MCA amends Ind AS 109, 107 and three other standards from 1 April 2026
Key points
- MCA has amended Ind AS 101, 107, 109, 110 and 7, mainly on financial instruments, electronic payment settlement and nature-dependent electricity contracts.
- Companies preparing financial statements under Ind AS are affected; the notification does not change which companies must follow Ind AS.
- The changes apply to annual reporting periods beginning on or after 1 April 2026; early application of the classification changes is not permitted in India.
The Ministry of Corporate Affairs (MCA) has notified the Companies (Indian Accounting Standards) Amendment Rules, 2026, through G.S.R. 725(E) dated 12 August 2026, issued in consultation with the National Financial Reporting Authority. The rules amend five standards: Ind AS 101, Ind AS 107, Ind AS 109, Ind AS 110 and Ind AS 7. The amended requirements apply to annual reporting periods beginning on or after 1 April 2026.
What has changed
| Set of amendments | Standards | Main points |
|---|---|---|
| Amendments to the Classification and Measurement of Financial Instruments | Ind AS 109, Ind AS 107 | Electronic payment settlement; loans with contingent features such as carbon-emission targets; non-recourse and tranched instruments; new disclosures |
| Contracts Referencing Nature-dependent Electricity | Ind AS 109, Ind AS 107 | Assessing whether contracts are held for expected electricity usage, hedge accounting and a single disclosure note for electricity contracts whose volumes depend on uncontrollable natural conditions such as the weather |
| Annual Improvements to Ind AS (2024) | Ind AS 101, 107, 109, 110 and 7 | Lessee derecognition of lease liabilities, initial measurement of trade receivables, de facto agents, hedge accounting on first-time adoption, cash flow reporting for investments held at cost |
Electronic payments. Under new paragraph B3.3.8 of Ind AS 109, a company settling a financial liability in cash through an electronic payment system may treat it as discharged before the settlement date, but only if the payment instruction leaves it with no practical ability to withdraw, stop or cancel the instruction, no practical ability to access the cash, and the settlement risk of the system is insignificant. A company that chooses this must apply it to all settlements through that payment system; otherwise the liability is derecognised on the settlement date.
Loans with contingent features. A financial asset whose cash flows change on an event not directly related to basic lending risks, such as the borrower meeting a carbon-emission target, can still pass the test of being solely payments of principal and interest if its cash flows are consistent with a basic lending arrangement both before and after the change and, in all contractually possible scenarios, its cash flows would not be significantly different from those of an identical instrument without that feature. A loan whose rate tracks a carbon price index, an example in the notification, does not pass. Ind AS 107 adds disclosures for such terms: a description of the contingent event, quantitative information on the possible changes to cash flows, and the gross carrying amount or amortised cost of the instruments with those terms.
Transition. The classification amendments apply retrospectively under Ind AS 8, but prior periods need not be restated, and may be restated only if that is possible without hindsight. If they are not restated, the effect is adjusted in opening balances and retained earnings at the start of the year of first application. The notification states that early application of these amendments is not permitted in India.
Who is affected
The rules apply to companies that prepare financial statements under the Companies (Indian Accounting Standards) Rules, 2015. They do not change which companies must follow Ind AS; companies that do not apply Ind AS are unaffected. The electricity amendments matter mainly to companies with such power contracts.
What this means for businesses
In practice, for a company with an April to March financial year, the first financial statements to reflect these changes are those for the year ending 31 March 2027. Finance teams may want to:
- review loans, investments and borrowings with interest linked to sustainability or other targets, and check whether their classification changes;
- decide whether to use the electronic payment option and record which payment systems meet the three conditions, since the notification does not name any system;
- check lease liabilities extinguished during the year, the initial measurement of trade receivables and how investments held at cost appear in the cash flow statement;
- plan the new disclosures before the year-end.
Where the effect could be material, discuss it with the auditors early.
Key dates
- 12 August 2026: rules notified, in force from their publication in the Official Gazette.
- Annual reporting periods beginning on or after 1 April 2026: amended requirements apply.
This update was written with AI from the official source above and automatically fact-checked against it before publishing. It is general information, not professional advice. Check the source, or talk to a Chartered Accountant, before acting on it.