Skip to content

CA Final · Financial Reporting · Financial Instruments: Disclosures

Sunrise Textiles Ltd prepares its financial statements under Ind AS and is drafting its risk disclosures for financial instruments. The finance head says that numbers alone in the risk note are enough and that narrative text can be dropped. According to Ind AS 107 (para 32A), what is the purpose of providing qualitative disclosures alongside quantitative disclosures?

Qualitative disclosures sit alongside quantitative ones so users can link related information and form an overall picture of the nature and extent of risks from financial instruments. The interaction of the two helps users evaluate the entity's risk exposure better. They do not replace the numbers.

  1. ATo let users link related disclosures and form an overall picture of the nature and extent of risks from financial instrumentsCorrect
  2. BTo replace the quantitative disclosures where the exposure is not material
  3. CTo allow the entity to avoid disclosing risk concentrations
  4. DTo meet only the requirements of the Companies Act, 2013 and not of the Standard

Explanation

Para 32A states that qualitative disclosures given in the context of quantitative disclosures enable users to link related disclosures and form an overall picture of the nature and extent of risks. They interact with the quantitative disclosures and do not replace them. Dropping the narrative would therefore defeat the objective.

Did you get it right without looking?

One question tells you little. A timed set on Financial Instruments: Disclosures shows your real accuracy, how long you take and where you lose marks.

Practise Financial Instruments: DisclosuresFree diagnostic mock

More Financial Instruments: Disclosures questions