Basel 3.1 and Primary statements: Difference between pages

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''Bank supervision - UK''.
''Financial reporting''


In the UK context, Basel 3.1 means the elements of Basel III that had not already been implemented in the UK by 2021.
The main accounting statements required to be presented.  


Basel 3.1 has particular significance in relation to the calculation of Risk Weighted Assets by banks, and related costs for their corporate customers.


These normally include statements of:


:<span style="color:#4B0082">'''''What is changing?'''''</span>
* Financial position (balance sheet).
* Comprehensive income (profit or loss).
* Changes in equity.
* Cash flows.


:"One key change which will impact corporates is the conversion factor (CF) associated with performance guarantees (incl. bid bond, advance, performance & retention guarantees).


:The proposal is to increase this from 20% CF to 50% CF.  
The primary statements are supported by ''notes'' providing additional and more detailed financial information.


:The CF defines the probability that a contingent liability exposure (such as a performance guarantee) will convert to an on balance sheet item for the bank...


The names of the primary financial statements are not normally mandatory, and they also differ according the accounting regime under which an entity is reporting.


:The capital that the bank is required to keep for performance guarantees is linearly proportional to the CF and it is likely that banks will need to pass on this additional capital charge.


:For example, for a corporate with an external S&P rating of ‘A’, if the existing pricing for such a performance guarantee was 0.4%, this would increase to 1%."
====Comprehensive income and profit or loss====


:''Naresh Aggarwal, Associate Director, Policy & Technical, ACT - February 2023.''
Comprehensive income includes both:


*Profit or loss for the period; and


== See also ==
*Other comprehensive income for the period.
* [[Advance payment bond]]
 
* [[Bank supervision]]
 
* [[Basel III]]
Many entities report their profit or loss and other comprehensive income in two separate statements.
* [[Basel IV]]
 
* [[Beneficiary]]
 
* [[Bid bond]]
The statement of profit or loss is also known as the ''income statement''.
* [[Capital]]
* [[Capital adequacy]]
* [[Contingent liabilities]]
* [[Contingent risk]]
* [[Corporate]]
* [[Credit Conversion Factor]]  (CCF or CF)
* [[Credit rating]]
* [[Guarantee]]
* [[Obligor]]
* [[Off balance sheet risk]]
* [[Performance guarantee]]
* [[Prudential Regulation Authority]]
* [[Retention bond]]
*[[Risk Weighted Assets]]  (RWAs)
* [[Standard & Poor's]]  (S&P)




==Other resource==
[https://www.treasurers.org/hub/technical/trade-finance-update-february-2023 Potential rise in the cost of performance guarantees due to Basel 3.1 - ACT]


[[Category:Accounting,_tax_and_regulation]]
== See also ==
[[Category:The_business_context]]
* [[Entity]]
[[Category:Corporate_finance]]
* [[FVTPL]]
[[Category:Investment]]
* [[FVTOCI]]
[[Category:Long_term_funding]]
* [[IAS 1]]
[[Category:Identify_and_assess_risks]]
* [[Income statement]]
[[Category:Manage_risks]]
* [[International Accounting Standards]]
[[Category:Risk_frameworks]]
* [[Notes]]
[[Category:Risk_reporting]]
* [[Statement of cash flows]]
[[Category:Financial_products_and_markets]]
* [[Statement of changes in equity]]
[[Category:Trade_finance]]
* [[Statement of comprehensive income]]
* [[Statement of financial position]]
* [[Statement of profit or loss and other comprehensive income]]

Revision as of 20:57, 5 July 2017

Financial reporting

The main accounting statements required to be presented.


These normally include statements of:

  • Financial position (balance sheet).
  • Comprehensive income (profit or loss).
  • Changes in equity.
  • Cash flows.


The primary statements are supported by notes providing additional and more detailed financial information.


The names of the primary financial statements are not normally mandatory, and they also differ according the accounting regime under which an entity is reporting.


Comprehensive income and profit or loss

Comprehensive income includes both:

  • Profit or loss for the period; and
  • Other comprehensive income for the period.


Many entities report their profit or loss and other comprehensive income in two separate statements.


The statement of profit or loss is also known as the income statement.


See also

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