Pipara & Co LLP

financial instruments: disclosures
Core principle
  1. The objective of this Indian Accounting Standard (Ind AS) is to require entities to provide disclosures in their financial statements that enable users to evaluate:
    1. the significance of financial instruments for the entity’s financial position and performance; and
    2. the nature and extent of risks arising from financial instruments to which the entity is exposed during the period and at the end of the reporting period, and how the entity manages those risks.

The principles in this Ind AS complement the principles for recognising, measuring and presenting financial assets and financial liabilities in Ind AS 32, Financial Instruments: Presentation, and Ind AS 109, Financial Instruments.

Scope
  1. This Ind AS shall be applied by all entities to all types of financial instruments, except:
    1. those interests in subsidiaries, associates or joint ventures that are accounted for in accordance with Ind AS 110, Consolidated Financial Statements, Ind AS 27, Separate Financial Statements or Ind AS 28, Investments in Associates and Joint Ventures. However, in some cases, Ind AS 110, Ind AS 27 or Ind AS 28 require or permit an entity to account for

# This Ind AS was notified vide G.S.R. 111(E) dated 16th February, 2015 and was amended vide Notification No. G.S.R. 365(E) dated 30th March, 2016, G.S.R. 310(E) dated 28th March, 2018, G.S.R. 273(E) dated 30th March, 2019, G.S.R. 463(E) dated 24th July, 2020 and G.S.R. 419(E) dated 18th June, 2021.

an interest in a subsidiary, associate or joint venture using Ind AS 109; in those cases, entities shall apply the requirements of this Ind AS and, for those measured at fair value, the requirements of Ind AS 113, Fair Value Measurement. Entities shall also apply this Ind AS to all derivatives linked to interests in subsidiaries, associates or joint ventures unless the derivative meets the definition of an equity instrument in Ind AS 32.

  1. employers’ rights and obligations arising from employee benefit plans, to which Ind AS 19, Employee Benefits, applies.
  2. [Refer Appendix 1]
  3. insurance contracts as defined in Ind AS 104, Insurance Contracts. However, this Ind AS applies to derivatives that are embedded in insurance contracts if Ind AS 109 requires the entity to account for them separately. Moreover, an issuer shall apply this Ind AS to financial guarantee contracts if the issuer applies Ind AS 109 in recognising and measuring the contracts, but shall apply Ind AS 104 if the issuer elects, in accordance with paragraph 4(d) of Ind AS 104, to apply Ind AS 104 in recognising and measuring them.
  4. financial instruments, contracts and obligations under share- based payment transactions to which Ind AS 102, Share- based Payment, applies, except that this Ind AS applies to contracts within the scope of Ind AS 109.
  5. instruments that are required to be classified as equity instruments in accordance with paragraphs 16A and 16B or paragraphs 16C and 16D of Ind AS 32.
  1. This Ind AS applies to recognised and unrecognised financial instruments. Recognised financial instruments include financial assets and financial liabilities that are within the scope of Ind AS Unrecognised financial instruments include some financial instruments that, although outside the scope of Ind AS 109, are within the scope of this Ind AS.
  1. This Ind AS applies to contracts to buy or sell a non-financial item that are within the scope of Ind AS 109.

5A 2The credit risk disclosure requirements in paragraphs 35A to 35N apply to those rights that Ind AS 115, Revenue from Contracts with Customers specifies are accounted for in accordance with Ind AS 109 for the purposes of recognising impairment gains or losses. Any reference to financial assets or financial instruments in these paragraphs shall include those rights unless otherwise specified.

Classes of financial instruments and level of disclosure

When this Ind AS requires disclosures by class of financial instrument, an entity shall group financial instruments into classes that are appropriate to the nature of the information disclosed and that take into account the characteristics of those financial instruments. An entity shall provide sufficient information to permit reconciliation to the line items presented in the balance sheet.

Significance of financial instruments for financial position and performance
  • An entity shall disclose information that enables users of its financial statements to evaluate the significance of financial instruments for its financial position and performance.
Balance sheet
Categories of financial assets and financial liabilities
  1. The carrying amounts of each of the following categories, as specified in Ind AS 109, shall be disclosed either in the balance sheet or in the notes:
    1. financial assets measured at fair value through profit or loss, showing separately (i) those designated as such upon initial recognition or subsequently in accordance with paragraph

6.7.1 of Ind AS 109 and (ii) those mandatorily measured at fair value through profit or loss in accordance with Ind AS 109.

2 Substituted vide Notification No. G.S.R. 365(E) dated 30th March, 2016 and, thereafter, substituted vide Notification No. G.S.R. 310(E) dated 28th March, 2018.

(b)- (d) [Refer Appendix 1]

  1. financial liabilities at fair value through profit or loss, showing separately (i) those designated as such upon initial recognition or subsequently in accordance with paragraph

6.7.1 of Ind AS 109 and (ii) those that meet the definition of held for trading in Ind AS 109 .

