the amount of change, during the period and cumulatively, in the fair value of the financial liability that is attributable to changes in the credit risk of that liability determined either:\n(i) as the amount of change in its fair value that is not attributable to changes in market conditions that give rise to market risk (see Appendix B, paragraph B4);\nor\n(ii) using an alternative method the entity believes more faithfully represents the amount of change in its fair value that is attributable to changes in the credit risk of the liability.\nChanges in market conditions that give rise to market risk include changes in a benchmark interest rate, the price of another entity’s financial instrument, a commodity price, a foreign exchange rate or an index of prices or rates. For contracts that include a unit-linking feature, changes in market conditions include changes in the performance of the related internal or external investment fund.\n(b) the difference between the financial liability’s carrying amount and the amount the entity would be contractually required to pay at maturity to the holder of the obligation.\n11.. The entity shall disclose:\n(a) the methods used to comply with the requirements in paragraphs 9(c) and 10(a).\n(b) if the entity believes that the disclosure it has given to comply with the requirements in paragraph 9(c) or 10(a) does not faithfully represent the change in the fair value of the financial asset or financial liability attributable to changes in its credit risk, the reasons for reaching this conclusion and the factors it believes are relevant.\nReclassification\n12.. If the entity has reclassified a financial asset as one measured:\n(a) at cost or amortised cost, rather than at fair value;\nor\n(b) at fair value, rather than at cost or amortised cost,\nit shall disclose the amount reclassified into and out of each category and the reason for that reclassification (see paragraphs 51-54 of IAS 39).\nDerecognition\n13.. 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:\n(a) the nature of the assets;\n(b) the nature of the risks and rewards of ownership to which the entity remains exposed;\n(c) when the entity continues to recognise all of the assets, the carrying amounts of the assets and of the associated liabilities;\nand\n(d) when the entity continues to recognise the assets to the extent of its continuing involvement, the total carrying amount of the original assets, the amount of the assets that the entity continues to recognise, and the carrying amount of the associated liabilities.\nCollateral\n14.. An entity shall disclose:\n(a) the carrying amount of financial assets it has pledged as collateral for liabilities or contingent liabilities, including amounts that have been reclassified in accordance with paragraph 37(a) of IAS 39;\nand\n(b) the terms and conditions relating to its pledge.\n15.. 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:\n(a) the fair value of the collateral held;\n(b) the fair value of any such collateral sold or repledged, and whether the entity has an obligation to return it;\nand\n(c) the terms and conditions associated with its use of the collateral.\nAllowance account for credit losses\n16.. 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.\nCompound financial instruments with multiple embedded derivatives\n17.. 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.\nDefaults and breaches\n18.. For loans payable recognised at the reporting date, an entity shall disclose:\n(a) details of any defaults during the period of principal, interest, sinking fund, or redemption terms of those loans payable;\n(b) the carrying amount of the loans payable in default at the reporting date;\nand\n(c) whether the default was remedied, or the terms of the loans payable were renegotiated, before the financial statements were authorised for issue.\n19.. 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).\nIncome statement and equity\nItems of income, expense, gains or losses\n20.. 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:\n(a) net gains or net losses on:\n(i) financial assets or financial liabilities at fair value through profit or loss, showing separately those on financial assets or financial liabilities designated as such upon initial recognition, and those on financial assets or financial liabilities that are classified as held for trading in accordance with IAS 39;\n(ii) available-for-sale financial assets, showing separately the amount of gain or loss recognised directly in equity during the period and the amount removed from equity and recognised in profit or loss for the period;\n(iii) held-to-maturity investments;\n(iv) loans and receivables;\nand\n(v) financial liabilities measured at amortised cost;\n(b) total interest income and total interest expense (calculated using the effective interest method) for financial assets or financial liabilities that are not at fair value through profit or loss;\n(c) fee income and expense (other than amounts included in determining the effective interest rate) arising from:\n(i) financial assets or financial liabilities that are not at fair value through profit or loss;\nand\n(ii) trust and other fiduciary activities that result in the holding or investing of assets on behalf of individuals, trusts, retirement benefit plans, and other institutions;\n(d) interest income on impaired financial assets accrued in accordance with paragraph AG93 of IAS 39;\nand\n(e) the amount of any impairment loss for each class of financial asset.