Financial Reporting

The International Financial Reporting Standards (IFRS) are a set of globally accepted standards, designed as a common global language for business affairs so that the financial reports of any company are understandable and comparable across international boundaries. Achieving IFRS compliance is crucial for any financial institution, both from a regulatory perspective (for reporting to the central bank or to other regulatory bodies) and from an economic perspective (for reporting to international or larger local investors).

iFRS-VBox is a software solution which covers the full set of reporting requirements in IFRS for banks. iFRS-VBox generates the Balance Sheet, the Profit and Loss statement and all necessary disclosures directly in compliance to IFRS. Basis for these production of the reports are the transaction-based Debit / Credit entries as well as the IFRS-compliant measurement of financial instruments in iFRS-VBox.

iFRS-VBox's approach leads to granular and audit-able financial statements as required in IAS 1, IFRS 7 and IFRS 8. The system comes equipped with per-defined reporting templates.

System Architecture iFRS-VBox

Significance of Financial Instruments

The reports analyze the aggregate as well as the single contract level balance sheet value of financial assets and liabilities. The balance sheet value is measured either at Amortized Cost or at Fair Value.

  • Separate reports are shown for various asset classes, like for assets designated as such upon initial recognition and additionally for those assets mandatorily measured at fair value in accordance with IFRS 9.
  • Asset exposure adjustment, showing the difference between the carrying amount of the financial asset and the amount the bank would contractually receive at maturity.
  • Liability exposure adjustment, showing the difference between the carrying amount of the financial liability and the amount the bank would be contractually required to pay at maturity.

Credit Risk Analysis

In view of the recent financial crisis, credit risk analysis has become a critical part of the required quantitative disclosures. IFRS-VBox includes reporting templates like:

  • Impairment provision of assets, showing the provision amounts for assets, separately for individually impaired assets and for collective impairment, on single asset level, on countreparty level and on portfolio level.
  • Detailed Information on specifically impaired assets, including exposures and counterparty group characteristics, assigned collaterals and their recovery schedule, individual expected recoveries, workout costs and realized recoveries.
  • Total credit risk of financial assets, showing the maximum exposure to credit risk on single contract level as well as on portfolio level, both the amounts before and after netting and credit risk mitigation. The portfolios are composed of assets with similar credit risk characteristics.
  • Market and credit risk portions: the amount of change, during the period and cumulatively, in the fair value of the financial asset that is attributable to changes in the credit risk of the financial asset and separately the amount that is attributable to market risk.

Collateral and Credit Risk Mitigation

Collaterals and other credit risk mitigation instruments are tracked separately by the system and contribute to the total view of credit risk.

  • Total credit risk mitigation, showing the amounts secured by on- and off-balance sheet credit risk mitigation instruments.
  • Collateral for assets, showing the fair value of the collateral received by the bank for assets, separately for collateral held and for collateral re-pledged or sold.

Bank's own Credit Risk

IAS 7 requires that the bank's own credit risk needs to be quantified and disclosed in addition to the asset side credit risk. IFRS-VBox includes reporting templates for:

  • Own credit risk exposure: the amount of change, during the period and cumulatively, in the fair value of the financial liability that is attributable to changes in the bank's own credit risk and separately the amount that is attributable to general market risk.
  • Assets pledged as collateral, showing the carrying amount of financial assets pledged for liabilities or contingent liabilities, including amounts classified in accordance to IFRS 9.

Income and Expense Disclosures

IFRS-VBox includes also reporting templates which enable the analysis of the Profit and Loss structure in a given period. Examples for such disclosures include:

  • Income and expense from Fair Value changes, showing the financial results of instruments measured at Fair Value, separately for the different types of classifications in IAS 39 respectively IFRS 9.
  • Interest income and interest expense (calculated using the Effective Interest Rate method) for financial assets and liabilities, separately per source of income or expense (interest, accrued interest, or amortization of fees, transaction costs, charges, permiums or discounts).
  • Fee income and expense (other than amounts included in determining the Effective Interest Rate), separately per source of income or expense.
  • Interest income (unwinding) and impairment expense from impaired assets.
  • Other comprehensive income or expense from derecognition, showing the result of any derecognition of assets and liabilities during the reporting period.

Market and Liquidity Risk

IFRS-VBox provides quantitative disclosures on market and on liqudity risk, concerning both the assets measures at Fair Value and those measures at Amortized Cost. Examples for such disclosures include:

  • Comparison of Fair Value to Carrying Amount, including assets and liabilities measured at Amortized Cost.
  • Contractual maturity analysis for all assets and liabilities.
  • Forward liquidity analysis, showing the realistic cash flow projection resulting from the currently held assets and liabilities.
  • Market risk sensitivity analysis, showing the impact on the net Profit and Loss resulting from interest rate and FX rate changes.

Additional Discosures

Additional disclosures not mentioned above, but provided by iFRS-VBox include:

  • Related Party Disclosures as required by IAS 24.
  • Business segment disclosures as required by IFRS 8, including but not limited to Balance Sheet and Profit and Loss splits into product lines, geographical areas, currency and further dimensions.
  • Concentration report, showing exposures to major customers.