  1. financial assets measured at amortised cost.
  2. financial liabilities measured at amortised cost.
  3. financial assets measured at fair value through other comprehensive income, showing separately (i) financial assets that are measured at fair value through other comprehensive income in accordance with paragraph 4.1.2A of Ind AS 109; and (ii) investments in equity instruments designated as such upon initial recognition in accordance with paragraph 5.7.5 of Ind AS 109.
Financial assets or financial liabilities at fair value through profit or loss
  1. If the entity has designated as measured at fair value through profit or loss a financial asset (or group of financial assets) that would otherwise be measured at fair value through other comprehensive income or amortised cost, it shall disclose:
    1. the maximum exposure to credit risk (see paragraph 36(a)) of the financial asset (or group of financial assets) at the end of the reporting period.
    2. the amount by which any related credit derivatives or similar instruments mitigate that maximum exposure to credit risk (see paragraph 36(b)).
    3. the amount of change, during the period and cumulatively, in the fair value of the financial asset (or group of financial assets) that is attributable to changes in the credit risk of the financial asset determined either:
      1. as the amount of change in its fair value that is not attributable to changes in market conditions that give rise to market risk; orusing an alternative method the entity believes more faithfully represents the amount of change in its fair value that is attributable to changes in the credit risk of the asset.

Changes in market conditions that give rise to market risk include changes in an observed (benchmark) interest rate, commodity price, foreign exchange rate or index of prices or rates.

  1. the amount of the change in the fair value of any related credit derivatives or similar instruments that has occurred during the period and cumulatively since the financial asset was designated.
  1. If the entity has designated a financial liability as at fair value through profit or loss in accordance with paragraph 4.2.2 of Ind AS 109 and is required to present the effects of changes in that liability’s credit risk in other comprehensive income (see paragraph 5.7.7 of Ind AS 109), it shall disclose:
    1. the amount of change, cumulatively, in the fair value of the financial liability that is attributable to changes in the credit risk of that liability (see paragraphs B5.7.13-B5.7.20 of Ind AS 109 for guidance on determining the effects of changes in a liability’s credit risk).
    2. the difference between the financial liability’s carrying amount and the amount the entity would be contractually required to pay at maturity to the holder of the obligation.
    3. any transfers of the cumulative gain or loss within equity during the period including the reason for such transfers.
    4. if a liability is derecognised during the period, the amount (if any) presented in other comprehensive income that was realised at derecognition.

10A If an entity has designated a financial liability as at fair value through profit or loss in accordance with paragraph 4.2.2 of Ind AS 109 and is required to present all changes in the fair value of that liability (including the effects of changes in the credit risk of the liability) in profit or loss (see paragraphs 5.7.7 and 5.7.8 of Ind AS 109), it shall disclose:

  1. the amount of change, during the period and cumulatively, in the fair value of the financial liability that is attributable to changes in the credit risk of that liability (see paragraphs B5.7.13–B5.7.20 of Ind AS 109 for guidance on determining the effects of changes in a liability’s credit risk); and
  2. the difference between the financial liability’s carrying amount and the amount the entity would be contractually required to pay at maturity to the holder of the obligation.
  1. The entity shall also disclose:
    1. a detailed description of the methods used to comply with the requirements in paragraphs 9(c), 10(a) and 10A(a) and paragraph 5.7.7(a) of Ind AS 109, including an explanation of why the method is appropriate.
    2. if the entity believes that the disclosure it has given, either in the balance sheet or in the notes, to comply with the requirements in paragraph 9(c), 10(a) or 10A(a) or paragraph 5.7.7(a) of Ind AS 109 does not faithfully represent the change in the fair value of the financial asset or financial liability attributable to changes in its credit risk, the reasons for reaching this conclusion and the factors it believes are relevant.
    3. a detailed description of the methodology or methodologies used to determine whether presenting the effects of changes in a liability’s credit risk in other comprehensive income would create or enlarge an accounting mismatch in profit or loss (see paragraphs 5.7.7 and 5.7.8 of Ind AS 109). If an entity is required to present the effects of changes in a liability’s credit risk in profit or loss (see paragraph 5.7.8 of Ind AS 109), the disclosure must include a detailed description of the economic relationship described in paragraph B5.7.6 of Ind AS 109.
Investments in equity instruments designated at fair value through other comprehensive income

 If an entity has designated investments in equity instruments to be measured at fair value through other comprehensive income, as permitted by paragraph 5.7.5 of Ind AS 109, it shall disclose:

  1. which investments in equity instruments have beendesignated to be measured at fair value through other comprehensive income.
  1. the reasons for using this presentation alternative.
  2. the fair value of each such investment at the end of the reporting period.
  3. dividends recognised during the period, showing separately those related to investments derecognised during the reporting period and those related to investments held at the end of the reporting period.
  4. any transfers of the cumulative gain or loss within equity during the period including the reason for such transfers.

