Financial Instrument Disclosures

Question 1

What must be disclosed for all Financial Instruments, for which it is practicable to estimate fair value

Answer 1

1. ) Fair Value
2. ) Related carrying amounts
3. ) Whether the instrument is an asset or liability

Question 2

If it is not practicable to estimate (FV estimate can be made without excessive costs) FV for a financial instrument, what must be disclosed?

Answer 2

1. ) The reasons why it is not practicable to estimate FV

2. ) Information pertinent to estimating FV, such as carrying amount, effective interest rate and maturity.

Question 3

What are some examples of Financial Instruments that are not required to have FV disclosed?

Answer 3

1. ) Employers obligations for pension benefits and post retirement benefts, stock options
2. ) Insurance Contracts
3. ) Lease contracts
4. ) Warranty obligations
5. ) Investments accounted for under the equity method
6. ) Noncontrolling interest in consolid sub

Question 4

What is credit risk?

Answer 4

The possibility of loss from the failure to of another party to perform accoring to the terms of a contract

Question 5

Under GAAP, must an entity disclose credit risk for financial instruments?

Answer 5

Yes, a company must disclose all significant concentrations of credit risk (occurs when an entity has contracts of material value with one or more parties of the same industry

Question 6

Under GAAP, must an entity disclose market risk for financial instruments?

Answer 6

Not required, but are encouraged. Under IFRS this is required

Question 7

What is market risk?

Answer 7

Possibility of loss from changes in market value due to changes in economic circumstances.

Question 8

What must be disclosed about each significant concentration of credit risk?

Answer 8

1. )Information about the common activity, region, or economic characteristic that identifies the concentration
2. )The maximum (gross) amount of loss due to the credit risk
3. )The entity’s policy of requiring collateral or other security to support financial instruments subject to credit risk
4. )The entity’s policy of entering into master netting arrangements to reduce the credit risk associated with financial instrument

Question 9

Where must required disclosures for Financial Instruments be made?

Answer 9

Can be made in the Body of financial statements or in the footnotes