HKFRS 7 - Financial Instruments - Disclosures

Objective of HKFRS 7

The primary objective of HKFRS 7 is to require entities to provide disclosures in their financial statements that enable users to evaluate:

The significance of financial instruments for the entity's financial position and performance

The nature and extent of risks arising from financial instruments to which the entity is exposed during the period and at the end of the reporting period, and how the entity manages those risks

The principles in HKFRS 7 complement the recognition, measurement and presentation principles in HKAS 32 (Financial Instruments: Presentation) and HKFRS 9 (Financial Instruments).

Scope (Paragraphs 3-5)

HKFRS 7 applies to all entities and all types of financial instruments, with specific exceptions:

Exceptions from Scope:

Exception Category	Details
(a) Interests in subsidiaries, associates, joint ventures	Accounted for under HKFRS 10, HKAS 27, or HKAS 28. However, if HKFRS 9 is used, HKFRS 7 applies. Derivatives linked to these interests also covered unless they meet equity instrument definition in HKAS 32
(b) Employee benefit plans	Rights/obligations under HKAS 19
(c) [Deleted]
(d) Insurance contracts	As defined in HKFRS 17, or investment contracts with discretionary participation features within HKFRS 17 scope. However, HKFRS 7 applies to: (i) embedded derivatives in HKFRS 17 contracts if HKFRS 9 requires separate accounting; (ii) separated investment components; (iii) financial guarantee contracts where issuer applies HKFRS 9; (iv) credit card contracts meeting insurance definition if HKFRS 9 applied; (v) certain insurance contracts where entity elects HKFRS 9
(e) Share-based payment transactions	Under HKFRS 2, except contracts within HKFRS 9 scope
(f) Puttable equity instruments	Classified as equity under HKAS 32 paragraphs 16A-16D

Key Scope Notes:

HKFRS 7 applies to both recognised and unrecognised financial instruments

Applies to contracts to buy/sell non-financial items within HKFRS 9 scope

Credit risk disclosure requirements (paragraphs 35A-35N) apply to rights under HKFRS 15 that are accounted for under HKFRS 9 for impairment purposes

Classes of Financial Instruments and Level of Disclosure (Paragraph 6)

When HKFRS 7 requires disclosures by class of financial instrument, entities must:

Group financial instruments into classes appropriate to the nature of the information disclosed

Take into account the characteristics of those financial instruments

Provide sufficient information to permit reconciliation to line items in the statement of financial position

Application Guidance (Appendix B, Paragraphs B1-B3):

At minimum, distinguish instruments measured at amortised cost from those at fair value

Treat as separate class those financial instruments outside the scope of HKFRS 7

Balance between excessive detail and obscuring important information

Do not obscure important information by including it among insignificant detail

Significance of Financial Instruments for Financial Position and Performance (Paragraphs 7-30)

Statement of Financial Position Disclosures (Paragraphs 8-19)

Categories of Financial Assets and Financial Liabilities (Paragraph 8)

Carrying amounts of each category must be disclosed, either in the statement of financial position or in the notes:

Category	Sub-classifications Required
(a) Financial assets at FVTPL	(i) Designated as such upon initial recognition or subsequently per HKFRS 9 para 6.7.1; (ii) Measured as such per HKFRS 9 para 3.3.5 election; (iii) Measured as such per HKAS 32 para 33A election; (iv) Mandatorily measured at FVTPL
(e) Financial liabilities at FVTPL	(i) Designated as such upon initial recognition or subsequently per HKFRS 9 para 6.7.1; (ii) Held for trading per HKFRS 9
(f) Financial assets at amortised cost
(g) Financial liabilities at amortised cost
(h) Financial assets at FVTOCI	(i) Per HKFRS 9 para 4.1.2A; (ii) Equity instruments designated per HKFRS 9 para 5.7.5

Financial Assets/Liabilities at Fair Value Through Profit or Loss (Paragraphs 9-11)

For financial assets designated at FVTPL that would otherwise be measured at FVTOCI or amortised cost:

Disclosure Requirements (Paragraph 9):

(a) Maximum exposure to credit risk at reporting date

(b) Amount by which credit derivatives/similar instruments mitigate that exposure

(c) Change in fair value attributable to changes in credit risk (during period and cumulatively)

(d) Change in fair value of related credit derivatives/similar instruments (during period and cumulatively)

For financial liabilities designated at FVTPL where credit risk changes are presented in OCI (per HKFRS 9 para 5.7.7):

