Ind AS 107 explained: this guide covers what it means, who it applies to, the step-by-step process, documents required, fees, due dates and penalties in India — so you can stay compliant with confidence and avoid costly mistakes.
Ind AS 107 prescribes the disclosures that enable users to evaluate the significance of financial instruments for an entity's financial position and performance, and the nature and extent of the credit, liquidity and market risks arising from them and how those risks are managed.
Overview
Ind AS 107, notified under the Companies (Ind AS) Rules, 2015, completes the financial-instruments trio: Ind AS 32 (presentation), Ind AS 109 (recognition and measurement) and Ind AS 107 (disclosure). It does not change measurement; it dictates what must be told to users so they can understand the instruments and the risks they create.
Scope
Ind AS 107 applies to all entities and to all types of financial instruments, with limited exceptions (such as interests in subsidiaries, associates and joint ventures accounted for under other standards, and employee-benefit and insurance arrangements). It applies to both recognised and unrecognised financial instruments.
Category One — Significance of Financial Instruments
These disclosures explain the impact of financial instruments on the statements:
- carrying amounts of each category of financial asset and liability (measured at amortised cost, FVOCI, FVTPL);
- net gains or losses by category, interest income and expense, and impairment losses;
- fair values of each class, with the fair value hierarchy — Level 1 (quoted prices in active markets), Level 2 (other observable inputs) and Level 3 (unobservable inputs) — and reconciliations of Level 3 movements;
- information about hedge accounting: the risk management strategy, the effect on amount, timing and uncertainty of cash flows, and the effect on the statements.
Category Two — Nature and Extent of Risks
For each type of risk, both qualitative (exposures, how they arise, objectives and processes for managing them) and quantitative disclosures are required.
| Risk | Key quantitative disclosure |
|---|---|
| Credit risk | Maximum exposure, credit quality, concentrations, expected-credit-loss allowance and its movements |
| Liquidity risk | Maturity analysis of financial liabilities by remaining contractual maturity |
| Market risk | Sensitivity analysis for currency, interest-rate and other price risk |
Credit Risk and Expected Credit Losses
Aligned with the Ind AS 109 expected credit loss (ECL) model, an entity discloses the maximum exposure to credit risk, the loss allowance, and how the gross carrying amounts and loss allowances have changed (including transfers between the 12-month and lifetime ECL stages). It also discloses collateral and other credit enhancements and any significant concentrations of credit risk.
Liquidity Risk
A maturity analysis of non-derivative (and derivative) financial liabilities is disclosed, showing the remaining contractual maturities based on undiscounted cash flows, together with a narrative of how the entity manages the resulting liquidity risk — for example through committed credit lines.
Market Risk — Sensitivity Analysis
For each type of market risk, the entity discloses a sensitivity analysis showing how profit or loss and equity would have been affected by reasonably possible changes in the relevant risk variable at the reporting date.
Worked Example
A company has US-dollar borrowings of USD 20,00,000, recorded at ₹16,60,00,000 (₹83/USD). It discloses that a reasonably possible 5% strengthening of the US dollar would increase the liability and reduce profit before tax by approximately ₹83,00,000, with an equal and opposite effect on a 5% weakening. This single, standardised disclosure lets users gauge the entity's foreign-currency exposure without access to internal models.
Key Point
Ind AS 107 disclosures are more extensive than the earlier Indian GAAP, which had limited requirements for financial-instrument risk disclosure. The risk narrative plus quantitative sensitivity and maturity analyses give users a structured view of the entity's exposure to and management of financial risk.