The Ministry of Corporate Affairs (MCA) introduced a series of amendments to the Companies (Indian Accounting Standards) Rules (commonly referred to as “Ind AS amendments”) in 2024 that became effective for many reporting entities in FY 2024–25. These amendments targeted a number of core standards — particularly on financial instruments, disclosures, insurance contracts, lease accounting (sale-and-leaseback), and the classification of liabilities as current or non-current — and introduced new disclosure requirements (for example, supplier finance / reverse factoring). The goal: improve transparency, reduce diversity in practice, and align certain Ind AS paragraphs more closely with the international references while addressing India-specific issues.
Why these amendments matter: users, preparers and auditors
These amendments matter for three core reasons:
- Transparency and comparability — Enhanced disclosures (financial instruments, supplier finance, lease transactions) give users a clearer view of a company’s financing structure and contingent exposures.
- Classification and presentation — Clarifications on when liabilities are current vs non-current (including covenant treatment) can materially change balance sheet presentation and covenant outcomes.
- Operational impact — Entities must update accounting policies, system logic, spreadsheet models and audit evidence, with knock-on effects on metrics used by management, lenders and investors. Major advisory firms quickly issued implementation alerts highlighting the need to adjust models and disclosures ahead of FY 2024–25 reporting.
Timeline & scope: When the amendments were notified and who is affected
The principal amendments were notified in mid-2024 (around August–September 2024) via the Companies (Indian Accounting Standards) Amendment Rules, 2024. Some clarifying or relief amendments followed later in 2024 as stakeholders raised implementation challenges. Applicability varies by amendment (some are effective immediately for annual reporting periods beginning on or after specific dates), but many of the changes were explicitly applicable for reporting periods beginning on or after April 1, 2024 (i.e., FY 2024–25), or with disclosure/application guidance expected for the FY 2024–25 year. Users should consult the specific MCA notifications and the ICAI Compendium for exact effective dates and transitional provisions.
Key amendment areas (high level)
Below are the high-level topics that saw meaningful change or clarifying guidance in the 2024 amendments:
- Financial instruments (Ind AS 32/107/109): Clarifications on classification, presentation and enhanced disclosure requirements to reduce practice variation.
- Insurance contracts (Ind AS 117): Measurement clarifications and interplay with financial instruments; some amendments to align expectations on recognition of claims and service components.
- Leases (Ind AS 116): Specific clarifications on sale-and-leaseback accounting and criteria for recognizing a sale.
- Current vs non-current classification (Ind AS 1): More explicit guidance around when liabilities affected by covenants can be classified as non-current and when they must be classified as current.
- Supplier finance / reverse factoring: New disclosure expectations in Ind AS 7 (cash flows) and Ind AS 107 (financial instruments) to reveal impact on liabilities, cash flows and credit risk.
- Income taxes (Ind AS 12): Updates on recognition/measurement and disclosures tying tax presentation with the amended standards.
Deep dive: Financial instruments (Ind AS 32 / 107 / 109)
Classification and presentation changes
The amendments clarified substance-over-form issues that often arise for instruments with multiple components (e.g., convertible instruments, loan commitments with linked derivatives). One clear objective: reduce divergent accounting where economically similar instruments were being classified differently. The amendments updated certain definitions and presentation rules to help companies decide whether an instrument is debt, equity or contains embedded features requiring bifurcation. Practical takeaways include stricter analysis on settlement mechanics, contingent settlement outcomes and conversion mechanics.
Disclosure expectations
Ind AS 107 amendments reinforced the need to disclose: nature and extent of risks from financial instruments; exposures from complex arrangements (such as supplier finance); judgments and changes in models/assumptions; and quantitative reconciliations for fair value hierarchies (level 1–3). Entities should be ready to provide detailed reconciliations and sensitivity analyses where significant estimation uncertainty exists. Big-4 implementation notes flagged that disclosures are not just a compliance exercise — they must be granular enough for an informed reader.
Practical examples
- A convertible bond with issuer settlement options will require careful assessment of whether the issuer has an unavoidable obligation to deliver cash — leading possibly to debt classification rather than equity.
- Instruments linked to an entity’s own equity may have presentation exceptions; the amendments clarify when those exceptions apply and when separate accounting is necessary.