Disclosure Requirements (Paragraph 10):

(a) Cumulative change in fair value attributable to changes in credit risk

(b) Difference between carrying amount and contractual amount payable at maturity

(c) Transfers of cumulative gain/loss within equity during period

(d) Amount realised at derecognition presented in OCI

For financial liabilities designated at FVTPL where all fair value changes (including credit risk) are in profit or loss (per HKFRS 9 para 5.7.7-5.7.8):

Disclosure Requirements (Paragraph 10A):

(a) Change in fair value attributable to credit risk changes (during period and cumulatively)

(b) Difference between carrying amount and contractual amount payable at maturity

Additional Disclosures (Paragraph 11):

Detailed description of methods used to comply with paragraphs 9(c), 10(a), 10A(a)

If entity believes disclosure does not faithfully represent credit risk changes, reasons and relevant factors

Detailed description of methodology to determine whether presenting credit risk changes in OCI would create/enlarge accounting mismatch

Investments in Equity Instruments Designated at FVTOCI (Paragraphs 11A-11B)

Disclosure Requirements (Paragraph 11A):

(a) Which equity instruments are designated

(b) Reasons for using this presentation alternative

(c) Fair value of each such investment at reporting date

(d) Dividends recognised (separately for derecognised and held investments)

(e) Transfers of cumulative gain/loss within equity

Disclosure Requirements on Derecognition (Paragraph 11B):

(a) Reasons for disposal

(b) Fair value at derecognition date

(c) Cumulative gain/loss on disposal

Reclassification (Paragraphs 12B-12D)

When financial assets are reclassified per HKFRS 9 paragraph 4.4.1:

Disclosure Requirements (Paragraph 12B):

(a) Date of reclassification

(b) Detailed explanation of change in business model and qualitative description of effect

(c) Amount reclassified into and out of each category

For Assets Reclassified Out of FVTPL (Paragraph 12C):

(a) Effective interest rate determined at reclassification date

(b) Interest revenue recognised

For Reclassifications Since Last Annual Reporting Date (Paragraph 12D):

(a) Fair value at reporting date

(b) Fair value gain/loss that would have been recognised if not reclassified

Offsetting Financial Assets and Financial Liabilities (Paragraphs 13A-13F)

These disclosures apply to all recognised financial instruments that are:

Set off in accordance with HKAS 32 paragraph 42

Subject to an enforceable master netting arrangement or similar agreement (regardless of set-off)

Quantitative Information Required (Paragraph 13C) - Tabular Format:

(a) Gross amounts of recognised financial assets and liabilities

(b) Amounts set off per HKAS 32 criteria

(c) Net amounts presented in statement of financial position

(d) Amounts subject to enforceable master netting arrangement not included in (b):

- (i) Amounts not meeting some/all offsetting criteria

- (ii) Amounts related to financial collateral (including cash collateral)

(e) Net amount after deducting (d) from (c)

Key Rules:

Total amount in (d) for an instrument is limited to the amount in (c) for that instrument

Description of rights of set-off must be included (Paragraph 13E)

Cross-reference between notes if information is in more than one note (Paragraph 13F)

Collateral (Paragraphs 14-15)

When Entity Pledges Collateral (Paragraph 14):

(a) Carrying amount of financial assets pledged as collateral for liabilities/contingent liabilities

(b) Terms and conditions relating to pledge

When Entity Holds Collateral (Paragraph 15):

(a) Fair value of collateral held

(b) Fair value of collateral sold/repledged and whether obligation to return exists

(c) Terms and conditions associated with use of collateral

Allowance Account for Credit Losses (Paragraph 16A)

For financial assets measured at FVTOCI per HKFRS 9 paragraph 4.1.2A:

Carrying amount is not reduced by loss allowance

Loss allowance is not presented separately in statement of financial position

Must disclose loss allowance in the notes

Compound Financial Instruments with Multiple Embedded Derivatives (Paragraph 17)

If an entity has issued an instrument containing both liability and equity components (per HKAS 32 para 28) with multiple embedded derivatives whose values are interdependent (e.g., callable convertible debt), the existence of those features must be disclosed.

