Financial Instruments; Ind as 109; Financial Assets for Banking Sector

International Journal of Economics and Management Studies
© 2017 by SSRG - IJEMS Journal
Volume 4 Issue 12
Year of Publication : 2017
Authors : Amarnath.DG
How to Cite?

Amarnath.DG, "Financial Instruments; Ind as 109; Financial Assets for Banking Sector," SSRG International Journal of Economics and Management Studies, vol. 4,  no. 12, pp. 1-7, 2017. Crossref,


Business is an exchange of goods and services, for money or money’s worth. Over the period of time, due to the development of modes of transportation, technology, communication etc. the business transactions have increased many fold not only on national but on an international level. Earlier barter system was the medium of exchange, then the invention of money as the common denominator for the transaction, due to the banking revolution the medium of exchanges were banking instruments like cheques, drafts, bills etc. Now due to the paucity of time, and intensity of transactions within and outside the country, more modern methods are followed, and they are financial instruments. Name any transaction; we will get an instrument as medium of exchange, because of well-regulated financial institutions, accurate data information, modern communication technologies, and the faith in these financial instruments by the parties involved. Some of these instruments are bonds, deposits receipts, equity stocks, derivative instruments, commodity markets, foreign exchange markets, etc. Over and above all these markets, we have an added advantage of getting these instruments hedged against the loss expected from these instruments. Hedge is an instrument to protect the likely loss arising from these financial instruments due to variation in prices, interest and exchange rates. Hedging is like getting an insurance cover to protect from would be loss. Modern banks are intermediaries, which mainly deal with financial instruments, and almost 90% of their total assets are formed of financial instruments. These assets are covered under Level 1 of fair value method under Ind AS 113; they are derived, observable and comparable. The proper valuation of these assets have to be derived, recorded and disclosed to the stakeholders. Ind AS 109; financial instrument guides, how the financial instruments shall be recorded in Profit and Loss A/c (P& L), Other Comprehensive Income A/c (OCI) etc. Ind AS 107 guides the information details to be disclosed. Under AS 32, financial instruments were recorded at purchase (historical) cost, and the variation in the market value were disclosed below the balance sheet, but now, the purchase cost is recorded and the every year fair value are shown in position statement by adjusting the price variation in P&L or OCI A/c. Impairment is considered year on year basis. Objectives of Ind AS 109 is to establish the principles for the financial reporting of financial assets/liabilities to present relevant and useful information to users to understand the nature of transactions and the risk attached with these instruments. This study tries to find out the overall impact of Ind AS 109 in comparison with AS 32 on the profitability of the financial institutions. The conclusion is that, there is not glaring impact on profitability but Ind AS 109 provide more information about financial instruments than AS 32 and also shows the present market value of instruments and the risks involved. It will help the stakeholders to take the timely action about the financial decisions. Note: seeing the overall length of Ind AS 109, only financial assets are considered and not financial liabilities debt and equity instrument for study.


Fair value through profit and loss (FVTPL), fair value through other Comprehensive income (FVOCI), amortized cost).


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