Errors in disclosure in “other notes forming part of Financial Statements – Financial Risk Management

National Financial Reporting Authority (NFRA) raised a few observations vide Report No.NF-20011/47/2021, Financial Reporting Quality Review Report (FRQRR contains instances of non-compliances or errors in Ind AS financial statements.

In this story, we would look into the NFRA observations relating to disclosure in “other notes forming part of Financial Statements- Financial Risk Management”.

1. NFRA Observed that It was not clear from the presentation and disclosures in the financial statements as to which line item of Balance Sheet the financial assets (unrealised gains) or financial liabilities (unrealised losses) relating to these outstanding Fx Forward Contracts, which were Derivative Financial Instruments within the scope of Ind AS 109, were presented. The accounting policy of the sample Company for Fx Forward Contracts was erroneous and it was in non-compliance with the classification and measurement requirements of Ind AS 109.

2. It was also observed that the assumption by the sample company, related to trade receivables supported by Letters of Credit and Bank Guarantees as having negligible credit risk was not justifiable.Also, the same was not in accordance with letter and spirit of principles and concepts of ECL approach for impairment loss recognition and measurement under Ind AS 109, Financial instruments.

To Read The Full Story Click Here