Defaults and Breaches (Paragraphs 18-19)

For Loans Payable at Reporting Date (Paragraph 18):

(a) Details of any defaults during period (principal, interest, sinking fund, redemption terms)

(b) Carrying amount of loans payable in default at reporting date

(c) Whether default was remedied or terms renegotiated before authorisation

For Other Breaches (Paragraph 19):

Same information as paragraph 18 if breaches permitted lender to demand accelerated repayment (unless remedied or renegotiated on or before reporting date)

Statement of Comprehensive Income Disclosures (Paragraphs 20-20A)

Items of Income, Expense, Gains or Losses (Paragraph 20)

Must disclose the following, either in statement of comprehensive income or notes:

Category	Specific Disclosures Required
(a)(i) Net gains/losses on financial assets/liabilities at FVTPL	Separate: (a) designated as such; (b) mandatorily measured at FVTPL. For liabilities at FVTPL, separate OCI and P&L amounts
(a)(v) Net gains/losses on financial liabilities at amortised cost
(a)(vi) Net gains/losses on financial assets at amortised cost
(a)(vii) Net gains/losses on equity instruments designated at FVTOCI
(a)(viii) Net gains/losses on financial assets at FVTOCI	Separate OCI amount and amount reclassified from AOCI to P&L
(b) Total interest revenue/expense (effective interest method)	For financial assets at amortised cost or FVTOCI; financial liabilities not at FVTPL
(c) Fee income/expense	(i) From financial assets/liabilities not at FVTPL; (ii) From trust/fiduciary activities

Derecognition of Financial Assets at Amortised Cost (Paragraph 20A)

Must disclose an analysis of gain/loss arising from derecognition of financial assets measured at amortised cost, showing separately gains and losses, including reasons for derecognition.

Other Disclosures

Accounting Policies (Paragraph 21)

In accordance with HKAS 1 paragraph 117, disclose material accounting policy information. Information about measurement basis(es) for financial instruments is expected to be material.

Hedge Accounting (Paragraphs 21A-24G)

Objective (Paragraph 21A): Disclosures shall provide information about:

Entity's risk management strategy and how it is applied

How hedging activities may affect amount, timing and uncertainty of future cash flows

Effect of hedge accounting on financial position, performance and equity changes

Presentation (Paragraph 21B):

Present in a single note or separate section

May incorporate by cross-reference to other statements (management commentary, risk report) available on same terms and at same time

Without cross-referenced information, financial statements are incomplete

Risk Categories (Paragraph 21C):

Determine each risk category based on risk exposures entity decides to hedge

Apply hedge accounting consistently for all disclosures

Level of Detail (Paragraph 21D):

Entity determines how much detail, emphasis, aggregation/disaggregation

Use same level of aggregation/disaggregation as for HKFRS 13

Risk Management Strategy (Paragraphs 22A-22C)

Explanation Required (Paragraph 22A): Enable users to evaluate:

(a) How each risk arises

(b) How entity manages each risk (including whether hedging entire item or risk component)

(c) Extent of risk exposures managed

Information to Include (Paragraph 22B):

(a) Description of hedging instruments used and how they are used

(b) How entity determines economic relationship between hedged item and hedging instrument

(c) How entity establishes hedge ratio and sources of hedge ineffectiveness

For Designated Risk Components (Paragraph 22C):

(a) How entity determined the risk component designated as hedged item

(b) How risk component relates to item in its entirety (e.g., historical coverage percentage)

Amount, Timing and Uncertainty of Future Cash Flows (Paragraphs 23A-23F)

Quantitative Information Required (Paragraph 23A):

By risk category, disclose terms and conditions of hedging instruments

Breakdown Required (Paragraph 23B):

(a) Profile of timing of nominal amount of hedging instrument

(b) Average price or rate (strike, forward prices, etc.)

Exemption for Dynamic Hedging (Paragraph 23C):

When entity frequently resets hedging relationships:

- Exempt from paragraphs 23A-23B

- Must disclose: (i) ultimate risk management strategy; (ii) how risk management strategy is reflected using hedge accounting; (iii) frequency of discontinuing/restarting relationships

Additional Disclosures:

- Sources of hedge ineffectiveness expected (Paragraph 23D)

- Sources of hedge ineffectiveness that emerge (Paragraph 23E)

- For cash flow hedges: description of forecast transactions no longer expected to occur (Paragraph 23F)

Effects of Hedge Accounting on Financial Position and Performance (Paragraphs 24A-24F)

Hedging Instruments - Tabular Format (Paragraph 24A):

Item	Details
(a) Carrying amount	Financial assets separately from financial liabilities
(b) Line item in statement of financial position
(c) Change in fair value used for hedge ineffectiveness
(d) Nominal amounts	Including quantities (tonnes, cubic metres)

Hedged Items - Tabular Format (Paragraph 24B):

