Download Disclosures

FINANCIAL REPORTING FOR
COOPERATIVE SOCIETIES
12th – 13th May 2016
HILTON HOTEL – NAIROBI
Disclosures
Credibility
.
Professionalism
.
AccountAbility
Content
1. Introduction
2. SFP Disclosures
3. SCI Disclosures
4. Others
5. Risks
Examples
Introduction
According to IFRSs disclosures
(also called the notes) are a
primary part of financial
statements. As you know the
financial statements consist of the
PoL, SCE, SFP,SCF and also the
notes.
Introduction
IAS 1 on presentation of financial
statements gives the formats for
the first four but does not give the
format for disclosures/notes.
However the standard
recommends that at a minimum,
disclosures should comprise:
Introduction
1. A statement of compliance e.g.
these financial statements comply
with IFRS and the SACCO societies
Act.
2. Key significant accounting policies
such as valuation of assets where
we have alternatives.
Introduction
3. A make up of some of the items in
the financial statements. For example
if a company has multiple sources of
revenue then it would be good to
disclose each source and the amount.
The same case applies to asset like
PPE.
Introduction
4. Additional items that have not been
provided in the financial statements
but are nevertheless important for
users to have an overall understanding
of the financials like contingent
liabilities and dividends proposed.
Introduction
The lack of substantive formats for
disclosures means that companies and
even SACCOs have some discretion in
the disclosures that they make in the
financial statements.
Introduction
As a SACCO remember disclosures are
being driven by:
1. IFRS
2. The law
3. Regulators (SASRA)
4. Users and promotions like FiRe
Introduction
The next section highlights key
disclosures as required by IFRS and
more specifically for financial
institutions like SACCOs.
You can also apply best practice like
those in the banking sector.
SFP Disclosures
 Total carrying value of each category of
financial assets and liabilities on face of the
statement of financial position or in the notes
 Information on fair value of loans and
receivables
 Financial liabilities designated as at fair value
through profit and loss
SFP Disclosures
 Financial assets reclassified
 Financial assets that do not
qualify for derecognition
 Details of financial assets
pledged as collateral & collateral
held
SFP Disclosures
 Reconciliation of allowance account
for credit losses.
 Compound financial instruments
with embedded derivatives
 Details of defaults and breaches of
loans payable
SCI Disclosures
 Gain or loss for each category of
financial assets and liabilities in the
statement of comprehensive income
or in the notes
 Total interest income and interest
expense (effective interest method)
SCI Disclosures
 Fee income and expense
 Interest on impaired financial
assets
 Amount of impairment loss
for each financial asset.
Other Disclosures
Accounting policies:
All relevant accounting policies.
Include measurement basis.
Other Disclosures
Hedge accounting:
Description of hedge, description and fair
value of hedged instrument and type of
risk hedged
Details of cash flow hedges, fair value
hedges and hedge of net investment in
foreign operations..
Other Disclosures
Fair value: Fair value for each
class of financial asset and
liability Disclose method and
relevant assumptions to calculate
fair value and if fair value cannot
be determined.
Risks
Qualitative disclosure
 Exposure to risk and how it
arises
 Objectives, policies and
processes for managing risk and
method used to measure risk.
Risks
Quantitative disclosure
 Summary of quantitative data
about exposure to risk based on
information given to key
management
 Concentrations of risks..
Risks – Liquidity Risk
Definition: The risk that an
entity will encounter difficulty
in meeting obligations
associated with financial
liabilities.
Risks – Liquidity Risk
Maturity analysis for financial
liabilities that shows the remaining
contractual maturities –
 Time bands and increment are
based on the entities’ judgement
 How liquidity risk is managed.
Risks – Credit Risk
Definition:
The risk that one party to a
financial instrument will cause a
financial loss for the other party by
failing to discharge an obligation.
Risks – Credit Risk
Maximum exposure to credit risk without taking into
account collateral
 Collateral held as security and other credit
enhancements
 Information of financial assets that are either past
due (when a counterparty has failed to make a
payment when contractually due) or impaired
 Information about collateral and other credit
enhancements obtained.
Risks – Market Risk
Definition:
The risk that the fair value or future cash
flows of a financial instrument will
fluctuate due to changes in market prices.
Market risk comprises three types of risk:
(i) currency risk,
(ii) interest rate risk and
(iii) price risk.
Risks – Market Risk
A sensitivity analysis (including
methods and assumptions used) for
each type of market risk exposed,
showing impact on profit or loss
and equity
or
Risks – Market Risk
If a sensitivity analysis is prepared
by an entity, showing
interdependencies between risk
variables and it is used to manage
financial risks, it can be used in
place of the above sensitivity
analysis.
IAS 32 - Questions