including:
a) contractual repricing or maturity dates, whichever dates are earlier; and
b) effective interest rates, when applicable. 67
• An entity provides information about its exposure to the effects of future changes in the prevailing level of interest rates.
• Changes in market interest rates have a direct effect on the contractually determined CFs associated with some FAs and FLs (cash flow interest rate risk) and on the fair value of others (fair value interest rate risk). 68
• Information about maturity dates (or repricing dates when they are earlier) indicates the length of time for which interest rates are fixed, and information about effective interest rates indicates the levels at which they are fixed.
• Disclosure of this information provides users of FSs with a basis for evaluating the fair value interest rate risk to which an entity is exposed and, thus, the potential for gain or loss.
• For instruments that are repriced to a market rate before maturity, disclosure of the period until the next repricing is more important for this purpose than disclosure of the period to maturity. 69
• An entity may elect to disclose information about expected
repricing or maturity dates when those dates differ significantly from the contractual dates.
• E.g., may be particularly relevant when an entity is able to predict, with reasonable reliability, the amount of fixed rate mortgage loans that will be repaid before maturity and it uses this information as the basis for managing its interest rate risk exposure.*
• The additional information includes disclosure that it is based on management’s expectations of future events and an explanation of the assumptions made about repricing or maturity dates and how those assumptions differ from the contractual dates. 70
• Indicates which of its FAs and FLs are:
a) exposed to fair value interest rate risk, such as financial FAs and FLs with a fixed interest rate;
b) exposed to cash flow interest rate risk, such as FAs and FLs with a floating interest rate that is reset as market rates change; and
c) not directly exposed to interest rate risk, such as some investments in equity instruments. 71
• The requirement 67(b) does not apply to FIs such as
investments in EIs and derivative instruments that do not bear a determinable effective interest rate.
• E.g., even though instruments such as interest rate derivatives (swaps, forward rate agreements & options) are exposed to FV or CF risk from changes in market interest rates, disclosure of an effective interest rate is not required. However, when
providing effective interest rate information, an entity discloses the effect of hedging transactions such as interest rate swaps. 72
• An entity may become exposed to interest rate risk as a result of a transaction in which no FA or FL is recognised on its BS. In such circumstances, the entity discloses information that
permits users of its FSs to understand the nature and extent of its exposure.*
• E.g, when an entity has a commitment to lend funds at a fixed interest rate, the disclosure normally includes the stated principal, interest rate and term to maturity of the amount to be lent and the significant terms of the transaction giving rise to the exposure. 73
• When an entity has a variety of FIs exposed to FV or CF interest rate risk, it may adopt one or more of the following approaches to
presenting:
a)The carrying amounts of FIs may be presented in tabular form, grouped by those that are contracted to mature or be repriced in the following periods after the BS date:
1) in one year or less;
2) in more than one but not more than two years;
3) in more than two but not more than three;
4) in more than three but not more than four;
5) in more than four but not more than five; and 6) in more than five years.
b) When the performance of an entity is significantly affected by the level of its exposure to interest rate risk or changes in that exposure, more detailed information is desirable. An entity such as a bank may disclose, for example, separate groupings of the carrying amounts of financial instruments contracted to mature or be repriced:
1) in one month or less after the BS date;
2) in more than one month but not more than three months after the BS date; and
3) in more than three months but not more than twelve months after the balance sheet date.*
c) Similarly, an entity may indicate its exposure to CF interest rate risk through a table indicating the aggregate carrying amount of groups of floating rate FAs and FLs maturing within various future time periods.**
d) Interest rate information may be disclosed for individual FIs.
Alternatively, weighted average rates or a range of rates may be presented for each class of FI. An entity may group into separate classes instruments denominated in different
currencies or having substantially different credit risks when those factors result in instruments having substantially
different effective interest rates. 74
• An entity may be able to provide useful information by indicating the effect of a hypothetical change in market interest rates on the fair value of its FIs and future profit or loss and CFs. Such information may be based on, for
example, an assumed one percentage point (100 basis points) change in market interest rates occurring at the BS date. The effects include changes in interest income and expense
relating to floating rate FIs and gains or losses resulting from changes in the fair value of fixed rate instruments.
• The reported interest rate sensitivity may be restricted to the direct effects of an interest rate change on interest-bearing FIs recognised at the BS date because the indirect effects of a rate change on
financial markets and individual entities cannot normally be predicted reliably. When disclosing interest rate sensitivity
information, an entity indicates the basis on which it has prepared the information, including any significant assumptions.* 75