*For Fair Value Hedges:*

Item	Details
(a)(i) Carrying amount	Assets separately from liabilities
(a)(ii) Accumulated fair value hedge adjustments	Included in carrying amount
(a)(iii) Line item in statement of financial position
(a)(iv) Change in value used for hedge ineffectiveness
(a)(v) Accumulated fair value hedge adjustments remaining for ceased adjustments

*For Cash Flow Hedges and Net Investment Hedges:*

Item	Details
(b)(i) Change in value used for hedge ineffectiveness
(b)(ii) Balances in cash flow hedge reserve and foreign currency translation reserve	For continuing hedges
(b)(iii) Balances remaining from discontinued hedging relationships

Hedge Ineffectiveness - Tabular Format (Paragraph 24C):

*For Fair Value Hedges:*

Item	Details
(a)(i) Hedge ineffectiveness recognised in P&L (or OCI for equity instruments)
(a)(ii) Line item in statement of comprehensive income

*For Cash Flow Hedges and Net Investment Hedges:*

Item	Details
(b)(i) Hedging gains/losses recognised in OCI
(b)(ii) Hedge ineffectiveness recognised in P&L
(b)(iii) Line item in statement of comprehensive income
(b)(iv) Amount reclassified from reserve to P&L	Differentiate: (1) no longer expected to occur; (2) hedged item affected P&L
(b)(v) Line item for reclassification adjustment
(b)(vi) For hedges of net positions: gains/losses in separate line item

Reconciliation of Equity Components (Paragraphs 24E-24F):

Differentiate between amounts in paragraph 24C(b)(i) and (b)(iv)

Differentiate between time value of options for transaction-related vs time-period related hedged items

Differentiate between forward elements and foreign currency basis spreads for transaction-related vs time-period related hedged items

Disclose by risk category

Option to Designate Credit Exposure at FVTPL (Paragraph 24G)

Disclosure Requirements:

(a) Reconciliation of nominal amount and fair value of credit derivatives used to manage credit risk

(b) Gain/loss recognised in P&L on designation

(c) On discontinuation: fair value becoming new carrying amount and related nominal/principal amount

Interest Rate Benchmark Reform Disclosures (Paragraphs 24H-24J)

For Hedging Relationships Applying Exceptions (Paragraph 24H):

Item	Details
(a) Significant interest rate benchmarks exposed to
(b) Extent of risk exposure directly affected by reform
(c) How entity is managing transition
(d) Significant assumptions/judgements in applying exceptions
(e) Nominal amount of hedging instruments

Additional Disclosures (Paragraphs 24I-24J):

Nature and extent of risks from financial instruments subject to reform

How entity manages these risks

Progress in completing transition

Disaggregated by significant benchmark: quantitative info about instruments yet to transition (non-derivative assets, non-derivative liabilities, derivatives)

Description of changes to risk management strategy if applicable

Fair Value Disclosures (Paragraphs 25-30)

General Requirement (Paragraph 25):

For each class of financial assets and liabilities, disclose fair value in a way that permits comparison with carrying amount.

Grouping (Paragraph 26):

Group into classes; offset only to extent carrying amounts are offset in statement of financial position.

Day 1 Profit/Loss (Paragraph 28):

When fair value is neither evidenced by quoted price in active market (Level 1) nor based on observable market data:

(a) Accounting policy for recognising difference between fair value at initial recognition and transaction price

(b) Aggregate difference yet to be recognised (beginning and end of period) with reconciliation

(c) Why transaction price was not best evidence of fair value

Exemptions from Fair Value Disclosure (Paragraph 29):

(a) When carrying amount is reasonable approximation of fair value (e.g., short-term trade receivables/payables)

(d) For lease liabilities

Nature and Extent of Risks Arising from Financial Instruments (Paragraphs 31-42)

Overall Objective (Paragraph 31)

Enable users 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.

Risks Typically Included (Paragraph 32)

Credit risk

Liquidity risk

Market risk

Qualitative Disclosures (Paragraph 33)

For each type of risk:

Item	Details
(a) Exposures to risk and how they arise
(b) Objectives, policies, processes for managing risk and methods used to measure risk
(c) Any changes from previous period

Quantitative Disclosures (Paragraphs 34-42)

General Requirements (Paragraph 34)

Item	Details
(a) Summary quantitative data	Based on information provided internally to key management personnel
(b) Specific disclosures	As required by paragraphs 35A-42
(c) Concentrations of risk	If not apparent from (a) and (b)

Unrepresentative Data (Paragraph 35):

If quantitative data at reporting date is unrepresentative of exposure during period, provide further representative information.

