London (July 28, 2004) -- The International Accounting Standards Board has published proposals aimed at giving the users of financial statements better information about an entity’s exposure to risks and how those risks are managed.

The proposals are set out in an exposure draft of an International Financial Reporting Standard, ED 7 Financial Instruments: Disclosures. If adopted, the proposed IFRS would apply to all entities. However, the extent of disclosure required would depend on the extent of the entity’s use of financial instruments and of its exposure to risk.

The IASB worked with the Financial Activities Advisory Committee, an expert advisory group of auditors, preparers and regulators, to develop the proposals. The proposed IFRS would require entities to provide disclosures in their financial statements that will enable users to evaluate the significance of financial instruments for the entity’s financial position and performance; the nature and extent of risks arising from financial instruments to which the entity was exposed during the period and at the reporting date; and the entity’s capital.

The IFRS would replace IAS 30, Disclosures in the Financial Statements and Similar Financial Institutions, and the disclosure requirements in IAS 32, Financial Instruments: Disclosure and Presentation. In doing so, the IASB said that it would remove some disclosure requirements that are regarded as "too onerous" and would simplify other disclosures. The ED also proposes locating all disclosures relating to financial instruments in one place.

"The proposals in ED 7 will improve financial reporting by helping users to understand the significance of financial instruments in financial statements, by giving information about companies’ capital and by revealing more clearly the risks attached to holding financial instruments," said Sir David Tweedie, IASB chairman.

The text of the exposure draft will be available on the IASB’s Web site,, after Aug 2. Comments on the exposure draft are due by Oct. 22. The effective date of the proposed IFRS and related amendments to IFRS 4 would be annual periods beginning on or after Jan. 1, 2007, with earlier application encouraged.

-- WebCPA staff

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