FRS 29 implements the International Financial Reporting Standard IFRS7 ‘Financial Instruments: Disclosures’, together with the related amendment to IAS 1 ‘Presentation of Financial Statements – Capital Disclosures’.

FRS 29 applies only to entities applying FRS 26 – the scope of that standard covers listed entities and entities that use the fair value accounting rules of the Companies Act 1985 to produce their financial statements. The ASB has issued proposals for extending the scope of FRS 26 to all entities (other than those who apply the requirements of Financial Reporting Standard for Smaller Entities) but has not yet reached a conclusion on implementing this proposal.

For entities applying it, FRS 29 replaces the disclosure requirements of FRS 25 (IAS 32) ‘Financial Instruments: Disclosure and Presentation’ and is mandatory for these entities for accounting periods commencing on or after 1 January 2007; earlier adoption is allowed to enable entities to move directly to the new requirements on first applying FRS 26, avoiding the need to make two changes in quick succession. The new standard bases its risk disclosure requirements on the entity’s management’s internal risk monitoring information, so reducing the burden for additional data collection.

The disclosures required by the Standard 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. These include, where relevant, certain minimum qualitative 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. This would include 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 non-compliance.

Certain companies are exempted from the requirements of the Standard:

• subsidiary undertakings where at least 90 percent of the voting rights are held within the group
• parent companies in their single-entity financial statements

provided the entity is included in publicly available consolidated financial statements which include disclosures that comply with this Standard.