Why Ind AS Matters More Than Ever
Indian Accounting Standards (Ind AS), converged with International Financial Reporting Standards (IFRS), are mandatory for listed companies, large unlisted companies, and their subsidiaries. With the Companies Act 2013 amendments emphasising digital filing and enhanced disclosures, understanding these standards is critical for accurate reporting.
🔴 Latest Update — August 2026: MCA Notifies Major Ind AS Amendments
On 12 August 2026, the Ministry of Corporate Affairs (MCA) notified the Companies (Indian Accounting Standards) Amendment Rules, 2026 (G.S.R. 725(E)), introducing significant changes to five key standards: Ind AS 101, 107, 109, 110, and 7. These amendments align Indian standards with the latest IFRS updates from the IASB and apply to annual reporting periods beginning on or after 1 April 2026 (FY 2026-27 onwards).
What’s New in the August 2026 Amendments?
1. Ind AS 109 — Financial Instruments: Classification & Measurement
- ESG-Linked Loans: Updated guidance clarifies that sustainability-linked or carbon-triggered loan features do not automatically fail the SPPI (Solely Payments of Principal and Interest) test. Cash flow assessments must now use a “not significantly different” benchmark.
- Electronic Payment Settlement: Financial liabilities paid via electronic payment systems can now be derecognised before actual settlement date, provided the payment instruction is irrevocable and settlement risk is insignificant.
- Contingent Cash Flow Features: New disclosures required for financial assets/liabilities with event-linked cash flows (e.g., ESG/carbon-linked triggers).
2. Ind AS 107 — Enhanced Disclosures
- Nature-Dependent Electricity Contracts: New dedicated disclosure section (paras 30A–30C) for solar/wind power purchase agreements (PPAs). Entities must provide a single note on contracts referencing weather-dependent or renewable electricity.
- FVOCI Equity Investments: Expanded disclosures for equity instruments designated at Fair Value through Other Comprehensive Income (paras 11A, 11B).
- Contingent Contractual Terms: New disclosure requirements (paras 20B–20D) for loans with cash flows that vary based on ESG, sustainability, or carbon-reduction triggers.
3. Ind AS 110 — Consolidated Financial Statements
- De Facto Agents: Clarified guidance on assessing control — a de facto agent relationship can exist without a contractual arrangement. This affects consolidation assessments for structured entities and special purpose vehicles.
4. Ind AS 7 — Statement of Cash Flows
- Equity Method Reference Removed: Paragraph 37 amended to remove equity method references for associates/JVs/subsidiaries in separate financial statements, consistent with Ind AS 27.
5. Ind AS 101 — First-Time Adoption
- Transitional Guidance: New paragraph 39AK and substituted Appendix B paragraphs B5–B6 on hedge relationships at the date of transition to Ind AS.
Action Items for CFOs & Audit Teams
- 📋 Review all ESG-linked financing arrangements — reassess SPPI classification under amended Ind AS 109
- ⚡ Identify nature-dependent electricity contracts — solar/wind PPAs now require specific disclosures under Ind AS 107
- 💳 Update electronic payment policies — determine if early derecognition of liabilities will be applied consistently
- 🏢 Reassess consolidation boundaries — evaluate de facto agent relationships in group structures
- 📊 Update disclosure checklists — ensure FVOCI, contingent cash flow, and PPA disclosures are captured
Key Standards Every Business Should Know
Ind AS 115 — Revenue from Contracts with Customers
This standard governs how and when revenue is recognised. The five-step model requires:
- Identify the contract with a customer
- Identify the performance obligations
- Determine the transaction price
- Allocate the price to each obligation
- Recognise revenue when/as obligations are satisfied
Ind AS 116 — Leases
All leases (except short-term and low-value) must be recognised on the balance sheet as a right-of-use asset and a lease liability. This significantly impacts companies with large rental obligations.
Ind AS 109 — Financial Instruments (Pre-2026 Amendments)
Governs classification, measurement, impairment, and hedge accounting for financial assets and liabilities. The Expected Credit Loss (ECL) model requires forward-looking provisioning for receivables. See August 2026 amendments above for ESG-linked loans and electronic payment updates.
Ind AS 12 — Income Taxes
Requires recognition of deferred tax assets and liabilities for temporary differences between book and tax values. Critical for accurate tax provision reporting.
Ind AS 19 — Employee Benefits
Governs accounting for gratuity, leave encashment, and other post-employment benefits. Requires actuarial valuations for defined benefit obligations.
Common Reporting Mistakes
- ❌ Recognising revenue before performance obligations are satisfied
- ❌ Not capitalising lease obligations on the balance sheet
- ❌ Using historical default rates instead of forward-looking ECL models
- ❌ Incorrect deferred tax calculations on timing differences
- ❌ Missing related party disclosures under Ind AS 24
- ❌ New: Not disclosing nature-dependent electricity contracts (solar/wind PPAs) under amended Ind AS 107
- ❌ New: Incorrect SPPI assessment for ESG-linked loans under amended Ind AS 109
Actionable Tips
- 📊 Map all revenue contracts to the 5-step Ind AS 115 model
- 🏢 Review all lease agreements for Ind AS 116 capitalisation
- 📈 Update ECL provisioning models with current economic data
- 🧮 Reconcile deferred tax computations quarterly
- 👥 Get actuarial valuations done annually for employee benefits
- ⚡ Identify all renewable energy PPAs — prepare new Ind AS 107 disclosures
- 🌱 Review sustainability-linked loans — reassess SPPI classification under amended Ind AS 109
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