IPSAS 30 is based on IFRS 7 Financial Instruments – Disclosures.
IPSAS 30 describes the disclosure requirements that enable users of the financial statements to evaluate [IPSAS 30.1]:
• the significance of financial instruments for the entity’s financial position and performance
• the nature and extent of risks arising from financial instruments and how the entity manages these risks
IPSAS 30 was issued in January 2010 and applies to annual periods beginning on or after 1 January 2013.
History of IPSAS 30
Annual periods beginning on or after 1 January 2013, if applied earlier, IPSAS 28 and IPSAS 29 should also be applied.
Refer to IFAC website here
Summary of IPSAS 30 Financial Instruments – Disclosures
IPSAS 30 describes the disclosure requirements that enable users of the financial statements to evaluate the significance of financial instruments for the entity’s financial position and performance, and the nature and extent of risks arising from financial instruments and how the entity manages these risks [IPSAS 30.1].
Whilst IPSAS 30 deals with the disclosures relating to financial instruments, IPSAS 28 deals with the presentation of financial instruments and IPSAS 29 deals with the recognition and measurement of financial instruments.
IPSAS 30 applies to all public sector entities other than GBEs [IPSAS 30.6].
The standard is applicable to all types of financial instruments except [IPSAS 30.3]:
• Interests in controlled entities, associates, and joint ventures that are accounted for in accordance with IPSAS 6, Consolidated and Separate Financial Statements, IPSAS 7, Investments in Associates, or IPSAS 8, Interests in Joint Ventures. However IPSAS 29 is applicable in cases where under IPSAS 6, 7 and 8 such interests are to be accounted for under IPSAS 29 and also applies to derivatives on interests in a controlled entities, associates, or joint ventures, except when the derivative meets the definition of an equity instrument as defined under IPSAS 28 Financial Instruments – Presentation.
• Employers’ rights and obligations under employee benefit plans in the scope of IPSAS 25, Employee Benefits
• Obligations arising from insurance contracts. However, IPSAS 28 is applicable to:
o derivatives that are embedded in insurance contracts if they should be separately be accounted for by IPSAS 29
o financial guarantee contracts if the issuer elects to apply IPSAS 29 to these contracts
• Financial instruments, contracts and obligations under share based payment transactions except for contracts within the scope of paragraphs 4–6 of IPSAS 29
• Instruments that are required to be classified as equity instruments in accordance with paragraphs 15 and 16 or 17 and 18 of IPSAS 28.
IPSAS 30 is applicable to recognized and unrecognized financial instruments. Unrecognized financial instruments are outside the scope of IPSAS 29 but in the scope of IPSAS 30 [IPSAS 30.4].
Key definitions [IPSAS 30.8]
Credit risk: the risk that one party to a financial instrument will cause a financial loss for the other party by failing to discharge an obligation.
Currency risk: the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in foreign exchange rates.
Interest rate risk : the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market interest rates.
Liquidity risk: the risk that an entity will encounter difficulty in meeting obligations associated with financial liabilities that are settled by delivering cash or another financial asset.
Loans payable: financial liabilities, other than short-term trade payables on normal credit terms.
Market risk: the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market prices. Market risk comprises three types of risk
• currency risk
• interest rate risk
• other price risk
Other price risk: is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market prices (other than those arising from interest rate risk or currency risk), whether those changes are caused by factors specific to the individual financial instrument or its issuer, or factors affecting all similar financial instruments traded in the market.
A financial asset is past due when a counterparty has failed to make a payment when contractually due.
Classes of financial instruments and level of disclosure
IPSAS 30 requires an entity to present disclosures by nature of the financial instruments. An entity is required to group financial instruments relevant to the nature of the information disclosed, and to provide sufficient information to permit reconciliation to the line items presented in the statement of financial position [IPSAS 30.9]. This implies that an entity is required to provide information by category as defined in IPSAS 29.
Significance of financial instruments
An entity should provide information that enables users of its financial statements to evaluate the significance of financial instruments for its financial position and performance [IPSAS 30.10].