Prepare examples tying the new classification outcomes to effects on leverage ratios and interest coverage metrics — these are what users look at most.
Deep dive: Insurance contracts (Ind AS 117 and related clarifications)
Measurement and recognition changes
The amendments around Ind AS 117 focused on the measurement of insurance contract liabilities, the allocation between claims and service components, and the interaction with financial instruments. Key points include the requirement to consider future cash flows more granularly and to reflect margins for contractual service where applicable. There was also emphasis on separate recognition of claims incurred and subsequent remeasurement where patterns of cash flows change. These clarifications can affect profit emergence and liabilities on the balance sheet for insurers.
Presentation & portfolio-level considerations
Insurers must revisit their portfolio groupings and ensure consistent application of the measurement model across similar contracts. The amendments encourage transparent presentation of insurance revenue, insurance service expenses and insurance finance income/expenses to avoid conflation of operating and financing results.
Examples and impacts for insurers
- A product with significant investment components may require tighter separation of insurance versus investment elements.
- Remeasurements due to actuarial assumption changes may now have refined disclosure lines and a clearer split between experience adjustments and changes in assumptions.
Insurers should re-run models and reconcile changes to retained earnings and OCI (if applicable) under the new measurement expectations.
Deep dive: Leases (Ind AS 116) — sale and leaseback clarifications
When a sale is recognised
The amendments clarified the sale recognition criteria in sale-and-leaseback transactions, aligning the assessment with the control transfer principles used elsewhere in Ind AS (i.e., whether control of the asset has transferred to the buyer). The guidance includes handling situations where a sale is conditional or where the buy-back or repurchase price is set at a level that effectively retains control. If a sale is recognised, the seller-lessee accounts for the leaseback under Ind AS 116 (right-of-use asset and lease liability).
Accounting when sale not recognised
Where the criteria for a sale are NOT met, the transaction must be accounted for as a financing arrangement. Under this outcome, the asset remains on the seller-lessee’s balance sheet and the proceeds are recorded as a liability (financing). The amendments made clear indicators (economic substance tests) that help determine which accounting path to follow.
Practical checklist for leases
- Evaluate control transfer indicators (legal title, significant risks and rewards, repurchase options).
- Assess repurchase price relative to fair value and market terms.
- Consider disclosure of transfer criteria conclusions and the nature of any continuing involvement.
Entities with significant property transactions should reconcile prior practice to the clarified approach and explain changes in their notes.
Current vs non-current classification (Ind AS 1): covenants and settlement
Covenant assessment & remedies
One of the most consequential amendments was clarifying when a liability subject to a covenant can still be presented as non-current. The key test: whether the entity has an unconditional right at the reporting date to defer settlement for at least 12 months. If a covenant breach has occurred but the lender has agreed (before the reporting date) not to demand immediate repayment, the liability may still be non-current. However, if the lender’s waiver is only after the reporting date, it is a subsequent event and the liability is current. These fine distinctions can change a company’s working capital presentation and covenant compliance story.
Presentation implications
Classification affects liquidity metrics, current ratio, and covenant calculations — all things lenders and rating agencies scrutinize. Entities must therefore maintain detailed timelines of covenant breaches, waivers, and communication with creditors, and carefully document facts and management judgments.
Example walkthrough
- Borrowing with a covenant breached on March 31, 2025: if lender provided a waiver before March 31, 2025 (and that waiver is unconditional), liability may be non-current; if waiver is dated April 10, 2025, liability is current for FY 2024–25, and the waiver is a non-adjusting event. Document dates and agreements.
Supplier finance arrangements: disclosure and cash flow presentation
What to disclose
Supplier finance (reverse factoring) arrangements can obscure true trade payables and short-term financing. The amendments require explicit disclosure of the nature of such arrangements, their impact on liabilities, the amounts outstanding, and how they are presented in cash flow statements (i.e., whether repayments are classified as operating or financing). Ind AS 107 and Ind AS 7 were updated to require more transparency about these arrangements.
Balance sheet and cash flow effects
- Many entities historically presented supplier finance payables as trade payables (operating). The amendments urge clear reconciliation and possible separate line items if the substance is financing.
