Ind AS 107 (Financial Instruments: Disclosures) is the Indian Accounting Standard that prescribes the disclosures entities must make about financial instruments in their financial statements.

The Ministry of Corporate Affairs (MCA) notified Ind AS 107 via the Companies (Indian Accounting Standards) Rules, 2015. It became effective on a voluntary basis from 1 April 2015 and mandatory from 1 April 2016 for Phase I companies. Ind AS 107 has no direct predecessor under Indian GAAP; partial guidance existed in AS 1 and the unnotified AS 32.

For FY 2026-27, Ind AS 107 remains crucial for all companies reporting under Ind AS. In practice, banks and NBFCs produce hundreds of pages of risk disclosures under this standard, dovetailing with RBI and Basel requirements.

Ind AS 107 at a Glance

Ind AS 107 sets out the disclosure requirements for financial instruments to ensure users can assess their impact on an entity’s financial position and risk profile. The standard primarily targets listed companies, large private limited companies, banks, NBFCs, and any entity reporting under Indian Accounting Standards.

What is Ind AS 107: Financial Instruments: Disclosures?

Ind AS 107 requires entities to disclose both quantitative and qualitative information about their financial instruments. The standard’s core principle is that users should be able to evaluate how financial instruments affect an entity’s financial position and performance as well as its exposure to risks such as credit risk, liquidity risk, and market risk.

ICAI introduced this standard as part of India’s convergence with International Financial Reporting Standards (IFRS). It aligns closely with IFRS 7. Before its notification by the Ministry of Corporate Affairs in February 2015, Indian GAAP lacked comprehensive disclosure requirements specific to financial instruments.

CFOs, finance teams in listed companies and NBFCs, statutory auditors, and CA students all rely on this standard when preparing or reviewing financial statements under the Indian Accounting Standards framework.

Objective of Ind AS 107

The objectives of Ind AS 107 are:

• Require entities to provide disclosures that enable users to evaluate the significance of financial instruments for the entity's financial position and performance.
• Establish disclosures about the nature and extent of risks arising from financial instruments and how the entity manages those risks.
• Specify quantitative and qualitative disclosures about credit risk, liquidity risk, and market risk.

These objectives directly support India’s “true and fair view” requirement in Section 129 of the Companies Act, 2013. By enforcing detailed disclosure around risks and exposures from financial instruments, Ind AS 107 helps ensure transparency for investors and regulators alike.

Who Must Apply Ind AS 107?

Entities covered, applicability table

All companies that are required to prepare their financial statements under Indian Accounting Standards must apply Ind AS 107. This includes:

Banks and insurance companies follow separate timelines but are now mandatorily covered if reporting under Ind AS.

Scope exclusions

The following items are excluded from the scope of Ind AS 107:

• Items outside the scope of Ind AS 109 (such as investments in subsidiaries, associates or joint ventures).
• Leases except as specifically required.
• Insurance contracts covered by Ind AS 117.
• Employee benefit plans governed by Ind AS 19.

When the standard does not apply

If a transaction or item is:

• An investment in a subsidiary/associate/joint venture, disclosures follow consolidation standards.
• A lease arrangement, accounting follows Ind AS 116 Leases unless otherwise required by this standard.
• An insurance contract, refer to Ind AS 117 Insurance Contracts.
• An employee benefit plan, apply Ind AS 19 Employee Benefits.

Key Definitions under Ind AS 107

Recognition and Measurement under Ind AS 107

When to recognise

Under Ind AS 107, recognition refers not to accounting entries but to when disclosures must be made regarding financial instruments held during or at period end. The entity must provide all required disclosures at each reporting date for every instrument within scope, whether recognised on balance sheet or off-balance sheet per Para B5.

Disclosures cover both significance (impact on position/performance) and nature/extents of risks arising from these instruments.

Initial measurement

At initial application or acquisition date, an entity must disclose:

• The categories into which each instrument falls, amortised cost; fair value through other comprehensive income (FVTOCI); fair value through profit or loss (FVTPL); designated categories per Para 8.
• Carrying amounts by category.
• Qualitative information describing management’s objectives for holding each class, trading; held-to-maturity; hedging purposes etc.

Quantitative figures used are carrying amounts or fair values at reporting date; qualitative explanations must describe methods used for classification/measurement per Para 8-30.

Subsequent measurement

Each reporting period requires updated disclosures reflecting any changes since last period:

• Net gains/losses by category, distinguishing between profit/loss account effects versus those taken directly through OCI (Para 20).
• Movements in expected credit loss provisions, by stage per Para 35A-35N.
• Updates on collateral held; concentrations; exposures by geography/industry/counterparty type.
• Reconciliation between balance sheet figures/disclosure tables, cross-referencing is mandatory so users can trace amounts across notes/statements.
• For market risks, updated sensitivity analyses reflecting year-end positions must be disclosed using reasonably possible changes in key variables per Para 40.

Aggregation level is critical, disclose enough detail so major exposures/concentrations are visible but avoid overwhelming granularity that clouds materiality judgment.

**Formula:**

Sensitivity Impact = Exposure Amount × Change in Risk Variable × Tax Adjustment Factor

Example for interest rate sensitivity:

If Rs 200 crore floating-rate debt × +1% rate = Rs 2 crore pre-tax impact

Post-tax impact = Rs 2 crore × (1, tax rate)

Three Pillars of Risk Disclosure - Credit, Liquidity, Market

Ind AS 107 organises its core disclosure requirements around three pillars:

Credit Risk:

Disclose maximum exposure before collateral; ECL methodology including key assumptions; stage-wise movement reconciliation; quality information such as overdue status; collateral details where relevant (Para 35A-35N).