11B If an entity derecognised investments in equity instruments measured at fair value through other comprehensive income during the reporting period, it shall disclose:

  1. the reasons for disposing of the investments.
  2. the fair value of the investments at the date of derecognition.
  3. the cumulative gain or loss on disposal.
Reclassification

12-12A [Refer Appendix 1]

12B An entity shall disclose if, in the current or previous reporting periods, it has reclassified any financial assets in accordance with paragraph 4.4.1 of Ind AS 109. For each such event, an entity shall disclose:

  1. the date of reclassification.
  2. a detailed explanation of the change in business model and a qualitative description of its effect on the entity’s financial statements.
  3. the amount reclassified into and out of each category.

12C For each reporting period following reclassification until derecognition, an entity shall disclose for assets reclassified out of the fair value through profit or loss category so that they are measured at amortised cost or fair value through other comprehensive income in accordance with paragraph 4.4.1 of IndAS 109:

  1. the effective interest rate determined on the date of reclassification; and
  2. the interest revenue recognised.

12D If, since its last annual reporting date, an entity has reclassified financial assets out of the fair value through other comprehensive income category so that they are measured at amortised cost or out of the fair value through profit or loss category so that they are measured at amortised cost or fair value through other comprehensive income it shall disclose:

  1. the fair value of the financial assets at the end of the reporting period; and
  2. the fair value gain or loss that would have been recognised in profit or loss or other comprehensive income during the reporting period if the financial assets had not been reclassified.
  1. [Refer Appendix 1]
Offsetting financial assets and financial liabilities

The disclosures in paragraphs 13B–13E supplement the other disclosure requirements of this Ind AS and are required for all recognised financial instruments that are set off in accordance with paragraph 42 of Ind AS 32. These disclosures also apply to recognised financial instruments that are subject to an enforceable master netting arrangement or similar agreement, irrespective of whether they are set off in accordance with paragraph 42 of Ind AS 32.

13B An entity shall disclose information to enable users of its financial statements to evaluate the effect or potential effect of netting arrangements on the entity’s financial position. This includes the effect or potential effect of rights of set-off associated with the entity’s recognised financial assets and recognised financial liabilities that are within the scope of paragraph 13A.

13C To meet the objective in paragraph 13B, an entity shall disclose, at the end of the reporting period, the following quantitative information separately for recognised financial assets and recognised financial liabilities that are within the scope of paragraph 13A:

the gross amounts of those recognised financial assets and recognised financial liabilities;

  1. the amounts that are set-off in accordance with the criteria in paragraph 42 of Ind AS 32 when determining the net amounts presented in the statement of financial position;
  2. the net amounts presented in the balance sheet;
  3. the amounts subject to an enforceable master netting arrangement or similar agreement that are not otherwise included in paragraph 13C(b), including:
    1. amounts related to recognised financial instruments that do not meet some or all of the offsetting criteria in paragraph 42 of Ind AS 32; and
    2. amounts related to financial collateral (including cash collateral); and
  4. the net amount after deducting the amounts in (d) from the amounts in (c) above.

The information required by this paragraph shall be presented in a tabular format, separately for financial assets and financial liabilities, unless another format is more appropriate.

13D The total amount disclosed in accordance with paragraph 13C(d) for an instrument shall be limited to the amount in paragraph 13C(c) for that instrument.

13E    An entity shall include a description in the disclosures of the rights of set-off associated with the entity’s recognised financial assets and recognised financial liabilities subject to enforceable master netting arrangements and similar agreements that are disclosed in accordance with paragraph 13C(d), including the nature of those rights.

13F If the information required by paragraphs 13B–13E is disclosed in more than one note to the financial statements, an entity shall cross-refer between those notes.

Collateral
  1. An entity shall disclose:
    1. the carrying amount of financial assets it has pledged as collateral for liabilities or contingent liabilities, including

amounts that have been reclassified in accordance with paragraph 3.2.23(a) of Ind AS 109; and

  1. the terms and conditions relating to its pledge.
  1. When an entity holds collateral (of financial or non-financial assets) and is permitted to sell or repledge the collateral in the absence of default by the owner of the collateral, it shall disclose:
    1. the fair value of the collateral held;
    2. the fair value of any such collateral sold or repledged, and whether the entity has an obligation to return it; and
    3. the terms and conditions associated with its use of the collateral.
Allowance account for credit losses
  1. [Refer Appendix 1]

16A The carrying amount of financial assets measured at fair value through other comprehensive income in accordance with paragraph 4.1.2A of Ind AS 109 is not reduced by a loss allowance and an entity shall not present the loss allowance separately in the balance sheet as a reduction of the carrying amount of the financial asset. However, an entity shall disclose the loss allowance in the notes to the financial statements.

Compound financial instruments with multiple embedded derivatives

If an entity has issued an instrument that contains both a liability and an equity component (see paragraph 28 of Ind AS 32) and the instrument has multiple embedded derivatives whose values are interdependent (such as a callable convertible debt instrument), it shall disclose the existence of those features.

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