Ind ASs relating to financial instruments

What are the Ind ASs relating to financial instruments?

Financial instruments are primarily governed by three standards as per Ind AS, viz, Ind AS 32, Ind AS 109 and Ind AS 107.

Ind AS 32 defines financial instruments, financial assets, financial liabilities and equity instruments. Ind AS 32 deals with financial instruments from the perspective of an issuer. It primarily addresses the presentation-related issues and provides guidance whether a financial instrument should be considered as a financial asset, a financial liability or an equity instrument. Ind AS 32 also addresses compound instruments that contain both liability and equity components.

Ind AS 109 also deals with the financial instruments albeit from the perspective of the investor. Primarily, it addresses the issues relating to the recognition and measurement of financial assets and the liabilities. Ind AS 109 provides guidance on the classification of financial assets and financial liabilities, recognition and derecognition of the financial instruments, measurement and subsequent measurement of such instruments and the impairment methodology to be followed for financial assets. This Standard also addresses the concepts on hedge accounting and provides guidance as to how a hedging relationship should be accounted for, be it a fair value hedge, a cash flow hedge or a hedge of net investment in foreign operation.

Financial instruments standards also include Ind AS 107 where all the requirements relating to disclosures about the financial instruments including hedge accounting are grouped and given in this standard. The primary objective of Ind AS 107 is to provide guidance on the disclosures that would enable the users of the financial statements to evaluate the significance of financial instruments for the entity’s financial position and performance. This Standard also prescribes disclosures relating to the nature and extent of the risks arising from financial instruments to which the entity is exposed to and how the entity manages those risks.