Liquidity Risk:

Provide maturity analyses showing contractual undiscounted cash outflows for all material liabilities, not just carrying values, and explain liquidity management strategies adopted by management (Para 39).

Market Risk:

Present sensitivity analyses quantifying how profit/equity would change given reasonable shifts in market variables like interest rates/currency rates/equity prices at year-end exposures (Para 40). If Value-at-Risk models are used internally they must be explained/disclosed too.

Additionally, for entities applying hedge accounting, disclose hedged items/instruments/effectiveness/results per Para 21A-24F.

Capital management objectives/policies/processes also require disclosure even though capital itself may extend beyond only financial instruments (Para 134).

In our audit practice we frequently observe that inadequate ECL methodology disclosure remains a leading source of regulatory comment letters, especially among NBFCs where PD/LGD/EAD models drive provisioning outcomes.

Worked Examples on Ind AS 107

Example 1: Credit risk disclosure for trade receivables

Sundaram Engineering's trade receivables stand at Rs 100 crore as at March 31 2026. The top five customers account for Rs 45 crore out of this total exposure. The closing expected credit loss provision is Rs 4.50 crore after movement during the year.

Computation Table

Journal Entry

No new accounting entry arises solely due to disclosure requirements here. However Sundaram Engineering must present a comprehensive note showing gross/net exposures by customer segment/aging bucket/ECL methodology/movement reconciliation/collateral if any, as mandated by Paras 35A-35N.

Example 2: Interest rate risk sensitivity analysis

Maharashtra Holdings has floating-rate borrowings totalling Rs 200 crore linked to MCLR as at March 31 2026. Management assesses a +100 basis points shift as reasonably possible over a one-year horizon.

Computation Table

Journal Entry

No accounting entry results directly from this analysis, it is purely a note disclosure requirement under Para 40:

"A +100 bps movement in MCLR would impact profit before tax by Rs 2 crore over a one-year period holding other variables constant." The method/assumptions behind this computation, including principal amount/sensitivity variable/tax effect, must be clearly described within annual report notes per Paras 40-41A.

Disclosure Requirements under Ind AS 107

Schedule III to the Companies Act, 2013, requires entities to present a true and fair view of their financial position. Ind AS 107 mandates granular disclosures on financial instruments so users can evaluate exposures, risk management, and measurement methods. These notes are central to audit reporting and regulatory scrutiny.

Auditors must ensure these disclosures reconcile with the primary statements and meet SA 700’s “true and fair view” requirement.

Common Mistakes & Industry-Specific Considerations

Common errors auditors flag

• Inadequate ECL methodology disclosure, particularly forward-looking inputs and macroeconomic overlays.
• Maturity analysis of liabilities using carrying amounts instead of contractual undiscounted cash flows.
• Missing sensitivity analyses for market risk exposures.
• Aggregating disclosures at too high a level, hiding material concentrations.
• Failing to update hedge accounting disclosures when designations change.
• Inadequate collateral and credit enhancement disclosure for credit risk exposures.

Industry application notes

Banks:

Banks produce the most extensive Ind AS 107 disclosures, hundreds of pages covering credit, liquidity, and market risks. Pillar 3 Basel disclosures align with Ind AS 107 requirements. The Reserve Bank of India (RBI) also prescribes additional credit risk details.

NBFCs:

For NBFCs, stage-wise ECL classification is core. Disclosures must explain Probability of Default (PD), Loss Given Default (LGD), Exposure at Default (EAD) methodologies. Movements between Stage 2 and Stage 3 are closely scrutinised by auditors and regulators.

Corporates:

Corporate groups focus on trade receivable ECLs, foreign exchange risk on imports/exports, and interest rate risk on borrowings. Disclosures are lighter than banks but must still be comprehensive enough for users to assess major exposures.

Ind AS 107 vs No notified counterpart vs IFRS: Key Differences

The table below compares disclosure requirements under Indian GAAP (AS), Ind AS 107, and IFRS 7:

Indian Accounting Standards have adopted the IFRS 7 model almost verbatim for financial instrument disclosures. However, some terminology aligns with Indian regulatory context. For example, Schedule III presentation conventions apply. The absence of a notified AS counterpart means legacy Indian GAAP filers cannot rely on comparable guidance.

Latest Amendments to Ind AS 107 (FY 2026-27)

No amendments have been notified to Ind AS 107 for FY 2026-27 as of 2026-05-02. The standard continues to apply in its existing form.

Related Standards You Should Know

• [Ind AS 109](/ind-as-109-financial-instruments/), Provides recognition and measurement basis on which Ind AS 107 disclosures rest.
• [Ind AS 32](/ind-as-32-financial-instruments-presentation/), Presentation classification feeds into Ind AS 107 categorisation.
• [Ind AS 113](/ind-as-113-fair-value-measurement/), Fair value measurement disclosures for financial instruments.
• [Ind AS 1](/ind-as-1-presentation-of-financial-statements/), Presentation framework for the disclosures.

Need Help with Ind AS 107 Compliance?

Patron Accounting LLP supports listed companies, NBFCs, and large corporates in meeting every aspect of Ind AS 107 compliance, from note drafting to auditor queries. Our team brings deep experience across sectors where disclosure quality is scrutinised by SEBI and NFRA.

Our services include:

• Statutory Audit
• Ind AS Advisory
• Financial Reporting & Schedule III
• Disclosure Review

Schedule a 30-minute consultation with our Ind AS team, Pune · Mumbai · Delhi · Gurugram.

About This Article

Reviewed by CA & CS Team · Patron Accounting LLP

Technical reviewer: CA Sundram Gupta, FCA

Last reviewed: 2026-05-02

Sources: ICAI Compendium of Accounting Standards · MCA Notification (Companies (Indian Accounting Standards) Rules, 2015, dated 16 February 2015) · IFRS Foundation