?? IND AS 109: Bridging Accounting with Business Reality

In today’s fast-paced financial world, IND AS 109 – Financial Instruments is more than just an accounting standard—it reflects the realities of business risks, credit exposure, and market volatility. But how did we get here? Let’s take a quick journey through its evolution and significance!

?? Objective of IND AS 109

IND AS 109 establishes principles for the recognition, classification, measurement, impairment, and hedge accounting of financial instruments. The goal is to ensure that financial statements provide relevant and reliable information that helps investors, lenders, and other stakeholders make informed decisions.

? A Brief History:

?? Before IND AS 109: Accounting for financial instruments was fragmented under multiple standards, leading to inconsistencies. ?? 2009 – The Turning Point: IFRS 9 (on which IND AS 109 is based) was introduced by the IASB as a response to the 2008 global financial crisis, which exposed weaknesses in existing accounting models. ?? 2018 – India Adopts IND AS 109: With a growing financial sector and increasing global integration, India aligned with IFRS 9, replacing AS 30, 31, and 32.

?? Why is IND AS 109 Important for Businesses?

? Reflects Business Reality: Companies face credit risk, market fluctuations, and liquidity challenges. IND AS 109 ensures that financial statements present a true and fair picture of these risks.

? Classification & Measurement: Simplifies financial asset classification into Amortized Cost, FVOCI, and FVTPL, making reporting more transparent.

? Expected Credit Loss (ECL) Model: Moves from an incurred loss model to an expected loss model, ensuring proactive risk management. This is especially relevant for banks, NBFCs, and businesses offering credit.

? Hedge Accounting: Aligns accounting with risk management practices, reducing volatility in financial statements.

IND AS 109 is not just about compliance—it’s about making financial reporting more aligned with real-world risks and decision-making. By improving comparability, enhancing risk assessment, and strengthening investor confidence, it becomes a crucial pillar of modern business finance. ??

#INDAS109 #FinancialReporting #Accounting #BusinessReality #CAFinal #FinancialInstruments #Finance #ECL #HedgeAccounting #IFRS9