With new major standards (IFRSs 9, 15, and 16) coming thick and fast, it might be easy to forget about other, newly effective requirements—notably IAS 7 Statement of Cash Flows. To comply with IAS 7, companies must adhere to new disclosure requirements that may be easy to overlook. We find it particularly important not to do so, especially given that both the European Securities and Markets Authority (ESMA) and the Commission de Surveillance du Secteur Financier (CSSF) have stated that compliance with IAS 7 is in their main focus areas.
In January 2016 the International Accounting Standards Board (IASB) amended IAS 7 to require disclosures to be made that enable users of financial statements to evaluate "changes in liabilities arising from financing activities." The term financing activities is defined, in IAS 7, as "activities that result in changes in the size and composition of the contributed equity and borrowings of the entity."
The amendment is, specifically, paragraphs 44A-44E of IAS 7. The requirements include, but are not limited to, the following disclosures:
- changes from financing cash flows
- changes arising from obtaining or losing control of subsidiaries or other businesses
- the effect of changes in foreign exchange rates
- changes in fair values
- other changes
These disclosures must now be made regarding annual periods beginning on or after 1 January 2017.
The amendment was part of the IASB's Disclosure Initiative – Principles of Disclosure paper, aiming to identify disclosure issues and address them by developing new principles or disclosures (or clarifying existing ones) on IFRSs—with the ultimate goal of improving communication in financial reporting.
The time to act is now in ensuring that your disclosures of your financial statements are complete!
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