Credit Risk Disclosures (Paragraphs 35A-38)

Scope and Objectives (Paragraphs 35A-35E)

Scope (Paragraph 35A):

Apply to financial instruments subject to HKFRS 9 impairment requirements

Special rules for trade receivables, contract assets, lease receivables

Objective (Paragraph 35B):

Enable users to understand effect of credit risk on amount, timing and uncertainty of future cash flows by providing:

Item	Details
(a) Credit risk management practices	How they relate to recognition and measurement of expected credit losses (ECL)
(b) Quantitative and qualitative information	About amounts arising from ECL, including changes and reasons
(c) Credit risk exposure	Including significant concentrations

Cross-Reference (Paragraph 35C):

May incorporate by cross-reference to other statements (management commentary, risk report) available on same terms and at same time.

Level of Detail (Paragraph 35D):

Entity determines how much detail, emphasis, aggregation/disaggregation.

Sufficiency (Paragraph 35E):

If disclosures are insufficient, provide additional information necessary.

Credit Risk Management Practices (Paragraphs 35F-35G)

Explanation Required (Paragraph 35F):

(a) How entity determined whether credit risk has increased significantly since initial recognition:

- (i) Whether financial instruments considered low credit risk (per HKFRS 9 para 5.5.10)

- (ii) Whether 30 days past due presumption rebutted

(b) Definitions of default and reasons for selecting them

(c) How instruments were grouped for collective measurement

(d) How credit-impaired financial assets are determined

(e) Write-off policy (indicators of no reasonable expectation of recovery, enforcement activity)

(f) How modification requirements applied:

- (i) Determining whether credit risk improved after modification

- (ii) Monitoring subsequent remeasurement at lifetime ECL

Inputs, Assumptions and Estimation Techniques (Paragraph 35G):

(a) Basis of inputs and assumptions for:

- (i) Measuring 12-month and lifetime ECL

- (ii) Determining significant increase in credit risk

- (iii) Determining credit-impaired financial assets

(b) How forward-looking information incorporated (including macroeconomic information)

(c) Changes in estimation techniques or significant assumptions and reasons

Quantitative and Qualitative Information about ECL Amounts (Paragraphs 35H-35L)

Reconciliation of Loss Allowance (Paragraph 35H):

By class of financial instrument, in a table, showing changes for:

Category	Details
(a) 12-month ECL
(b) Lifetime ECL for:	(i) Significant increase in credit risk but not credit-impaired
	(ii) Credit-impaired financial assets (not POCI)
	(iii) Trade receivables, contract assets, lease receivables per para 5.5.15
(c) Purchased or originated credit-impaired (POCI)	Also disclose total undiscounted ECL at initial recognition for assets initially recognised during period

Explanation of Changes (Paragraph 35I):

Explain how significant changes in gross carrying amount contributed to changes in loss allowance. Examples:

Financial instruments originated or acquired

Modification of contractual cash flows (no derecognition)

Derecognised (including written-off)

Changes between 12-month and lifetime ECL measurement

Modifications (Paragraph 35J):

Item	Details
(a) Amortised cost before modification and net modification gain/loss	For assets modified during period while having lifetime ECL loss allowance
(b) Gross carrying amount at reporting date	For assets modified since initial recognition when loss allowance was lifetime ECL, and loss allowance changed to 12-month ECL during period

Collateral and Credit Enhancements (Paragraph 35K):

Item	Details
(a) Maximum exposure to credit risk	Without taking account of collateral or other credit enhancements
(b) Narrative description	Nature and quality of collateral; significant changes in quality; info about instruments without loss allowance due to collateral
(c) Quantitative information	About collateral for credit-impaired financial assets

Written-off Assets (Paragraph 35L):

Disclose contractual amount outstanding on financial assets written off during period still subject to enforcement activity.

Credit Risk Exposure (Paragraphs 35M-35N)

By Credit Risk Rating Grades (Paragraph 35M):

Disclose gross carrying amount of financial assets and exposure to credit risk on loan commitments and financial guarantee contracts, separately for:

(a) 12-month ECL

(b) Lifetime ECL:

- (i) Significant increase in credit risk but not credit-impaired

- (ii) Credit-impaired (not POCI)

- (iii) Trade receivables, contract assets, lease receivables per para 5.5.15

(c) POCI financial assets

Provision Matrix (Paragraph 35N):

For trade receivables, contract assets and lease receivables applying paragraph 5.5.15, information may be based on a provision matrix.