\nOther disclosures\nAccounting policies\n21.. 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.\nHedge accounting\n22.. 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):\n(a) a description of each type of hedge;\n(b) a description of the financial instruments designated as hedging instruments and their fair values at the reporting date;\nand\n(c) the nature of the risks being hedged.\n23.. For cash flow hedges, an entity shall disclose:\n(a) the periods when the cash flows are expected to occur and when they are expected to affect profit or loss;\n(b) a description of any forecast transaction for which hedge accounting had previously been used, but which is no longer expected to occur;\n(c) the amount that was recognised in equity during the period;\n(d) the amount that was removed from equity and included in profit or loss for the period, showing the amount included in each line item in the income statement;\nand\n(e) the amount that was removed from equity during the period and included in the initial cost or other carrying amount of a non-financial asset or non-financial liability whose acquisition or incurrence was a hedged highly probable forecast transaction.\n24.. An entity shall disclose separately:\n(a) in fair value hedges, gains or losses:\n(i) on the hedging instrument;\nand\n(ii) on the hedged item attributable to the hedged risk.\n(b) the ineffectiveness recognised in profit or loss that arises from cash flow hedges;\nand\n(c) the ineffectiveness recognised in profit or loss that arises from hedges of net investments in foreign operations.\nFair value\n25.. 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.\n26.. 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.\n27.. An entity shall disclose:\n(a) the methods and, when a valuation technique is used, the assumptions applied in determining fair values of each class of financial assets or financial liabilities. For example, if applicable, an entity discloses information about the assumptions relating to prepayment rates, rates of estimated credit losses, and interest rates or discount rates.\n(b) whether fair values are determined, in whole or in part, directly by reference to published price quotations in an active market or are estimated using a valuation technique (see paragraphs AG71-AG79 of IAS 39).\n(c) whether the fair values recognised or disclosed in the financial statements are determined in whole or in part using a valuation technique based on assumptions that are not supported by prices from observable current market transactions in the same instrument (ie without modification or repackaging) and not based on available observable market data. For fair values that are recognised in the financial statements, if changing one or more of those assumptions to reasonably possible alternative assumptions would change fair value significantly, the entity shall state this fact and disclose the effect of those changes. For this purpose, significance shall be judged with respect to profit or loss, and total assets or total liabilities, or, when changes in fair value are recognised in equity, total equity.\n(d) if (c) applies, the total amount of the change in fair value estimated using such a valuation technique that was recognised in profit or loss during the period.\n28.. 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:\n(a) its accounting policy for recognising that difference in profit or loss to reflect a change in factors (including time) that market participants would consider in setting a price (see paragraph AG76A of IAS 39);\nand\n(b) the aggregate difference yet to be recognised in profit or loss at the beginning and end of the period and a reconciliation of changes in the balance of this difference.\n29.. Disclosures of fair value are not required:\n(a) when the carrying amount is a reasonable approximation of fair value, for example, for financial instruments such as short-term trade receivables and payables;\n(b) for an investment in equity instruments that do not have a quoted market price in an active market, or derivatives linked to such equity instruments, that is measured at cost in accordance with IAS 39 because its fair value cannot be measured reliably;\nor\n(c) for a contract containing a discretionary participation feature (as described in IFRS 4) if the fair value of that feature cannot be measured reliably.\n30.. 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:\n(a) the fact that fair value information has not been disclosed for these instruments because their fair value cannot be measured reliably;\n(b) a description of the financial instruments, their carrying amount, and an explanation of why fair value cannot be measured reliably;\n(c) information about the market for the instruments;\n(d) information about whether and how the entity intends to dispose of the financial instruments;\nand\n(e) if financial instruments whose fair value previously could not be reliably measured are derecognised, that fact, their carrying amount at the time of derecognition, and the amount of gain or loss recognised.