Risk Disclosure After The Introduction Of IFRS 7

This study aims to examine the quality of disclosure practice under IFRS 7-Financial Instruments: Disclosures by listed companies for the Financial Year 2007 as the pilot year of application. The article starts by making a detailed explanation of the new requirements on the disclosure of financial risk exposure under IFRS 7, particular comparisons are made between requirements in IFRS 7 and previous standards. Key risk categories and updated requirements on disclosure quality are clarified as benchmarks to assess the degree of compliance made by companies to the new standard. The study selected companies within Banking & Financial Service sector from the London Stock Exchange as sample companies to study the disclosure made for relevant risk categories under the updated quantified disclosure standards. Empirical analysis based on 2007 financial statement data is performed to testify the potential correlation between certain company characteristics and disclosure pattern observed for key risk categories required by IFRS 7, various antecedent determinants for disclosure quality are tested and relevant market performance consequences after the disclosure made to public are analyzed. As conclusion, the study sets out the major determinants for risk disclosure quality, discovers the underlying logic behind the disclosure quality observed based on empirical evidence. At the end of the study, implications from the potential impact of IFRS 7 requirements are suggested as study results, and possible predictions and suggestions are given on the better future application of this new standard, as well as on the risk management and reporting schemes of corporations.