Maximum Credit Risk Exposure (Paragraph 36)

For financial instruments not subject to HKFRS 9 impairment requirements:

Disclosure Requirements:

(a) Amount best representing maximum exposure to credit risk at reporting date (without collateral/credit enhancements) - not required if carrying amount best represents maximum exposure

(b) Description of collateral and other credit enhancements and their financial effect

Collateral and Other Credit Enhancements Obtained (Paragraph 38)

When entity obtains financial or non-financial assets by taking possession of collateral or calling on credit enhancements:

Disclosure Requirements:

(a) Nature and carrying amount of assets held at reporting date

(b) Policies for disposing or using assets not readily convertible into cash

Liquidity Risk Disclosures (Paragraph 39)

Required Disclosures:

(a) Maturity analysis for non-derivative financial liabilities (including issued financial guarantee contracts) - remaining contractual maturities

(b) Maturity analysis for derivative financial liabilities - remaining contractual maturities (when essential for understanding timing of cash flows)

(c) Description of how entity manages liquidity risk

Market Risk Disclosures (Paragraphs 40-42)

Sensitivity Analysis (Paragraphs 40-41)

Standard Approach (Paragraph 40):

Item	Details
(a) Sensitivity analysis for each type of market risk	Show how profit or loss and equity would be affected by reasonably possible changes in risk variable
(b) Methods and assumptions used
(c) Changes from previous period	Methods, assumptions, and reasons

Alternative Approach (Paragraph 41):

If entity uses value-at-risk or similar that reflects interdependencies between risk variables:

Item	Details
(a) Explanation of method, main parameters and assumptions
(b) Explanation of objective and limitations	May not fully reflect fair value of assets and liabilities

Other Market Risk Disclosures (Paragraph 42)

If sensitivity analyses are unrepresentative of risk inherent in financial instrument (e.g., year-end exposure does not reflect exposure during year), disclose that fact and reason.

Transfers of Financial Assets (Paragraphs 42A-42H)

Scope and Objectives (Paragraphs 42A-42C)

Application:

Present disclosures in a single note

Required for all transferred financial assets not derecognised and any continuing involvement at reporting date

Applies when entity transfers all or part of a financial asset

Definition of Transfer (Paragraph 42A):

Entity transfers a financial asset if it either:

(a) Transfers contractual rights to receive cash flows; or

(b) Retains contractual rights but assumes contractual obligation to pay cash flows to recipients

Objectives (Paragraph 42B):

Enable users to:

(a) Understand relationship between transferred assets not derecognised and associated liabilities

(b) Evaluate nature of and risks associated with continuing involvement in derecognised assets

Continuing Involvement (Paragraph 42C):

Entity has continuing involvement if it retains any contractual rights/obligations inherent in transferred asset or obtains new ones.

Not Continuing Involvement:

Normal representations and warranties

Forward, option and other contracts to reacquire at fair value

Arrangements meeting conditions in HKFRS 9 para 3.2.5(a)-(c)

Transferred Financial Assets Not Derecognised in Their Entirety (Paragraph 42D)

Disclosure Requirements for Each Class:

(a) Nature of transferred assets

(b) Nature of risks and rewards of ownership to which entity is exposed

(c) Description of relationship between transferred assets and associated liabilities, including restrictions

(d) When counterparty has recourse only to transferred assets: schedule of fair value of transferred assets, fair value of associated liabilities, net position

(e) When entity continues to recognise all transferred assets: carrying amounts of transferred assets and associated liabilities

(f) When entity continues to recognise to extent of continuing involvement: total carrying amount of original assets before transfer, carrying amount of assets continued to be recognised, carrying amount of associated liabilities

Transferred Financial Assets Derecognised in Their Entirety (Paragraphs 42E-42G)

Minimum Disclosures for Each Type of Continuing Involvement (Paragraph 42E):

(a) Carrying amount of recognised assets and liabilities representing continuing involvement, and line items

(b) Fair value of assets and liabilities representing continuing involvement

(c) Amount best representing maximum exposure to loss from continuing involvement, and how determined

(d) Undiscounted cash outflows that would/may be required to repurchase (e.g., strike price) or other amounts payable

(e) Maturity analysis of undiscounted cash outflows

(f) Qualitative information explaining and supporting quantitative disclosures

Aggregation (Paragraph 42F):

May aggregate information for a particular asset if entity has more than one type of continuing involvement.

