Skip to content

CA Final · Financial Reporting

Financial Instruments: Disclosures under Ind AS 107 for CA Final

Ind AS 107 requires an entity to disclose information that lets users judge how significant financial instruments are to its position and performance, and what risks arise from them and how they are managed. To solve questions, identify the class of instrument, pick the right disclosure heading, and apply it to the facts given.

What this chapter covers

Ind AS 107 is a disclosure standard. It does not tell you how to recognise or measure a financial instrument. That is done by Ind AS 109 and Ind AS 32. Ind AS 107 tells you what to report in the financial statements and notes once those standards have been applied.

The standard has two broad parts. The first part covers the significance of financial instruments: balance sheet items, income statement items, accounting policies, hedge accounting and fair value. The second part covers the nature and extent of risks: credit risk, liquidity risk and market risk, with qualitative and quantitative disclosures for each.

This chapter links closely to Ind AS 32, Ind AS 109 and Ind AS 113, and to Schedule III (Division II) presentation. Case scenarios in Paper 1 often give a few facts about loans, receivables, borrowings or derivatives and ask what must be disclosed. Strong command of Ind AS 109 classification makes this chapter much easier.

The chapter is compact and conceptual, so it is a good place to secure marks with modest effort. It suits both case-scenario MCQs, where you must spot the correct disclosure or risk type, and short descriptive answers, where a structured list of disclosures earns marks. It also supports longer questions on Ind AS 109 and on Ind AS company financial statements, and it feeds into Paper 6 integrated case studies that involve financial instruments and risk.

Financial Instruments: Disclosures: topics in the order to study them

  1. 1Ind AS 107 Objective, Scope and Classes of InstrumentsStart here because the objective, scope and idea of classes frame every later disclosure.
  2. 2Significance of Financial Instruments: Balance Sheet and P&L DisclosuresNext, learn what to show for categories of assets and liabilities, income, expenses, gains and losses, as it builds on classification from Ind AS 109.
  3. 3Nature and Extent of Risks: Credit Risk DisclosuresCredit risk comes first among risks because it links to expected credit losses and is the most tested risk.
  4. 4Liquidity Risk and Market Risk DisclosuresStudy these after credit risk to compare the three risks, including maturity analysis and sensitivity analysis.
  5. 5Ind AS 107 Differences from IFRS 7Leave this for last, as you need the full standard in mind before noting where the Indian text differs.

How to prepare Financial Instruments: Disclosures

Treat this as a disclosure checklist chapter. Understand the logic of each disclosure rather than memorising lists blindly.

  1. Revise the classification categories under Ind AS 109 first, so the classes in Ind AS 107 make sense.
  2. Read the objective and scope, then write the two-part structure on one page: significance and risks.
  3. For each disclosure heading, note what it shows and why a user needs it. Practise listing it in your own words.
  4. Build a three-column table for credit, liquidity and market risk: qualitative disclosure, quantitative disclosure, and typical trigger in a case.
  5. Solve case-scenario MCQs and ask: which risk or which disclosure is the question really testing?
  6. Write two or three short descriptive answers in provision-facts-conclusion style, and compare them with the ICAI material.
  7. Revise the Ind AS 107 versus IFRS 7 differences in a short list just before the exam.

Common mistakes in Financial Instruments: Disclosures

  • Discussing recognition or measurement when asked about disclosure.

    Fix: Read the question for the word disclose. Answer with what is reported and where, not how it is measured.

  • Mixing up credit, liquidity and market risk in case scenarios.

    Fix: Ask the cause: counterparty default is credit, inability to pay on time is liquidity, price or rate movement is market.

  • Treating market risk as only currency risk.

    Fix: Remember the three components: currency, interest rate and other price risk.

  • Writing generic answers without tying them to the facts given.

    Fix: State the relevant disclosure, link it to the facts, and conclude in one line.

  • Skipping the IFRS 7 differences.

    Fix: Keep a short revision list of the differences and revisit it before each mock test.

Last-day revision: Financial Instruments: Disclosures

  • Ind AS 107 deals only with disclosure, not recognition or measurement.
  • Disclosures serve two aims: significance of instruments and nature and extent of risks.
  • Disclose financial assets and liabilities by category, as classified under Ind AS 109.
  • Group instruments into classes suited to their nature and the information being given.
  • Income statement disclosures cover items such as interest income, interest expense, gains and losses by category.
  • Credit risk is the risk that one party fails to pay and causes a loss to the other.
  • Liquidity risk is the risk of difficulty in meeting obligations settled in cash or another financial asset.
  • Market risk has three parts: currency risk, interest rate risk and other price risk.
  • Market risk is usually shown through sensitivity analysis.
  • Liquidity risk disclosure includes a maturity analysis of financial liabilities.
  • Qualitative disclosures explain exposures and how management handles them.
  • Learn the Ind AS 107 versus IFRS 7 differences as a short separate list.

Financial Instruments: Disclosures practice questions

Financial Instruments: Disclosures in other exams

The same ground in other exams, if you are preparing for more than one or want another angle on it.

Financial Instruments: Disclosures: frequently asked questions

Is Ind AS 107 a high-effort chapter for CA Final?

No. It is a compact, conceptual chapter. Once you know Ind AS 109 classification, most of it is structured disclosure logic that you can learn in a short time.

Do I need to memorise every disclosure paragraph in Ind AS 107?

No. Learn the headings and the purpose of each disclosure. Then apply them to the facts in a case, which is how the exam tests it.

Which standards should I revise before this chapter?

Revise Ind AS 32 and Ind AS 109 first, especially classification and expected credit losses. Ind AS 113 on fair value also helps.

How are numerical questions asked in this chapter?

Numerical work is limited. You may be given exposure or maturity data and asked to present or interpret it under the right disclosure heading.