- On cash flow statements, entities must ensure consistent classification (operating vs financing) and explain the basis for classification.
Audit and control considerations
Audit teams will probe contractual terms — who bears credit risk, who pays interest, who controls settlement and who bears late payment exposure. Ensure contracts with banks and suppliers are accessible and that IT systems capture the revised presentation.
Income taxes (Ind AS 12): key updates
Recognition and measurement of deferred taxes
The amendments to Ind AS 12 focused on clarifying measurement of deferred tax assets/liabilities when other Ind AS changes affect recognition/timing — for instance, changes in lease accounting or derecognition of financial instruments. Companies must revisit deferred tax models to ensure consistency between the tax base and carrying amounts under the amended Ind AS rules.
New disclosures
Disclosures about significant temporary differences, tax rate reconciling items, and the assumptions supporting recognition of deferred tax assets received renewed emphasis. Where amendments produce material timing differences, companies should explain the drivers and sensitivity of the deferred tax position.
Other consequential and editorial amendments
Paragraph renumbering, cross-reference fixes
The 2024 amendment package also included technical edits: paragraph renumbering, alignment with IAS/IFRS text where helpful, and removal of obsolete cross-references. While seemingly administrative, these changes can affect how guidance is located and interpreted, especially for legal/standards citations.
Guidance notes and compendiums (ICAI)
The Institute of Chartered Accountants of India (ICAI) published compendiums and guidance to help practitioners implement the amendments. Importantly, ICAI and some regulators provided temporary relaxations or voluntary application windows for some guidance notes for FY 2024–25 to ease the transition — check ICAI announcements for specifics on voluntary application. ICAI
Implementation challenges & practical steps for FY 2024–25
Systems, models and data
- Data gaps: New disclosures (e.g., supplier finance) require contract-level data that many ERPs don’t segregate today. Start by mapping data fields to source contracts.
- Models: Expected credit loss models (Ind AS 109), lease accounting models, and insurance actuarial models may need reruns. Keep version controls and reconciliations.
- Controls: Strengthen controls around the capture of covenants, waivers, and communication timelines with lenders.
Audit interaction and documentation
Auditors will demand robust documentation of management’s judgments (e.g., covenant waivers, classification tests, fair value significant inputs). Maintain clear contemporaneous evidence: signed waivers, board minutes, model runs, reconciliations and sensitivity analyses.
Board & stakeholder communications
Plan to discuss impacts with audit committees and lenders well before reporting date. Provide scenario analyses to lenders if covenant classification changes could trigger covenant breaches or repricing.
Year-end checklist for preparers and auditors
- Inventory of changes: Map each Ind AS amendment to affected accounting policies.
- Contracts & waivers: Compile all borrowing agreements, covenant calculations, waivers and dates.
- Supplier finance register: List all arrangements, show amounts outstanding and cash flow presentation logic.
- Lease reassessment: For sale-and-leaseback and lease modifications, document sale tests and accounting conclusions.
- Financial instrument analysis: Reassess complex instruments for classification; disclose key judgments.
- Insurance liability reconciliations: Re-run actuarial models and reconcile post-amendment balances.
- Deferred tax recalculations: Update deferred tax computations for any measurement changes.
- Disclosures: Draft enhanced notes and sensitivity disclosures for significant estimates.
- Board sign-off: Ensure audit committee has reviewed changes and disclosures.
Example disclosures & templates (illustrative)
Below are brief illustrative disclosure lines you can adapt (not exhaustive):
a) Supplier finance arrangements (example note):
“During the year, the Group entered into a supplier finance program with Bank X. At March 31, 2025 the outstanding balance under the program was ₹X million (presented as ‘trade payables – supplier finance’). The entity retains/does not retain the credit risk. Repayments under the program are presented as [operating/financing] cash flows. See Note Y for contractual terms.”
b) Lease sale-and-leaseback (example note):
“The sale in relation to Property A met/did not meet the criteria for sale recognition under Ind AS 116 because … As such, the transaction has been accounted for as a sale recognized / financing arrangement. The impact on the financial statements is: …”
c) Covenant waiver (example note):
“On March 25, 2025, the Company breached covenant Z. Lender provided a waiver dated March 28, 2025. Management concluded it has an unconditional right to defer settlement for >12 months and accordingly classified the borrowing as non-current as at March 31, 2025. Documentation supporting the waiver is retained.”
