International GAAP Bank Limited — Illustrative disclosures under IFRS 7 as amended by IFRS 9 ...

288 Pages·2017·2.94 MB·English

International GAAP Bank Limited
Illustrative disclosures under IFRS 7
as amended by IFRS 9
September 2017

International GAAP Bank Limited Illustrative disclosures under IFRS 7 as amended by IFRS 9
Foreword
The impact of IFRS 9 Financial Instruments has attracted a huge amount of interest, speculation and debate. Looking at the various impact
analyses a consistent theme has emerged. Provision for loss allowances will go up; and thereafter loss allowances will be more sensitive
to change in the future economic outlook than we have been used to in the past. Measurement will be complex but with that the credit
loss allowance will be more meaningful.
And as the effective date draws closer banks are increasingly focusing on what they will disclose. Investors, on the other hand, are
more focused on what they would like to be disclosed. Often when large changes are made to accounting standards it can feel that the
implementation of disclosures in financial statements comes second to the elements of recognition and measurement. This is natural
given how implementation projects are managed and how recognition and measurement is seen to drive many of the disclosure
requirements. But this time around the balance between measurement and disclosure needs to be different. With a new classification
approach for financial assets and the impairment model comes substantially different disclosure requirements in IFRS 7 Financial
Instruments: Disclosures. The disclosures are extensive and will require considerably more effort to complete. The basis for loss allowances
will be a bank’s expectation of future economic scenarios and how these may drive losses in their loan books; which in turn will drive
financial performance and balance sheet strength. This means that much more attention will be on the words, not just the numbers.
I hope this publication helps you in setting your standard for implementing the disclosure requirements if you are a bank; or helps you
consider what good may look like if you are an investor, auditor, or regulator. All feedback will be warmly received.
Andrew Spooner
Global IFRS Lead for Financial Instruments
September 2017
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International GAAP Bank Limited Illustrative disclosures under IFRS 7 as amended by IFRS 9
Key contacts
Global IFRS Leader Global IFRS Lead for Financial Instruments
Veronica Poole Andrew Spooner
[email protected] [email protected]
IFRS centres of excellence
Americas
Canada Karen Higgins [email protected]
LATCO Miguel Millan ifrs‑[email protected]
United States Robert Uhl iasplus‑[email protected]
Asia‑Pacific
Australia Anna Crawford [email protected]
China Stephen Taylor [email protected]
Japan Shinya Iwasaki [email protected]
Singapore James Xu ifrs‑[email protected]
Europe‑Africa
Belgium Thomas Carlier ifrs‑[email protected]
Denmark Jan Peter Larsen [email protected]
France Laurence Rivat [email protected]
Germany Jens Berger [email protected]
Italy Massimiliano Semprini ifrs‑[email protected]
Luxembourg Eddy Termaten [email protected]
Netherlands Ralph Ter Hoeven [email protected]
Russia Michael Raikhman [email protected]
South Africa Nita Ranchod [email protected]
Spain Cleber Custodio [email protected]
United Kingdom Elizabeth Chrispin [email protected]
Acknowledgments
We would like to extend our thanks to Evi Chatzitsakou and the IFRS centres of excellence in France, Germany, United States, Canada and
the United Kingdom for their review.
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International GAAP Bank Limited Illustrative disclosures under IFRS 7 as amended by IFRS 9
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International GAAP Bank Limited Illustrative disclosures under IFRS 7 as amended by IFRS 9
Introduction
This publication includes illustrative financial instruments disclosures for banks applying IFRS 9. It is not a full set of financial statements.
The illustrative disclosures outlined in this publication are in accordance with IFRSs, disclosures required by regulatory bodies have not
been included. The relevant IFRS disclosure requirements are also included. Local regulatory requirements may limit the application of
certain accounting policy choices or disclosures presented in this publication and preparers should tailor the disclosures they provide to
their specific circumstances.
The illustrative disclosures are prepared assuming International GAAP Bank Limited (‘the Group’) already applies IFRS 9 and therefore
the transitional disclosures are not included. This publication does not include consolidated statement of cash flows, because IFRS 9 did
not introduce any changes to the statement of cash flows. This publication includes the following:
• a consolidated statement of profit or loss for the year ended 31 December 20XX;
• a consolidated statement of comprehensive income for the year ended 31 December 20XX;
• a consolidated statement of financial position for the year ended 31 December 20XX;
• a consolidated statement of changes in equity for the year ended 31 December 20XX;
• IFRS 7 disclosures in the notes of the financial statements as amended by IFRS 9; and
• comparative information in respect of the preceding period, i.e. the year ended 31 December 20YY.
To enhance understanding of the financial instruments specific disclosures some disclosures required by IAS 1 are also included, such as
the disclosure of significant accounting policies and critical judgements and estimates. The entity only accounts for International GAAP
Bank Limited have not been included as this publication aims to illustrate how the financial instruments disclosures of a banking group are
affected by IFRS 9.
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International GAAP Bank Limited Illustrative disclosures under IFRS 7 as amended by IFRS 9
