Investor Presentaiton
HKAS 1.51(a)
HKAS 1.49
HK Listco Ltd
Financial statements for the year ended 31 December 2023
33
FINANCIAL RISK MANAGEMENT 264 AND FAIR VALUES OF FINANCIAL
INSTRUMENTS265
Exposure to credit, liquidity, interest rate and currency risks arises in the normal course of the group's
business. The group is also exposed to equity price risk arising from its equity investments in other
entities and movements in its own equity share price.
HKFRS 7.1
264
HKFRS 7.7, 31,
& B3
HKFRS 7.32A
HKFRS 7.B6
HKFRS 13.91
HKFRS 7 sets out disclosure requirements relating to an entity's exposure to risks arising from financial instruments and is applicable
to all entities that hold financial instruments.
The objective of HKFRS 7 is to require entities to provide information that enables users of financial statements to evaluate:
the significance of financial instruments for an entity's financial position and performance; and
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.
In order to meet this objective HKFRS 7 sets out both qualitative and quantitative minimum disclosure requirements. However,
HKFRS 7 does not prescribe either the format of the information required to be disclosed or its location within the financial
statements and/or other reports. Instead, the standard states that it is necessary to strike a balance between overburdening
financial statements with excessive detail that may not assist users and obscuring important information as a result of too much
aggregation (see paragraph B3 of HKFRS 7).
An entity should therefore decide, in light of its circumstances, how much detail it needs to provide to satisfy the requirements of the
standard, including how much emphasis it places on different aspects of the requirements and how it aggregates information to
display the overall picture without combining information with different characteristics. It should also be noted that HKFRS 7
introduces the concept of looking first to information provided internally to key management personnel (as defined in HKAS 24,
Related party disclosures), for example the entity's board of directors or chief executive officer, as a source of quantitative data on
the entity's exposure to financial risks. Basing disclosures on information used by key management personnel provides information
about how management views and manages its risk, as well as about the risks themselves, which the IASB considered was useful
information for users (as discussed in paragraph BC47 of HKFRS 7). The IASB also considered this approach has practical advantages
for preparers because it allows them to use the data they use in managing risk. The requirements of HKFRS 7 in this regard are
discussed further in footnote 267.
In practice, the requirements of HKFRS 7 will be met by a combination of narrative descriptions and quantitative data, as appropriate
to the nature of the instruments and their relative significance to the entity. This information may be either included in the various
notes that refer to the specific financial instruments and/or included in a separate note. A mixed approach is illustrated here, as can
be seen from the references to HKFRS 7 throughout the notes to the illustrative financial statements and the specific note 33 which
provides the additional risk and fair value disclosures required by the standard.
Paragraph 32A of HKFRS 7 emphasises the interaction between qualitative and quantitative disclosures by stating that providing
qualitative disclosures in the context of quantitative disclosures enables users to link related disclosures and hence form an overall
picture of the nature and extent of risks arising from financial instruments.
Additionally, paragraph B6 of HKFRS 7 explicitly provides for the financial risk disclosures, as set out in paragraphs 31 to 42 of HKFRS
7, to be given either in the financial statements or incorporated by cross-reference from the financial statements to some other
statement that is not part of the financial statements, such as a management commentary, provided it is available to users of
financial statements on the same terms as the financial statements and at the same time. Including all disclosures required by HKFRS
within the financial statements themselves helps users in differentiating between disclosures that are required by HKFRS and other
information. However, if such information is presented outside the financial statements, then in our view it should be marked clearly
as being part of the disclosures required by HKFRS and cross-referenced to the financial statements. An entity could identify such
information as, for example, "information that is an integral part of the audited financial statements" or "disclosures that are
required by HKFRS".
265 As mentioned in footnote 161, the disclosure objectives of HKFRS 13 are:
•
to provide information that enables users of financial statements to assess the methods and inputs used to develop those
measurements, and
•
to assess the effect on profit or loss or other comprehensive income of recurring fair value measurements that are based on
significant unobservable inputs.
As indicated in these disclosure objectives, HKFRS 13 disclosures aim at helping users understand how the entity determines the fair
values of assets and liabilities (both financial and non-financial) recognised in the statement of financial position; and how its
financial performance is impacted by the measurement uncertainty and subjectivity involved in determining the fair values as a
result of using significant unobservable inputs in the valuations. On the other hand, HKFRS 7's disclosure objectives, as introduced in
footnote 264 above, focus on helping users understand the entity's risk exposure associated with financial instruments and how the
entity manages the risk.
167
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