Impact on financial ratios, covenants and lending
- Leverage ratios (debt/equity): Reclassification of liabilities or recognition of additional lease liabilities will increase reported leverage.
- Working capital: Moving supplier finance from trade payables to financing could materially change current liabilities and working capital positions.
- Interest coverage & covenants: Recognition timing of insurance revenue or remeasurement of liabilities might affect EBITDA or interest coverage, which impacts covenant testing. Lenders may request covenant renegotiation — early communication is essential.
Practical examples – case studies
Case 1 — Manufacturer with supplier finance
A mid-sized manufacturer used supplier finance to extend payment tenure. Post-amendment, the company reclassifies amounts as financing rather than trade payables and restates prior-year presentation in the notes. The outcome: current ratio declines, and management communicates the change to lenders with a pro-forma covenant calculation. Audit documentation includes bank agreements and supplier confirmations.
Case 2 — Real estate sale-and-leaseback
A developer sells a property and leases it back. On assessing control transfer and repurchase options, management determines the sale is not recognized and accounts for proceeds as a financing liability. The right-of-use asset remains on balance sheet. The disclosure explains the economics and reasons for financing treatment.
Conclusion
The Ind AS amendments for FY 2024–25 represent a meaningful tightening and clarification across several high-impact areas: financial instruments, insurance, lease accounting and liability classification. For many entities the changes will affect presentation, disclosure and key financial metrics — and therefore require an organised, documented implementation plan.
Immediate next steps for preparers:
- Map affected accounting policies and quantify P&L/BS impacts.
- Collect all contracts (loans, supplier finance, leases, insurance contracts).
- Re-run models (credit loss, actuarial, lease, deferred tax) and prepare sensitivity analyses.
- Upgrade disclosures with clear narrative explaining judgments and dates (waivers, control tests).
- Engage auditors and the audit committee early and provide timeline and reconciliations.
Regulators and the accounting profession in India have provided supporting compendia and, in some areas, temporary relief to ease adoption. That said, transparency and documentation are non-negotiable. Start sooner rather than later — the FY 2024–25 reporting cycle demands that these changes be embedded into the financial statements and supporting audit evidence. ICAI
References & further reading
- MCA — Companies (Indian Accounting Standards) Amendment Rules, 2024 (notification summary resources and regulatory text). TaxGuru
- ICAI — Compendium of Indian Accounting Standards (Year 2024–25), Volume I & II. ICAI
- EY & KPMG client alerts and year-end considerations for FY 2024–25 (implementation guidance).
TaxGuru and other practitioner summaries on key Ind AS amendments (practical walkthroughs). TaxGuru
FAQs
Are the 2024 Ind AS amendments mandatory for all companies in FY 2024–25?
Most of the substantive amendments notified in 2024 were applicable for periods beginning on or after April 1, 2024 (FY 2024–25), but exact applicability varies by specific amendment and transitional provisions. Always confirm the effective date in the MCA notification and the ICAI compendium for the standard you are applying.
How should we present supplier finance in the cash flow statement?
Presentation depends on the substance of the arrangement. If the arrangement is financing in nature (bank pays supplier and entity owes bank), repayments may be classified as financing. If it’s part of trade payable management, some entities present it within operating cash flows. The amendments require clear disclosure of the approach and rationale.
If a covenant was breached but lender agreed to a waiver after reporting date, is the liability current?
Yes. A waiver after the reporting date is a non-adjusting event. The liability is current at the reporting date unless the lender’s unconditional waiver was in place before the reporting date. Document dates and agreements carefully.
Do insurers need to change actuarial assumptions because of the Ind AS amendment?
Insurers should reassess measurement models and assumptions, and separately present claims and service components where required. Actuarial models may need reruns and enhanced disclosures.
Where can preparers get consolidated guidance and templates?
ICOs and big-4 firms (e.g., EY, KPMG) have published implementation notes; ICAI released a Compendium of Ind AS (2024–25) that collates amendments and guidance. Use these resources and the MCA notifications as primary references.