\nNATURE AND EXTENT OF RISKS ARISING FROM FINANCIAL INSTRUMENTS\n31.. 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.\n32.. 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.\nQualitative disclosures\n33.. For each type of risk arising from financial instruments, an entity shall disclose:\n(a) the exposures to risk and how they arise;\n(b) its objectives, policies and processes for managing the risk and the methods used to measure the risk;\nand\n(c) any changes in (a) or (b) from the previous period.\nQuantitative disclosures\n34.. For each type of risk arising from financial instruments, an entity shall disclose:\n(a) summary quantitative data about its exposure to that risk at the reporting date. This disclosure shall be based on the information provided internally to key management personnel of the entity (as defined in IAS 24 Related Party Disclosures), for example the entity’s board of directors or chief executive officer.\n(b) the disclosures required by paragraphs 36-42, to the extent not provided in (a), unless the risk is not material (see paragraphs 29-31 of IAS 1 for a discussion of materiality).\n(c) concentrations of risk if not apparent from (a) and (b).\n35.. 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.\nCredit risk\n36.. An entity shall disclose by class of financial instrument:\n(a) the amount that best represents its maximum exposure to credit risk at the reporting date without taking account of any collateral held or other credit enhancements (eg netting agreements that do not qualify for offset in accordance with IAS 32);\n(b) in respect of the amount disclosed in (a), a description of collateral held as security and other credit enhancements;\n(c) information about the credit quality of financial assets that are neither past due nor impaired;\nand\n(d) the carrying amount of financial assets that would otherwise be past due or impaired whose terms have been renegotiated.\nFinancial assets that are either past due or impaired\n37.. An entity shall disclose by class of financial asset:\n(a) an analysis of the age of financial assets that are past due as at the reporting date but not impaired;\n(b) an analysis of financial assets that are individually determined to be impaired as at the reporting date, including the factors the entity considered in determining that they are impaired;\nand\n(c) for the amounts disclosed in (a) and (b), a description of collateral held by the entity as security and other credit enhancements and, unless impracticable, an estimate of their fair value.\nCollateral and other credit enhancements obtained\n38.. 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:\n(a) the nature and carrying amount of the assets obtained;\nand\n(b) when the assets are not readily convertible into cash, its policies for disposing of such assets or for using them in its operations.\nLiquidity risk\n39.. An entity shall disclose:\n(a) a maturity analysis for financial liabilities that shows the remaining contractual maturities;\nand\n(b) a description of how it manages the liquidity risk inherent in (a).\nMarket risk\nSensitivity analysis\n40.. Unless an entity complies with paragraph 41, it shall disclose:\n(a) a sensitivity analysis for each type of market risk to which the entity is exposed at the reporting date, showing how profit or loss and equity would have been affected by changes in the relevant risk variable that were reasonably possible at that date;\n(b) the methods and assumptions used in preparing the sensitivity analysis;\nand\n(c) changes from the previous period in the methods and assumptions used, and the reasons for such changes.\n41.. 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:\n(a) an explanation of the method used in preparing such a sensitivity analysis, and of the main parameters and assumptions underlying the data provided;\nand\n(b) an explanation of the objective of the method used and of limitations that may result in the information not fully reflecting the fair value of the assets and liabilities involved.\nOther market risk disclosures\n42.. 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.\nEFFECTIVE DATE AND TRANSITION\n43.. 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.\n44.. 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.\nWITHDRAWAL OF IAS 30\n45.. This IFRS supersedes IAS 30 Disclosures in the Financial Statements of Banks and Similar Financial Institutions.",
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  "version": "current",
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  "provenance": {
    "source": "legislation.gov.uk",
    "source_url": "https://www.legislation.gov.uk/eur/2006/108/annex/appendix/INTERNATIONAL",
    "retrieved_at": "2026-11-01T14:53:58.207860+00:00"
  },
  "licence": "Open Government Licence v3.0",
  "licence_url": "https://www.nationalarchives.gov.uk/doc/open-government-licence/version/3/",
  "attribution": "Contains public sector information licensed under the Open Government Licence v3.0. Source: legislation.gov.uk, The National Archives."
}