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CA Final · Financial Reporting · Financial Instruments: Disclosures

Sagar Textiles Ltd's finance team is drafting the risk disclosures under Ind AS 107. The CFO asks why the standard stresses giving qualitative disclosures alongside the quantitative data on credit, liquidity and market risk. Which statement reflects the stated rationale in Ind AS 107 (paragraph 32A)?

Ind AS 107 requires qualitative disclosures alongside quantitative ones because together they let users link related disclosures and form an overall picture of the nature and extent of risks from financial instruments. The interaction between the two helps users evaluate the entity's exposure to risks better than numbers alone.

  1. AQualitative disclosures replace quantitative disclosures when the exposure is not material
  2. BQualitative disclosures are needed only for the first year of application of the standard
  3. CQualitative disclosures allow users to link related disclosures and form an overall picture of the nature and extent of risks, improving evaluation of the entity's exposureCorrect
  4. DQualitative disclosures are required only for entities that have not adopted hedge accounting

Explanation

Paragraph 32A says that giving qualitative disclosures in the context of quantitative ones enables users to link related disclosures and form an overall picture of the nature and extent of risks. The interaction between the two lets users evaluate exposure better. The standard does not treat qualitative disclosures as a substitute for quantitative ones, so the option saying they replace quantitative data is wrong.

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