When we examine financial risks we also need to look at what organisations are expected to disclose about them in their financial statements under International Financial Reporting Standards (IFRS). The key document here is Standard 7 (IFRS 7) which deals with disclosures about financial instruments. In doing this we are not just identifying accounting requirements that organisations must abide by: we are also examining risk management. The disclosures on financial instruments, specified in IFRS 7, enable investors and other stakeholders to have information about how an organisation manages its risks and what exposure to financial risks it has. The fact that these disclosures have to be made will, therefore, help to prescribe how organisations go about the business of managing their financial risks.
In respect of liquidity risk, paragraph 39 of IFRS 7 states that entities should disclose:
Appendix B of IFRS 7 then goes into some detail about how this contractual maturity analysis should be prepared. The expectations are that:
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