FINANCIAL REPORTING FOR COOPERATIVE SOCIETIES 12th – 13th May 2016 HILTON HOTEL – NAIROBI Disclosures Credibility . Professionalism . AccountAbility

Content Introduction SFP Disclosures SCI Disclosures Others Risks Examples

Introduction According to IFRSs disclosures (also called the notes) are a primary part of financial statements. As you know the financial statements consist of the PoL, SCE, SFP,SCF and also the notes.

Introduction IAS 1 on presentation of financial statements gives the formats for the first four but does not give the format for disclosures/notes. However the standard recommends that at a minimum, disclosures should comprise:

Introduction A statement of compliance e.g. these financial statements comply with IFRS and the SACCO societies Act. Key significant accounting policies such as valuation of assets where we have alternatives.

Introduction 3. A make up of some of the items in the financial statements. For example if a company has multiple sources of revenue then it would be good to disclose each source and the amount. The same case applies to asset like PPE.

Introduction 4. Additional items that have not been provided in the financial statements but are nevertheless important for users to have an overall understanding of the financials like contingent liabilities and dividends proposed.

Introduction The lack of substantive formats for disclosures means that companies and even SACCOs have some discretion in the disclosures that they make in the financial statements.

Introduction As a SACCO remember disclosures are being driven by: IFRS The law Regulators (SASRA) Users and promotions like FiRe

Introduction The next section highlights key disclosures as required by IFRS and more specifically for financial institutions like SACCOs. You can also apply best practice like those in the banking sector.

SFP Disclosures Total carrying value of each category of financial assets and liabilities on face of the statement of financial position or in the notes Information on fair value of loans and receivables Financial liabilities designated as at fair value through profit and loss

SFP Disclosures Financial assets reclassified Financial assets that do not qualify for derecognition Details of financial assets pledged as collateral & collateral held

SFP Disclosures Reconciliation of allowance account for credit losses. Compound financial instruments with embedded derivatives Details of defaults and breaches of loans payable

SCI Disclosures Gain or loss for each category of financial assets and liabilities in the statement of comprehensive income or in the notes Total interest income and interest expense (effective interest method)

SCI Disclosures Fee income and expense Interest on impaired financial assets Amount of impairment loss for each financial asset.

Other Disclosures Accounting policies: All relevant accounting policies. Include measurement basis.

Other Disclosures Hedge accounting: Description of hedge, description and fair value of hedged instrument and type of risk hedged Details of cash flow hedges, fair value hedges and hedge of net investment in foreign operations..

Other Disclosures Fair value: Fair value for each class of financial asset and liability Disclose method and relevant assumptions to calculate fair value and if fair value cannot be determined.

Risks Qualitative disclosure Exposure to risk and how it arises Objectives, policies and processes for managing risk and method used to measure risk.

Risks Quantitative disclosure Summary of quantitative data about exposure to risk based on information given to key management Concentrations of risks..

Risks – Liquidity Risk Definition: The risk that an entity will encounter difficulty in meeting obligations associated with financial liabilities.

Risks – Liquidity Risk Maturity analysis for financial liabilities that shows the remaining contractual maturities – Time bands and increment are based on the entities’ judgement How liquidity risk is managed.

Risks – Credit Risk Definition: The risk that one party to a financial instrument will cause a financial loss for the other party by failing to discharge an obligation.

Risks – Credit Risk Maximum exposure to credit risk without taking into account collateral Collateral held as security and other credit enhancements Information of financial assets that are either past due (when a counterparty has failed to make a payment when contractually due) or impaired Information about collateral and other credit enhancements obtained.

Risks – Market Risk Definition: The risk that the fair value or future cash flows of a financial instrument will fluctuate due to changes in market prices. Market risk comprises three types of risk: (i) currency risk, (ii) interest rate risk and (iii) price risk.

Risks – Market Risk A sensitivity analysis (including methods and assumptions used) for each type of market risk exposed, showing impact on profit or loss and equity or

Risks – Market Risk If a sensitivity analysis is prepared by an entity, showing interdependencies between risk variables and it is used to manage financial risks, it can be used in place of the above sensitivity analysis.

IAS 32 - Questions