Statement of financial position disclosures
Disclose the carrying amount of following categories, either in the statement of financial position (i.e. the “balance sheet”) or in the notes [IPSAS 30.11]:
• financial assets at fair value through surplus or deficit, showing separately those:
o designated at initial recognition
• held-to-maturity investments
• loans and receivables
• available-for-sale assets
• financial liabilities at fair value through surplus and deficit, showing separately those:
o designated at initial recognition
• financial liabilities measured at amortized cost
Other statement of financial position related disclosures:
• The disclosures required about financial assets and financial liabilities designated to be measured at fair value through surplus and deficit, include disclosures about maximum credit risk exposure and other credit risk exposures market risk, changes in fair values attributable to these risks and the methods used for these calculations [IPSAS 30.12-14].
• If financial assets were reclassified: the amount reclassified from one category to another and the reason for the reclassification [IPSAS 30.15]. If reclassified out of the fair value through surplus or deficit category or out of the available-for-sale category: the carrying amount and the fair values of all reclassified financial assets in the current and previous periods [IPSAS 30.16], and other disclosures about possible reclassifications [IPSAS 30.16 (c) – (f)].
• If a financial liability was designated as at fair value through surplus or deficit [IPSAS 30.15]:
o 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
o 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
• information about financial assets pledged as collateral [IPSAS 30.18]
o carrying amount of these assets
o terms and conditions relating to the pledge
• information about financial or non-financial assets held as collateral [IPSAS 30.19]:
o its fair value
o fair value of such assets sold or repledged and the if an obligation exists to return it
o terms and conditions related to the use of the collateral
• reconciliation of all changes in the allowance account for credit losses for each category of financial assets [IPSAS 30.20]
• information about financial instruments with both equity and liability component (compound instrument) and with multiple embedded derivatives whose values are interdependent (e.g. callable convertible debt instrument) [IPSAS 30.21]
• information about loan payables [IPSAS 30.22-23]:
o default of any term of loan agreements
o carrying amount of loans in default
o information about remediation or renegotiation
o breaches during the period
Statement of financial performance (the “Income Statement”) disclosures
Items of revenue, expense, gains and losses to disclose on the face of the statement of financial position or in the notes [IPSAS 30.24]:
• separate disclosure of gains and losses from [IPSAS 30.24(a)]:
o financial assets or liabilities measured at fair value through surplus or deficit, showing separately those designated at initial recognition and those held for trading
o available-for-sale financial assets
o held-to-maturity investments
o loans and receivables
o financial liabilities measured at amortized cost.
• total interest revenue and total interest expense for those financial instruments that are not measured at fair value through surplus or deficit [IPSAS 30.24(b)]
• fee revenue and expense from [IPSAS 30.24(c)]:
o financial assets or liabilities not at fair value through surplus or deficit
o trust and other fiduciary activities
• interest revenue on impaired financial assets [IPSAS 30.24(d)]
• amount of impairment losses for each class of financial assets [IPSAS 30.24(e)]
• accounting policies – measurement bases and other accounting policies - for financial instruments [IPSAS 30.25]
• hedge accounting, disclosure requirements include [IPSAS 30.26]:
o description of each type of hedge
o description of the hedging instrument and their fair values
o nature of risks being hedged
• cash flow hedges, disclose [IPSAS 30.27]:
o the periods in which the cash flows are expected to occur, when they are expected to be included surplus or deficit
o description of any forecast transaction for which hedge accounting had previously been used but is no longer expected to occur
o amount of gain or loss recognized in net assets/equity
o the amount reclassified from net assets/equity to surplus or deficit: the amount included in each line item of the statement of financial performance
o the amount removed from net assets/equity and included in the cost or the carrying amount of the non-financial instrument whose acquisition or incurrence was hedged highly probable forecast transaction
• fair value hedges disclose information about gains or losses on [IPSAS 30.28 (a)]:
o the hedging instrument
o the hedged item
• hedge ineffectiveness recognized in surplus or deficit from:
o cash flow hedges [IPSAS 30.28(b)]
o net investment hedges [IPSAS 30.28(c)]
• the fair values of each class of financial asset and financial liability [IPSAS 30.29] and for each class:
o offsetting should only be performed to the extent that the carrying amounts are offset in the financial statements [IPSAS 30.30]
o methods and valuation technique used and the assumptions applied
IPSAS 30 indicates a fair value hierarchy with 3 levels of inputs based on input significance to the measurement of the overall fair value (IPSAS 30.32):
• Level 1 – quoted prices for identical instruments
