MCA amended Indian Accounting Standards Rules
The Ministry of Corporate Affairs (MCA) has notified Companies (Indian Accounting Standards) Amendment Rules 2025, bringing changes primarily to the Ind AS 21, a standard that mandates companies to estimate the spot exchange rate when the “exchangeability” between two currencies is missing. The amendments will help more accurately capture the impact of transactions conducted by firms in foreign currency on their financial statements. The proposed amendments to Ind AS21 will give clearer guidance to companies to determine “appropriate exchange rate,” a move which could come handy for them in dealing with countries witnessing undue short-term currency volatility or are not adequately transparent about the exchange values of their currencies.
These amendments will be applicable from annual reporting periods starting April 2025. They set the conditions for entities who can conclude that its functional currency is not exchangeable into the foreign currency. For instance, in case the “exchangeability” is lacking, the entity can translate “affected foreign currency” (monetary items and non-monetary items) at a fair value in a foreign currency using the estimated spot exchange rate.
Industry sources feel the improvement in financial reporting from the proposed amendments would help enhance investors’ trust in Indian firms with substantial foreign operations, including the export-intensive ones. A major benefit being seen is in terms of capital inflows from global patient capital such as sovereign funds, pension funds.
