IFRS definitions

Question 1

Definition

Define: credit risk

Answer 1

IFRS 7: The risk that one party to a financial instrument will cause a financial loss for the other party by failing to discharge an obligation.

Question 2

Definition

Define: currency risk

Answer 2

IFRS 7: The risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in foreign exchange rates.

Question 3

Definition

Define: interest rate risk

Answer 3

IFRS 7: The risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market interest rates.

Question 4

Definition

Define: liquidity risk

Answer 4

IFRS 7: The risk that an entity will encounter difficulty in meeting obligations associated with financial liabilities that are settled by delivering cash or another financial asset.

Question 5

Definition

Define: loans payable

Answer 5

IFRS 7: Loans payable are financial liabilities; other than short-term trade payables on normal credit terms.

Question 6

Definition

Define: market risk

Answer 6

IFRS 7: The risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market prices. Market risk comprises three types of risk: currency risk; interest rate risk and other price risk.

Question 7

Definition

Define: other price risk

Answer 7

IFRS 7: The risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market prices (other than those arising from interest rate risk or currency risk) whether those changes are caused by factors specific to the individual financial instrument or its issuer; or factors affecting all similar financial instruments traded in the market.

Question 8

Definition

Define: past due

Answer 8

IFRS 7: A financial asset is past due when a counterparty has failed to make a payment when contractually due.