Additional Disclosures (Paragraph 42G):

Item	Details
(a) Gain/loss recognised at transfer date
(b) Income and expenses recognised (period and cumulative) from continuing involvement
(c) If proceeds not evenly distributed:	(i) When greatest transfer activity took place; (ii) Amount recognised; (iii) Total proceeds

Supplementary Information (Paragraph 42H)

Disclose any additional information necessary to meet disclosure objectives in paragraph 42B.

Initial Application of HKFRS 9 (Paragraphs 42I-42S)

Transition Disclosures (Paragraphs 42I-42J)

Quantitative Information (Paragraph 42I):

For each class of financial assets and liabilities at date of initial application:

Item	Details
(a) Original measurement category and carrying amount (per HKAS 39 or previous HKFRS 9)
(b) New measurement category and carrying amount (per HKFRS 9)
(c) Amounts previously designated at FVTPL but no longer so designated	Distinguish between required and elected reclassification

Qualitative Information (Paragraph 42J):

Item	Details
(a) How classification requirements applied to assets whose classification changed
(b) Reasons for designation/de-designation at FVTPL at date of initial application

Classification Changes (Paragraphs 42K-42O)

Changes in Classification (Paragraph 42L):

Show separately:

(a) Changes in carrying amounts based on HKAS 39 measurement categories (not from change in measurement attribute)

(b) Changes in carrying amounts arising from change in measurement attribute

Reclassified to Amortised Cost or FVTOCI (Paragraph 42M):

Item	Details
(a) Fair value at end of reporting period
(b) Fair value gain/loss that would have been recognised if not reclassified

Reclassified Out of FVTPL (Paragraph 42N):

Item	Details
(a) Effective interest rate determined at date of initial application
(b) Interest revenue or expense recognised

Reconciliation (Paragraph 42O):

Disclosures must permit reconciliation between:

(a) Measurement categories under HKAS 39 and HKFRS 9

(b) Class of financial instrument

Impairment Transition (Paragraph 42P)

On date of initial application of HKFRS 9 Section 5.5, disclose information permitting reconciliation of:

Ending impairment allowances under HKAS 39 and provisions under HKAS 37

To opening loss allowances under HKFRS 9

Practical Expedients (Paragraphs 42R-42S)

Modified Time Value of Money (Paragraph 42R):

If impracticable to assess modified time value of money element based on facts at initial recognition:

Assess based on facts at initial recognition without considering modification requirements

Disclose carrying amount of affected financial assets until derecognition

Prepayment Features (Paragraph 42S):

If impracticable to assess whether fair value of prepayment feature was insignificant:

Assess without considering exception for prepayment features

Disclose carrying amount of affected financial assets until derecognition

Effective Date and Transition (Paragraphs 43-44II)

Amendment	Effective Date	Key Requirements
Original HKFRS 7	Annual periods beginning on/after 1 January 2007	Earlier application encouraged
Improving Disclosures (March 2009)	Annual periods beginning on/after 1 January 2009	Enhanced fair value and liquidity risk disclosures
Transfers of Financial Assets (October 2010)	Annual periods beginning on/after 1 July 2011	Disclosures about transferred financial assets
Offsetting (December 2011)	Annual periods beginning on/after 1 January 2013	Retrospective application
HKFRS 9 (September 2014)	When HKFRS 9 applied	Comprehensive amendments
Interest Rate Benchmark Reform (November 2019)	When amendments to HKFRS 9/HKAS 39 applied	Phase 1 disclosures
Interest Rate Benchmark Reform - Phase 2 (October 2020)	When amendments to HKFRS 9/HKAS 39/HKFRS 4/HKFRS 16 applied	Phase 2 disclosures
Disclosure of Accounting Policies (April 2021)	Annual periods beginning on/after 1 January 2023	Amendments to paragraphs 21 and B5

Appendix A - Defined Terms

Term	Definition
Credit risk	Risk that one party will cause financial loss for the other by failing to discharge an obligation
Credit risk rating grades	Rating of credit risk based on risk of default occurring on the financial instrument
Currency risk	Risk that fair value or future cash flows will fluctuate because of changes in foreign exchange rates
Interest rate risk	Risk that fair value or future cash flows will fluctuate because of changes in market interest rates
Liquidity risk	Risk that entity will encounter difficulty in meeting obligations associated with financial liabilities settled by delivering cash or another financial asset
Loans payable	Financial liabilities, other than short-term trade payables on normal credit terms
Market risk	Risk that fair value or future cash flows will fluctuate because of changes in market prices. Comprises: currency risk, interest rate risk, other price risk
Other price risk	Risk that fair value or future cash flows will fluctuate because of changes in market prices (other than interest rate risk or currency risk)

