MCA releases Companies Indian Accounting Standards Amendment Rules 2025

• 15 May 2025
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The Ministry of Corporate Affairs (MCA) has notified the Companies (Indian Accounting Standards) Amendment Rules 2025. These rules are mostly revisions to Ind AS 21, a standard that requires businesses to estimate the spot exchange rate when the "exchangeability" between two currencies is absent.

The change would make it easier to see how foreign exchange transactions affect a company's financial reporting. Companies will have clearer guidance on how to determine the "appropriate exchange rate" thanks to the amendments to Ind AS21. This could be helpful when dealing with nations that exhibit excessive short-term currency volatility or lack sufficient transparency regarding the exchange values of their currencies.

According to the notification released by MCA, “A currency is exchangeable into another currency when an entity is able to obtain the other currency within a time frame that allows for a normal administrative delay and through a market or exchange mechanism in which an exchange transaction would create enforceable rights and obligations.”

These changes will take effect in April 2025 for annual reporting periods. They provide the framework for organizations to determine that their functional currency cannot be converted into another currency. For example, the entity can use the expected spot exchange rate to translate affected foreign currency (monetary and non-monetary products) at a fair value in a foreign currency if the exchangeability is lacking.

According to industry sources, the proposed revisions improvement in financial reporting would increase confidence of investors in Indian companies that operate at an international level, especially those companies that rely heavily on exports. One significant advantage is the inflow of money from international patient capital, including pension funds and sovereign funds.

You can visit the official MCA portal to read the Companies (Indian Accounting Standards) Amendment Rules 2025.

Source: Financial Express