This month, the ASB has issued an amendment to FRS 26 reflecting the amendments to IAS 39 'Financial Instruments: Recognition and Measurement' made by the IASB from the version of IAS 39 implemented by the ASB as FRS 26. The main changes relate to:

• transition and initial recognition of financial assets and financial liabilities;
• cash flow hedge accounting of forecast intragroup transactions;
• the fair value option, with related disclosures inserted in FRS 25 (IAS 32) 'Financial Instruments: Presentation and Disclosure'; and
• financial guarantee contracts and credit insurance.

A deferral of the effective date of the standard for one year is also made for certain Irish entities with listed debt securities but no listed equity.

The changes are effective from the same dates as the equivalent changes to IAS 39 - in most cases this is for accounting periods commencing on or after 1 January 2006, with early adoption permitted. Transition provisions are included that replicate those for IAS 39 amendments, including those applicable to first time adopters. The ASB has, however, amended the date by which transitional 'fair value option' designations need to be made from 1 September 2005 to 1 December 2005. This applies only to those entities adopting the amended fair value option for accounting periods commencing before 1 January 2006.

Meanwhile, the ASB is considering responses to its proposals to extend the scope of FRS 26 to all entities other than those applying the FRSSE, from 2007. At present, FRS 26 is applicable to entities with listed securities, for accounting periods commencing on or after 1 January 2005, and those entities applying the fair value accounting rules in the Companies Act 1985, for accounting periods commencing on or after 1 January 2006.

Entities within the scope of FRS 26 must also make the disclosures required by FRS 25 (IAS 32) 'Financial Instruments: Disclosure and Presentation'. The ASB intends to issue shortly a standard implementing the IASB standard IFRS 7 'Financial Instruments: Disclosures' and the related amendment to IAS 1 'Presentation of Financial Statements - Capital Disclosures'. The new UK standard will replace the existing disclosure requirements of FRS 25 and will apply to those entities within the scope of FRS 26, for accounting periods commencing on or after 1 January 2007. Earlier adoption is permitted, enabling entities required to apply the disclosure requirements of FRS 25 for 2005 or 2006 to choose instead to move directly to the new IFRS 7 requirements, thus avoiding the need to make two changes in quick succession.

The required disclosures include:

• information on the significance of financial instruments for an entity's financial position and performance;
• information about exposure to risks arising from financial instruments, including where relevant certain minimum disclosures about credit, liquidity and market risks together with descriptions of management's objectives, policies and processes for managing those risks. Quantitative disclosures are also required to provide information about the extent to which the entity is exposed to risk, based on information provided internally to the entity's key management;
• the entity's objectives, policies and processes for managing capital, quantitative data about what the entity regards as capital, and whether the entity has complied with any capital requirements and, if it has not complied, the consequences of such noncompliance.