Appendix B - Application Guidance Key Points

Classes of Financial Instruments (B1-B3)

Distinguish amortised cost from fair value instruments

Treat out-of-scope instruments as separate class

Balance between excessive detail and obscuring information

Accounting Policies (B5)

Include measurement basis for financial instruments

For FVTPL designation: nature, criteria, how conditions satisfied

Whether regular way purchases/sales at trade date or settlement date

How net gains/losses determined

Risk Disclosures (B6-B11F)

May be incorporated by cross-reference

Summary quantitative data based on internal information to key management

Concentrations of risk: description, shared characteristic, amount

Credit Risk Management (B8A-B8J)

Default definitions: qualitative/quantitative factors, different definitions for different instruments, cure rate assumptions

Monitoring modified financial assets: deterioration rate

Inputs and assumptions: internal historical information, rating reports, expected life, timing of collateral sale

Loss allowance reconciliation: narrative explanation of portfolio composition, volume, severity

Loan commitments and financial guarantees: disclose separately from financial assets

Collateral: main types, volume, policies, counterparties, risk concentrations

Credit risk rating grades: consistent with internal reporting to key management

Past due analysis: if past due is only borrower-specific information

Collective measurement: disclose separately gross carrying amount for instruments measured on collective basis

Maximum Credit Risk Exposure (B9-B10)

For financial asset: gross carrying amount net of amounts offset and loss allowance

Examples: loans, derivatives, financial guarantees, loan commitments

Liquidity Risk (B10A-B11F)

Explain how summary data determined

State if cash outflows could occur significantly earlier or be for significantly different amounts

Time bands: not later than 1 month, 1-3 months, 3 months-1 year, 1-5 years

Do not separate embedded derivative from hybrid instrument

Contractual maturities essential for: interest rate swaps in cash flow hedges, loan commitments

Allocation: earliest period entity can be required to pay

Contractual amounts: undiscounted cash flows (gross lease liabilities, forward prices, net amounts for swaps, gross amounts for currency swaps, gross loan commitments)

Management of liquidity risk: committed borrowing facilities, deposits at central banks, diverse funding sources, concentrations, internal controls, contingency plans, accelerated repayment terms, collateral posting requirements, settlement options, master netting agreements

Market Risk Sensitivity Analysis (B17-B18)

Aggregate information without combining different characteristics

Separate trading from non-trading instruments

Do not aggregate hyperinflation areas with low inflation areas

Key Takeaways Summary Table

Topic Area	Key Requirements
Objective	Enable users to evaluate significance of financial instruments and nature/extent of risks
Scope	All entities, all financial instruments, with specific exceptions (subsidiaries, employee benefits, insurance contracts, share-based payments, puttable equity instruments)
Classes	Group by nature and characteristics; permit reconciliation to statement of financial position
Statement of Financial Position	Disclose carrying amounts by category (FVTPL, amortised cost, FVTOCI); FVTPL designation disclosures; credit risk changes; reclassification; offsetting; collateral; defaults/breaches
Statement of Comprehensive Income	Net gains/losses by category; interest revenue/expense; fee income/expense; derecognition analysis
Hedge Accounting	Risk management strategy; amount/timing/uncertainty of future cash flows; effects on financial position and performance; tabular format required
Fair Value	Disclose by class; exemptions for reasonable approximation; Day 1 P&L disclosures
Qualitative Risk Disclosures	Exposures and how they arise; objectives, policies, processes; changes from previous period
Quantitative Risk Disclosures	Summary data based on internal reporting; concentrations; unrepresentative data explanation
Credit Risk	Management practices; inputs/assumptions; loss allowance reconciliation; modifications; collateral; credit risk exposure by rating grades; maximum exposure
Liquidity Risk	Maturity analysis for non-derivative and derivative financial liabilities; management description
Market Risk	Sensitivity analysis (standard or value-at-risk); unrepresentative data explanation
Transfers of Financial Assets	Not derecognised: nature, risks/rewards, relationship with liabilities. Derecognised with continuing involvement: carrying amounts, fair values, maximum exposure, cash outflows, maturity analysis
Initial Application of HKFRS 9	Original vs new measurement categories; classification changes; impairment reconciliation; practical expedients