• Level 2 – observable market inputs other than Level 1 inputs
• Level 3 – inputs not based on observable market data
For each class of financial instruments, following disclosures are required [IPSAS 30.33]:
• the level of inputs used in the determination of the fair value
• movements (in and out) between levels of fair value hierarchy and the reason for the transfers
• if level 3 inputs are used for the measurement, disclosure include a.o. [IPSAS 30.33(c)-(e)]:
o gains and losses recognized in surplus or deficit, including a description of where they are presented
o gains and losses recognized in net assets/equity
o information if fair value could change significantly upon the change of any assumptions
If a difference between the transaction price and the fair value based on a valuation technique has been determined upon recognition [IPSAS 30.34]:
• the accounting policy for recognizing the difference in surplus or deficit
• the aggregate difference that still has to be recognized in surplus or deficit, at the beginning and end of the period and a reconciliation of these amounts
Disclosure of fair values is not required [IPSAS 30.35]:
• the carrying amount is a reasonable approximation of fair value
• for investment in equity instruments or derivatives linked to such instruments, measured at cost because the fair value cannot be reasonably measured
• for a contract containing a discretionary participation feature if the fair value of that feature cannot be measured reliably
• additional information should be required to facilitate users of the financial statements to make their own judgments about possible differences between the carrying amount and the fair value [IPSAS 30.36]
Disclosures about concessionary loans
For concessionary loans granted following should be disclosed [IPSAS 30.37]:
• Reconciliation between the opening and closing balance of the loans, including:
o Nominal value of loans granted
o Fair value adjustments on initial recognition
o Loans repaid
o Impairment losses
o Increase from the passage of time
o Other changes
• Nominal value of the loans at the end of the period
• Purpose and terms of various types of loans
• Valuation assumptions
Nature and extent of exposure to risks arising from financial instruments
Information should be disclosed that enables users of the financial statements to evaluate the nature and extent of risks arising from financial instruments to which the entity is exposed at the end of the reporting period [IPSAS 30.38]. The risk relating to financial instruments include but are not limited to [IPSAS 30.39]:
• Credit risk
• Liquidity risk
• Market risk
IPSAS 30 requires an entity to make both qualitative and quantitative disclosures.
For each type of risk related to financial instruments following disclosures are required [IPSAS 30.40]:
• risk exposures and their source
• objectives, policies, and processes for managing those risks and how these risks are measured
• changes from the previous period
For each type of risk related to financial instruments following disclosures are required [IPSAS 30.41]:
• summary quantitative data about exposure to each risk at the reporting date, this information should be based on the information that is disclosed to key management personnel
• disclosures about credit risk, liquidity risk, and market risk, unless these risks are not material (see further)
• concentrations of risk
• Disclosures per class of financial instruments about credit risk include [IPSAS 30.43]
o amount of maximum exposure to credit risk (without taking into account the collateral or other credit enhancements)
o description of collateral and credit enhancements
o information about credit quality of financial assets that are neither past due nor impaired
o information about credit quality of financial assets whose terms have been renegotiated
• for financial assets that are either past due or impaired, analytical disclosures are required [IPSAS 30.44]
• information about collateral or other credit enhancements obtained including [IPSAS 30.45]:
o the nature and carrying amounts of such assets
o policies for disposing these assets if not readily convertible to cash
• Disclosures about liquidity risk concern [IPSAS 30.47]:
o a maturity analysis of derivative and non-derivative financial liabilities
o description liquidity risk management is performed for foregoing
• Disclosures about market risk concern [IPSAS 30.47]:
o a sensitivity analysis of each type of market risk to which the entity is exposed
o methods and assumptions for the preparation of the risk analysis
o changes if any, from the assumptions and methods from the previous period, and the reason for the change
• if an entity prepares a sensitivity analysis such as value-at-risk for management purposes that reflects interdependencies of more than one component of market risk (for instance, interest risk and foreign currency risk combined), it may disclose that analysis instead of a separate sensitivity analysis for each type of market risk [IPSAS 30.48]. Further disclosures are required:
o explanation of the methods used, the main parameters and assumptions
o explanation of the objective of the method used and of limitations
If the analysis is not representative for a risk inherent in a financial instrument, this should be disclosed together with an explanation why it is judged unrepresentative [IPSAS 30.49].
Issuance of IPSAS 30: Financial Instruments: Disclosures
1 January 2013
Effective date of IPSAS 30