IAS 30 Disclosures in the Financial Statements of Banks and Similar Financial Institutions

This Standard is effective for financial statementscovering periods beginning on or after 1 January 1991.
In 1998, paragraphs 24 and 25 of IAS 30 were amended. Theamendments replace references to IAS 25, Accounting for Investments, byreferences to IAS 39, Financial Instruments: Recognition and Measurement.
In 1999, paragraphs 26, 27, 50 and 51 of IAS 30 wereamended. These amendments replace references to IAS 10, Contingencies andEvents Occurring After the Balance Sheet Date, by references to IAS 37,Provisions, Contingent Liabilities and Contingent Assets, and conform theterminology used to that in IAS 37.
International Accounting Standard 30 Disclosures in theFinancial Statements of Banks and Similar Financial Institutions (IAS 30) isset out in paragraphs 1-59. All the paragraphs have equal authority but retainthe IASC format of the Standard when it was adopted by the IASB. IAS 30 shouldbe read in the context of the Preface to International Financial ReportingStandards and the Framework for the Preparation and Presentation of FinancialStatements. These provide a basis for selecting and applying accountingpolicies in the absence of explicit guidance.


Scope


1. This Standard should beapplied in the financial statements of banks and similar financial institutions(subsequently referred to as banks).
2. For the purposes of this Standard, theterm "bank" includes all financial institutions, one of whoseprincipal activities is to take deposits and borrow with the objective oflending and investing and which are within the scope of banking or similarlegislation. The Standard is relevant to such enterprises whether or not theyhave the word "bank" in their name.
3. Banks represent a significant andinfluential sector of business worldwide. Most individuals and organisationsmake use of banks, either as depositors or borrowers. Banks play a major rolein maintaining confidence in the monetary system through their closerelationship with regulatory authorities and governments and the regulationsimposed on them by those governments. Hence there is considerable andwidespread interest in the well-being of banks, and in particular theirsolvency and liquidity and the relative degree of risk that attaches to thedifferent types of their business. The operations, and thus the accounting andreporting requirements, of banks are different from those of other commercialenterprises. This Standard recognises their special needs. It also encouragesthe presentation of a commentary on the financial statements which deals withsuch matters as the management and control of liquidity and risk.
4. This Standard supplements otherInternational Accounting Standards which also apply to banks unless they arespecifically exempted in a Standard.
5. This Standard applies to the separatefinancial statements and the consolidated financial statements of a bank. Wherea group undertakes banking operations, this Standard is applicable in respectof those operations on a consolidated basis.

Background
6. The users of the financial statements of a bank need relevant, reliable and comparable information which assists them in evaluating the financial position and performance of the bank and which is useful to them in making economic decisions. They also need information which gives them a better understanding of the special characteristics of the operations of a bank. Users need such information even though a bank is subject to supervision and provides the regulatory authorities with information that is not always available to the public. Therefore disclosures in the financial statements of a bank need to be sufficiently comprehensive to meet the needs of users, within the constraint of what it is reasonable to require of management.

7. The users of the financial statements of a bank are interested in its liquidity and solvency and the risks related to the assets and liabilities recognised on its balance sheet and to its off balance sheet items. Liquidity refers to the availability of sufficient funds to meet deposit withdrawals and other financial commitments as they fall due. Solvency refers to the excess of assets over liabilities and, hence, to the adequacy of the bank's capital. A bank is exposed to liquidity risk and to risks arising from currency fluctuations, interest rate movements, changes in market prices and from counterparty failure. These risks may be reflected in the financial statements, but users obtain a better understanding if management provides a commentary on the financial statements which describes the way it manages and controls the risks associated with the operations of the bank.

Accounting Policies
8. Banks use differing methods for the recognition and measurement of items in their financial statements. While harmonisation of these methods is desirable, it is beyond the scope of this Standard. In order to comply with IAS 1 Presentation of Financial Statements and thereby enable users to understand the basis on which the financial statements of a bank are prepared, accounting policies dealing with the following items may need to be disclosed:
(a) the recognition of the principal types of income (see paragraphs 10 and 11);
(b) the valuation of investment and dealing securities (see paragraphs 24 and 25);
(c) the distinction between those transactions and other events that result in the recognition of assets and liabilities on the balance sheet and those transactions and other events that only give rise to contingencies and commitments (see paragraphs 26 to 29);
(d) the basis for the determination of impairment losses on loans and advances and for writing off uncollectible loans and advances (see paragraphs 43-49); and
(e) the basis for the determination of charges for general banking risks and the accounting treatment of such charges (see paragraphs 50 to 52).
Some of these topics are the subject of existing International Accounting Standards while others may be dealt with at a later date.
Editorial note: First paragraph and sub-paragraph (d) substituted by improvements project standard IAS 39 with effect for annual periods beginning on or after 1 January 2005. If an entity applies this Standard for an earlier period, these amendments shall be applied for that earlier period. Previously "Banks use differing methods for the recognition and measurement of items in their financial statements. While harmonisation of these methods is desirable, it is beyond the scope of this Standard. In order to comply with IAS 1, Presentation of Financial Statements, and thereby enable users to understand the basis on which the financial statements of a bank are prepared, accounting policies dealing with the following items may need to be disclosed: […] (d) the basis for the determination of losses on loans and advances and for writing off uncollectable loans and advances (see paragraphs 43 to 49); and"
Income Statement

