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Summary of GUIDELINES FOR THE IMPLEMENTATION OF THE FRAMEWORK FOR CONSOLIDATED FINANCIAL REPORTING (FINREP)

Core Content

The FINREP framework is designed to provide standardized consolidated financial reporting for credit institutions under IAS/IFRS. It aims to enhance comparability and transparency of financial information for supervisory purposes. The framework is not an interpretation of IAS/IFRS but a structured reporting standard that incorporates certain elements from these standards and EU directives.

Main Objectives

• To ensure consistency and comparability in financial reporting across credit institutions.
• To align reporting with the Common Framework for Reporting of the Solvency Ratio (COREP).
• To allow for national supervisory discretion in the scope and frequency of reporting.

Key Principles

• IAS/IFRS form the basis of FINREP, except for two exceptions: the fair value option and hedge accounting.
• Standardisation is prioritized, which may limit some presentational options under IAS/IFRS.
• Core information includes mandatory tables for consolidated balance sheets and income statements.
• Non-core information provides optional additional details that contribute to commonality in reporting among European supervisory authorities.
• Reporting frequency is determined by national supervisory authorities.

Structure of FINREP

3.1. Core Information

• Consolidated Balance Sheet: Includes assets, liabilities, and equity and minority interest.
• Consolidated Income Statement: Separates income and expenses from continuing and discontinued operations. Gains and losses on financial assets and liabilities are presented on a net basis.

3.2. Non-Core Information

• Provides additional details and disaggregations of core information.
• May include:
  • Allocation of financial assets by economic sector.
  • Details on equity instruments and provisions.
• Reporting of non-core information is optional at the national level.

3.3. References

• References are made to IAS/IFRS, CRD, ECB Regulation, and Common Practice (CP).
• CP is used to add relevant data items for supervisory purposes and to complete breakdowns.

3.4. Structure of the Consolidated Balance Sheet

• Financial instruments are presented by category (portfolio approach), except for cash balances with central banks and deposits from central banks.
• Specific line items are included for prudential understanding of the financial position.

3.5. Structure of the Consolidated Income Statement

• Income and expenses from continuing operations are presented by nature.
• Gains and losses on financial assets and liabilities are presented on a net basis.
• Discontinued operations are disclosed as a net single amount.

3.6. Additional Tables

• Provide disaggregated information on core captions.
• Include data on credit risk exposure, revaluation reserves, interest income/expenses, derivatives, and realised gains/losses.
• These tables are designed to complement IAS/IFRS and align with COREP.

Detailed Guidance

1. Deposits from Credit Institutions

• Covered in table 1.2 and related detailed tables.
• Deposits from credit institutions are those received from entities with a banking license.
• Deposits from non-credit institutions include liabilities to other financial institutions, corporates, and private customers.

2. Equity Component of Financial Instruments

• Presented in the equity and minority interest section of the consolidated balance sheet.
• Includes contractual obligations that may result in future delivery of own equity instruments.
• Also covers equity components of compound financial instruments.

3. Treasury Shares

• Included in table 1.3.
• Refers to financial instruments with own equity characteristics that have been reacquired by the issuing entity.

4. Interest Income and Expenses

• Can be reported as interest income/expense or net gains (losses) depending on the clean/dirty pricing method.
• National supervisory authorities may require specific reporting methods.

5. Dividend Income

• Can be reported separately or included in gains (losses) on financial assets.
• National authorities may require separate reporting.

6. Provisions

• Aggregated additions and reversals are presented in a separate line item.
• May be allocated by nature if allowed by national supervisory authorities.

7. Derivatives

• Data is required on carrying amount and gross notional amount.
• Derivatives are broken down by underlying risk.
• If influenced by multiple underlying risks, they are allocated to the most risk-sensitive one.
• Derivatives not designated as effective hedges are included in held-for-trading category.

8. Available-for-Sale Financial Assets (AFS)

• Table 5 requires a product breakdown of AFS financial assets.
• Includes fair value, impairment, and cumulative losses.
• Illustrative examples show how impairment affects fair value changes and income statement.

9. Loans and Receivables (Table 6)

• Allows disaggregation into unimpaired and impaired assets.
• Collective impairment applies to non-individually significant assets.
• Individual impairment may also be performed for insignificant loans.
• Table 6 is useful for supervisory alignment and COREP.

10. Impairment and Past Due Assets (Table 7)

• Requires analysis of age of past due assets that are not yet impaired.
• Breakdown by number of past due days.
• Impaired assets are excluded from past due analysis.

11. Tangible and Intangible Assets (Tables 9, 10, 11)

• Provided in a common format to meet IAS 16, IAS 40, and IAS 38 requirements.
• Entities may choose between revaluation model and cost model.

12. Investments in Associates, Subsidiaries, and Joint Ventures (Table 12)

• Contains summarised financial information.
• Allows for equity or non-equity methods of accounting.
• Sub-table B provides details on subsidiaries not consolidated.

13. Derecognition and Financial Liabilities (Table 17)

• Discloses transferred financial assets that do not qualify for derecognition.
• Links to COREP for capital purposes.

14. Realised Gains and Losses (Table 21)

• Breakdown of gains and losses at derecognition for financial instruments not measured at fair value through profit or loss.

15. Repurchase Agreements (Table 33)

• Not presented separately on the balance sheet.
• Table 33 provides detailed information on repos, reverse repos, and related agreements.
• Includes collateral information and financing breakdowns.

Annex 1: Economic Sector Allocation

• Aligns FINREP economic sector classes with CRD exposure classes.
• Provides correspondence tables for Standardised Approach and Internal Ratings Based Approach.
• Sectors include:
  • Central governments
  • Credit institutions
  • Non-credit institutions
  • Corporates
  • Retail
• Helps credit institutions in IT system preparation and instrument classification.

Conclusion

FINREP is a comprehensive and standardized framework for credit institutions, designed to meet supervisory and prudential requirements. It integrates IAS/IFRS, CRD, and COREP standards, and allows for national discretion in reporting scope and frequency. The framework ensures consistency in financial reporting while providing detailed guidance for various financial instruments and reporting elements.