Maturity analysis disclosures must reflect gross contractual cash flows

IFRS 7 Financial Instruments: Disclosures requires disclosure about the liquidity risk faced by entities, which is 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.

What information must be disclosed about liquidity risk?

IFRS 7, paragraph 39 requires entities to disclose a maturity analysis, separately for non-derivative and derivative financial liabilities, as well as a description of how they manage this liquidity risk.

Basis for preparing the maturity analysis

The maturity analysis discloses summary quantitative data about its exposure to liquidity risk based on information provided internally to key management personnel.

How many time bands are required?

Entities must use judgement to determine how many time bands to disclose and for what periods. For example, one entity might determine that the following time bands are appropriate, but equally, these will be different for another entity with a different set of facts and circumstances:

• Not later than one month
• Later than one month and not later than three months
• Later than three months and not later than one year
• Later than one year and not later than five years.

Allocation to time bands is based on contractual, not expected, cash flows

It is important to note that disclosure of payments in the relevant time bands is based on the earliest date that the entity is contractually required to settle the liability, not the expected timing. For example:

• If the counterparty has the choice of when an amount is repaid, the liability is allocated to the earliest period in which the entity can be required to pay. So, financial liabilities repayable on demand, such as demand deposits, must be included in the earliest time band
• When an entity is committed to make amounts available in instalments, each instalment is allocated to the earliest period in which the entity can be required to pay. For example, an undrawn loan commitment is included in the time band containing the earliest date it can be drawn down.
• For issued financial guarantee contracts, the maximum amount of the guarantee is allocated to the earliest period in which the guarantee could be called.

Cash outflows must be gross

Contractual amounts disclosed in the maturity analysis are the contractual gross undiscounted cash flows, as opposed to the discounted values that may be presented in the balance sheet, e.g. lease liabilities. This includes:

• Gross lease liabilities (before deducting future finance charges)
• Prices specified in forward agreements to purchase financial assets for cash
• Net amounts for pay-floating/receive-fixed interest rate swaps for which net cash flows are exchanged
• Contractual amounts to be exchanged in a derivative financial instrument, such as a currency swap for which gross cash flows are exchanged
• Gross loan commitments.

How to determine gross cash outflows for variable rate instruments?

When amounts payable are not fixed, the gross cash outflow is determined by reference to the conditions existing at the end of the reporting period. For example, outflows for a variable rate loan will be calculated using the interest rate at the end of the reporting period, and the same applies when outflows vary with changes in an index (the outflows will be calculated using the index at the end of the period).

Example

The following example demonstrates how ABC Limited prepares its maturity analysis for its financial liabilities in its 30 June 2025 annual financial statements.

At 30 June 2025, ABC Limited has the following liabilities:

• Trade and other payables (current)                                        $2 million
• Bank overdraft (current)                                                        $5 million
• Derivative liabilities – interest rate swap (current)                 $200,000
• Bank loans (non-current)                                                       $7 million
• Contract liabilities (deferred revenue)                                   $1 million
• Contingent consideration owing under IFRS 3 (current)
• Classified as a financial liability                                         $2 million
• Lease liabilities (current)                                                      $100,000
• Lease liabilities (non-current)                                               $400,000
• Employee benefit provisions                                                  $400,000.

Additional information

• Bank loans: Interest payments are payable on the last day of each financial year, at a fixed rate of 5 per cent per annum. The capital portion of the loan is repayable in one lump sum on 30 June 2029.

• Bank overdraft: This has a variable interest rate of 10 per cent per annum.
• Lease liabilities: Include annual capital repayments of $100,000 per year for the next five years and interest payments of $10,000 per year.
• Interest rate swap: The fair value of $200,000 is determined based on the estimated discounted net cash flows required to be settled over the next two years. Gross estimated cash outflows (undiscounted) are $100,000 for the 2026 year, and $120,000 for the 2027 financial year.

What does the maturity analysis look like?

	< 12 months	1 – 2 years	2 - 3 years	>3 years	Total
	$	$	$	$	$
Non-derivatives Note 2
Trade and other payables	2,000,000 Note 1				2,000,000
Bank overdraft	5,500,000 Note 4, 5				5,500,000
Bank loans	350,000 Note 3, 5	350,000 Note 3	350,000 Note 3	7,350,000 Note 3	8,400,000
Contingent consideration	2,000,000 Note 1				2,000,000
Lease liabilities	110,000 Note 5	110,000	110,000	220,000	550,000
Total non-derivatives	9,960,000	460,000	460,000	7,570,000	18,450,000
Derivatives Note 2, 6
Derivative financial liabilities	100,000	120,000			220,000

Notes:

1. For the purposes of this analysis, trade payables and contingent consideration are non-interest-bearing, so the amounts disclosed equal the carrying amount in the financial statements.
2. A separate analysis is required for derivative and non-derivative liabilities (refer to IFRS 7, paragraphs 39(a) and (b)).
3. The rate used for the bank loans is 5% which is the fixed rate. If the loan had a variable rate (say 4.5 per cent at 30 June 2025), the outflows disclosed for interest payments would be disclosed at 4.5 per cent, i.e. the year-end rate. IFRS 7, paragraph B11D states, ‘When the amount payable is not fixed, the amount disclosed is determined by reference to the conditions existing at the end of the reporting period. For example, when the amount payable varies with changes in an index, the amount disclosed may be based on the level of the index at the end of the period.’
4. The rate used for the bank overdraft is the variable rate of 10% at 30 June 2025 (refer IFRS 7, paragraph B11D above).
5. Non-derivatives, other than those that are non-interest bearing, are all disclosed as the gross cash outflows required, i.e. at undiscounted amounts (i.e. including future interest payments) (refer to IFRS 7, paragraph B11D). That is, we are not required to estimate the forward rate.
6. Derivatives – if these are to be settled net, they should be disclosed at the net settlement, undiscounted amounts – refer IFRS 7, paragraph11D(c).

Why are some liabilities excluded from the maturity analysis?

You can see that contract liabilities and employee benefit provisions are excluded from the above maturity analysis.

Contract liabilities (deferred revenue) are not financial liabilities because they will be extinguished by the goods/services to be delivered under IFRS 15 Revenue from Contracts with Customers. Therefore, they are not a financial liability and are not included in the maturity analysis.

Although employee benefit provisions are a financial liability, they are scoped out of IFRS 7 by paragraph 3(b), i.e. employee rights under IAS 19 Employee Benefits.

Some common errors

We have identified the following common errors entities should be aware to look out for when preparing the maturity analysis:

1. If the total column equals the carrying amounts for non-current liabilities, interest payments have likely not been included as gross cash outflows, and these should be added in.
2. If you see amounts in time bands greater than 12 months classified in the balance sheet as current liabilities, disclosure is wrong. IFRS 7, paragraph B11C, requires disclosure in the maturity analysis on a contractual cash flow basis. Therefore, even though the entity may expect to pay the amount in a later period, it must still be disclosed as being less than 12 months.
3. Lease liabilities were incorrectly omitted from the maturity analysis.
4. Average interest rates used for variable rate instruments rather than the rate at the end of the reporting period.

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