Contents
Glossary 6
Consolidated statement of profit or loss 8
Consolidated statement of comprehensive income 14
Consolidated statement of financial position 18
Consolidated statement of changes in equity 22
Notes to the consolidated financial statements 24
[The following list of notes in this publication is included for ease of reference]
– Note 1 Significant accounting policies 25
– Note 2 Critical accounting judgements and key sources of estimation uncertainty 58
– Note 3 Credit risk 62
– Note 4 Liquidity risk 142
– Note 5 Market risk 154
– Note 6 Capital risk 180
– Note 7 Fair value of financial assets and liabilities 184
– Note 8 Net interest income 103
– Note 9 Net fee and commission income 216
– Note 10 Net trading income 217
– Note 11 Net income from financial instruments designated at FVTPL 218
– Note 12 Other revenue 219
– Note 13 Net gain/(loss) from derecognition of financial assets measured at amortised cost 220
– Note 14 Cash and cash equivalents 221
– Note 15 Trading assets 222
– Note 16 Derivative financial instruments 224
– Note 17 Loans and advances to banks 252
– Note 18 Loans and advances to customers 252
– Note 19 Investment securities 254
– Note 20 Trading liabilities 259
– Note 21 Deposits from banks 259
– Note 22 Deposits from customers 261
– Note 23 Debt securities in issue 261
– Note 24 Subordinated liabilities 262
– Note 25 Share capital 265
– Note 26 Share premium 265
– Note 27 Retained earnings 265
– Note 28 Other reserves 266
– Note 29 Transfers of financial assets 274
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International GAAP Bank Limited Illustrative disclosures under IFRS 7 as amended by IFRS 9
Glossary of abbreviations
ALCO Asset and Liability Management Committee
Basel III Basel III: International regulatory framework for banks
Bps Basis points
CCP Central Counterparty Clearing House
CDS Credit default swap
CET1 Common Equity Tier 1
CVA Credit valuation adjustment
DVA Debit valuation adjustment
EAD Exposure at default
ECL Expected credit loss
EIR Effective interest rate
FVA Funding valuation adjustment
FVTOCI Fair value through other comprehensive income
FVTPL Fair value through profit or loss
G7 The Group of Seven – an informal bloc of industrialized democracies – Canada, France, Germany, Italy,
Japan, the United Kingdom, and the United States
GDP Gross domestic product
IAS 1 IAS 1 Presentation of Financial Statements
IFRS International Financial Reporting Standards
IFRS 3 IFRS 3 Business Combinations
IFRS 7 IFRS 7 Financial Instruments: Disclosures
IFRS 9 IFRS 9 Financial Instruments
IFRS 13 IFRS 13 Fair Value Measurement
ISDA International Swaps and Derivatives Association
LGD Loss given default
LTV Loan-to-value
NCI Non-controlling interests
OCI Other comprehensive income
OTC Over the counter
PD Probability of default
POCI Purchased or originated credit-impaired
S&P Standard & Poor’s
SPPI Solely payments of principal and interest on the principal amount outstanding
VaR Value at risk
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International GAAP Bank Limited Illustrative disclosures under IFRS 7 as amended by IFRS 9
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International GAAP Bank Limited Illustrative disclosures under IFRS 7 as amended by IFRS 9
Consolidated statement of profit or loss
IAS 1:10A An entity may present a single statement of profit or loss and other comprehensive income, with profit or loss and other
comprehensive income presented in two sections. The sections should be presented together, with the profit or loss section
presented first followed directly by the other comprehensive income section. An entity may present the profit or loss section
in a separate income statement. If so, the separate income statement should immediately precede the statement presenting
comprehensive income, which begins with profit or loss.
When two statements are presented, the information required in IAS 1:82(a) – (ea) and IAS 1:81B(a) (see below) should be
presented in the separate income statement. Where the single statement is adopted, IAS 1:10A requires that the profit and
loss section is presented first followed directly by the statement of comprehensive income section. Where two statements are
presented, the income statement is presented immediately before the statement of comprehensive income. This publication
illustrates the practice of two statements.
References in this commentary to inclusion of items in the income statement should be read as referring to inclusion in the
statement of comprehensive income when the single statement approach is used.
IAS 1:81A The statement of profit or loss and other comprehensive income (statement of comprehensive income) should present,
in addition to the profit or loss and other comprehensive income sections:
1 (a) profit or loss;
2 (b) total other comprehensive income; and
3 (c) comprehensive income for the period, being the total of profit or loss and other comprehensive income.
If an entity presents a separate income statement, it does not present the profit or loss section in the statement presenting
comprehensive income.
IAS 1:81B The following items should also be disclosed in the income statement and statement of comprehensive income as
allocations for the period:
(a) profit or loss attributable to:
4 • non-controlling interests; and
5 • owners of the parent.
(b) comprehensive income for the period attributable to:
6 • non-controlling interests; and
7 • owners of the parent.
If an entity presents profit or loss in a separate statement it presents (a) in that statement.
IAS 1:82 The profit or loss section or the income statement should include line items that present the following for the period:
8 (a) revenue, presenting separately interest revenue calculated using the effective interest method;
9 (aa) gains and losses arising from the derecognition of financial assets measured at amortised cost;
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