Accounting Standards Board - Technical - Standards in Issue

Derivatives and other Financial Instruments: Disclosures

FRS 13

Issued: September 1998

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	FRS 13


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FRS 13 is withdrawn on implementation of the disclosure requirements of FRS 25 (IAS 32) 'Financial Instruments: Disclosure and Presentation'.

Some financial instruments, such as cash, debtors and creditors, generally arise as part of an entity's operating and financing activities and tend to be highly visible in the financial statements. Others (such as swaps, forwards, caps and collars, and other derivatives) are entered into in order to manage the risks arising from the operating and financing activities of the entity and are generally less visible. FRS 13 seeks to improve the disclosures provided in respect of all financial instruments and it does this by focusing on the way in which they are used by the reporting entity. The objective of its disclosures is to provide information about:

the impact of the instruments on the entity's risk profile;
how the risks arising from financial instruments might affect the entity's performance and financial condition; and
how these risks are being managed.

FRS 13 applies to all entities, other than insurance companies and groups, that have one or more of their capital instruments listed or publicly traded on a stock exchange or market and all banks and similar institutions.

The FRS requires both narrative and numerical disclosures.

The narrative disclosures should include an explanation of the role that financial instruments play in creating or changing the risks that the entity faces in its activities. The directors' approach to managing each of those risks should also be explained, and this should include a description of the objectives, policies and strategies for holding and issuing financial instruments.

The numerical disclosures are intended primarily to show how these objectives and policies were implemented in the period. They focus on:

interest rate risk;
currency risk;
liquidity risk (except for banks and similar institutions, which are covered by existing requirements);
fair values; and
hedging activities.

Although all entities falling within the scope of FRS 13 are required to provide the same type of narrative disclosures, the standard requires different numerical disclosures for each of:

entities that are not financial institutions;
banks and similar institutions; and
other types of financial institution.

FRS 13 is effective for accounting periods ending on or after 23 March 1999.

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To find out how to obtain a copy of this FRS, go to Publications.