By CA Hatim Rampurawala | Published: Jan 12, 2026



New & Updated Indian Accounting Standards (Ind AS) – FY 2025–26

The Ministry of Corporate Affairs (MCA), in alignment with recent IFRS developments, has notified several amendments to Indian Accounting Standards (Ind AS) applicable from 1 April 2025. These changes aim to improve transparency, enhance comparability, and address emerging accounting issues such as supplier finance arrangements, global minimum tax (Pillar Two), and foreign currency exchangeability.

1. Ind AS 21 – The Effects of Changes in Foreign Exchange Rates

Key Amendment

The amendment introduces new guidance on determining the spot exchange rate when a currency is not exchangeable. This situation may arise due to legal restrictions, lack of an active market, or government controls.

What is New?

  • Entities must estimate the spot exchange rate when exchangeability is temporarily or permanently unavailable.
  • The estimated rate should reflect the rate at which an entity could have exchanged the currency at the measurement date.
  • Additional disclosures are required explaining:
    • Nature of the restriction
    • Carrying amounts affected
    • Risks arising due to non-exchangeability

Practical Impact

This amendment is particularly relevant for entities operating in jurisdictions with foreign exchange controls or hyperinflationary economies.

2. Ind AS 1 – Presentation of Financial Statements

Key Amendment: Classification of Liabilities

The amendment clarifies that classification of liabilities as current or non-current depends on the entity’s right to defer settlement at the reporting date, and not on management intention or expectations.

Important Clarifications

  • If the right to defer settlement exists at the reporting date → Non-current
  • If such right does not exist → Current
  • Loan covenants tested after the reporting period do not affect classification

Audit & Reporting Impact

Entities must carefully review loan agreements and covenant clauses as of the balance sheet date to ensure correct classification.

3. Ind AS 7 & Ind AS 107 – Supplier Finance Arrangements

Background

Supplier Finance Arrangements (also known as Supply Chain Financing or Reverse Factoring) have increased significantly and required enhanced transparency.

New Disclosure Requirements

  • Description of supplier finance arrangements
  • Carrying amount of liabilities subject to such arrangements
  • Payment terms compared with normal trade payables
  • Impact on liquidity risk and cash flows

Presentation Impact

In certain cases, trade payables under supplier finance arrangements may need to be presented separately from regular trade payables.

4. Ind AS 12 – Income Taxes (Pillar Two Tax Rules)

Overview

The amendment introduces an exception related to the OECD’s Pillar Two Global Minimum Tax framework.

Accounting Treatment

  • No recognition of deferred tax assets or liabilities arising from Pillar Two taxes
  • Mandatory disclosures about:
    • Exposure to Pillar Two legislation
    • Jurisdictions where applicable
    • Potential impact on future tax expense

Why This Matters

This avoids complexity and volatility in deferred tax calculations while still ensuring transparency for users of financial statements.

5. Ind AS 101 – First-time Adoption of Ind AS

Key Changes

  • Alignment with amended Ind AS 21 for hyperinflationary economies
  • Clarifications on lease classification exemptions

Applicability

These amendments mainly affect entities transitioning from Indian GAAP to Ind AS from FY 2025–26 onwards.

6. Other Minor Amendments

  • Ind AS 10: Minor terminology updates relating to covenants
  • Ind AS 108, 109, 115, 28 & 32: Technical corrections and alignment with IFRS wording

Effective Date Summary

Standard Nature of Amendment Effective From
Ind AS 21 Foreign currency exchangeability 1 April 2025
Ind AS 1 Liability classification 1 April 2025
Ind AS 7 & 107 Supplier finance disclosures 1 April 2025
Ind AS 12 Pillar Two tax exception 1 April 2025

Conclusion

The FY 2025–26 Ind AS amendments represent a significant step towards enhanced financial reporting transparency and global alignment. Entities should assess the impact early, update accounting policies, and ensure adequate disclosures to avoid last-minute compliance challenges.