9. A bank should present an income statement which groups income and expenses by nature and discloses the amounts of the principal types of income and expenses.
10. In addition to the requirements of other Standards, the disclosures in the income statement or the notes to the financial statements shall include, but are not limited to, the following items of income and expenses:
Interest and similar income;
Interest expense and similar charges;
Dividend income;
Fee and commission income;
Fee and commission expense;
Gains less losses arising from dealing securities;
Gains less losses arising from investment securities;
Gains less losses arising from dealing in foreign currencies;
Other operating income;
Impairment losses on loans and advances;
General administrative expenses; and
Other operating expenses.

Editorial note: First paragraph and tenth item substituted by improvements project standard IAS 39 with effect for annual periods beginning on or after 1 January 2005. If an entity applies this Standard for an earlier period, these amendments shall be applied for that earlier period. Previously "In addition to the requirements of other International Accounting Standards, the disclosures in the income statement or the notes to the financial statements should include, but are not limited to, the following items of income and expenses: […] Losses on loans and advances;"
11. The principal types of income arising from the operations of a bank include interest, fees for services, commissions and dealing results. Each type of income is separately disclosed in order that users can assess the performance of a bank. Such disclosures are in addition to those of the source of income required by IAS 14, Segment Reporting.
12. The principal types of expenses arising from the operations of a bank include interest, commissions, losses on loans and advances, charges relating to the reduction in the carrying amount of investments and general administrative expenses. Each type of expense is separately disclosed in order that users can assess the performance of a bank.

13. Income and expense items shall not be offset except for those relating to hedges and to assets and liabilities that have been offset in accordance with IAS 32.
Editorial note: Substituted by improvements project standard IAS 39 with effect for annual periods beginning on or after 1 January 2005. If an entity applies this Standard for an earlier period, these amendments shall be applied for that earlier period. Previously "Income and expense items should not be offset except for those relating to hedges and to assets and liabilities which have been offset in accordance with paragraph 23."
14. Offsetting in cases other than those relating to hedges and to assets and liabilities that have been offset as described in IAS 32 prevents users from assessing the performance of the separate activities of a bank and the return that it obtains on particular classes of assets.
Editorial note: Substituted by improvements project standard IAS 39 with effect for annual periods beginning on or after 1 January 2005. If an entity applies this Standard for an earlier period, these amendments shall be applied for that earlier period. Previously "Offsetting in cases other than those relating to hedges and to assets and liabilities which have been offset as described in paragraph 23 prevents users from assessing the performance of the separate activities of a bank and the return that it obtains on particular classes of assets."

15. Gains and losses arising from each of the following are normally reported on a net basis:
(a) disposals and changes in the carrying amount of dealing securities;
(b) disposals of investment securities; and
(c) dealings in foreign currencies.
16. Interest income and interest expense are disclosed separately in order to give a better understanding of the composition of, and reasons for changes in, net interest.
17. Net interest is a product of both interest rates and the amounts of borrowing and lending. It is desirable for management to provide a commentary about average interest rates, average interest earning assets and average interest-bearing liabilities for the period. In some countries, governments provide assistance to banks by making deposits and other credit facilities available at interest rates which are substantially below market rates. In these cases, management's commentary often discloses the extent of these deposits and facilities and their effect on net income.

Balance Sheet
18. A bank should present a balance sheet that groups assets and liabilities by nature and lists them in an order that reflects their relative liquidity.
19. In addition to the requirements of other International Accounting Standards, the disclosures in the balance sheet or the notes to the financial statements should include, but are not limited to, the following assets and liabilities:
Assets
Cash and balances with the central bank;
Treasury bills and other bills eligible for rediscounting with the central bank;
Government and other securities held for dealing purposes;
Placements with, and loans and advances to, other banks;
Other money market placements;
Loans and advances to customers; and
Investment securities.
Liabilities
Deposits from other banks;
Other money market deposits;
Amounts owed to other depositors;
Certificates of deposits;
Promissory notes and other liabilities evidenced by paper; and
Other borrowed funds.

20. The most useful approach to the classification of the assets and liabilities of a bank is to group them by their nature and list them in the approximate order of their liquidity; this may equate broadly to their maturities. Current and non-current items are not presented separately because most assets and liabilities of a bank can be realised or settled in the near future.
21. The distinction between balances with other banks and those with other parts of the money market and from other depositors is relevant information because it gives an understanding of a bank's relations with, and dependence on, other banks and the money market. Hence, a bank discloses separately:
(a) balances with the central bank;
(b) placements with other banks;
(c) other money market placements;
(d) deposits from other banks;
(e) other money market deposits; and
(f) other deposits.