Why do companies using supplier finance arrangements need to make additional disclosures?

Companies using supply chain finance, reverse factoring, or similar payables financing arrangements must now disclose the terms and conditions of such arrangements, outstanding amounts, and payment timelines compared with normal trade payables. This enhances transparency and reduces the risk of "hidden debt" through supply chain financing.

How have the rules for classifying loans as current or non-current been clarified?

The amendments provide clear guidance on when a loan should be classified as current or non-current. If a company has the right to extend repayment by 12 months or more, the loan can be shown as non-current. If there is a breach of a loan covenant (condition) by the reporting date, the loan must be classified as current unless the lender provides a grace period extending 12 months.

What are the new disclosure requirements related to the OECD Pillar Two global minimum tax?

Companies falling under the OECD Pillar Two global minimum tax regime (15%) must disclose the applicability of the rules, their exposure to additional top-up taxes, and the likely effect on their effective tax rates.

What other technical updates have been made across the Indian Accounting Standards?

The amendments have corrected references to older standards (Ind AS 17 and Ind AS 18) and aligned them with current standards (Ind AS 116 and Ind AS 115). There are also clarifications and terminology updates in standards like Ind AS 108, Ind AS 109, Ind AS 28, and Ind AS 10.

What should businesses do in response to the Companies (Indian Accounting Standards) Second Amendment Rules, 2025?

Businesses should review their supplier finance programs, check loan covenants, evaluate their global tax exposure, train finance teams on the new rules, and update their accounting policies to replace old standard references with the new ones.

How can IndiaFilings help businesses comply with the Ind AS Amendments 2025?

IndiaFilings offers expert guidance from Chartered Accountants to help businesses stay compliant with changing laws, including Ind AS, MCA filings, GST, and global tax reporting. They can assist in reviewing financial policies, preparing disclosures, and avoiding penalties related to the Ind AS Amendments 2025.

Are there any specific industries or types of companies that will be most impacted by these amendments?

The amendments will have a significant impact on companies covered under Ind AS, including listed companies, large private entities, and multinationals operating in India. Companies using supplier finance arrangements, those with complex loan structures, and those subject to global minimum tax rules will need to pay particular attention to the changes.

How can businesses ensure they are accurately classifying loans as current or non-current under the new rules?

Businesses should carefully review their debt agreements with their auditors to ensure they are correctly classifying liabilities as current or non-current based on the new guidelines. Factors like the right to extend repayment, breaches of loan covenants, and grace periods provided by lenders need to be considered.

Companies (Indian Accounting Standards) Second Amendment Rules, 2025

Q: When do the Companies (Indian Accounting Standards) Second Amendment Rules, 2025 become effective?

The amendments have different effective dates. Most of the changes, such as those related to leases, supplier finance, and global tax disclosures, apply for financial years starting on or after April 1, 2025. However, some debt classification rules (Ind AS 1 and Ind AS 10) become mandatory from April 1, 2026.

Q: What are the key changes introduced in the lease accounting standards?

The amendments have simplified lease accounting for companies transitioning to Ind AS for the first time. They can now use facts available on the transition date to classify leases (such as land and building components), instead of re-examining past contracts. This makes the transition to Ind AS easier for first-time adopters.

The Ministry of Corporate Affairs (MCA) has issued a notification on 13th August 2025, introducing the Companies (Indian Accounting Standards) Second Amendment Rules, 2025. These amendments, made in consultation with the National Financial Reporting Authority (NFRA), update several Indian Accounting Standards (Ind AS) to align Indian financial reporting with global practices, improve transparency, and address international tax reforms like the OECD Pillar Two minimum tax.

Businesses covered under Ind AS, whether listed companies, large private entities, or multinationals, must carefully note these updates as they carry direct compliance obligations.

Key Highlights of Ind AS Amendments 2025

The notification introduces several important updates across key accounting areas.

1. Simplified Lease Accounting for First-Time Adopters (Ind AS 101 & Ind AS 116)

Companies transitioning to Ind AS for the first time can now use facts available on the transition date to classify leases (such as land and building components), instead of re-examining past contracts.

Example:If a company has a 20-year land lease bundled with a 10-year building lease, it can classify both on the transition date instead of reconstructing old lease records.

2. Supplier Finance Arrangements Must Be Disclosed (Ind AS 7 & Ind AS 107)

Companies using supply chain finance, reverse factoring, or similar payables financing must disclose:

The terms and conditions of such arrangements.
Outstanding amounts under these arrangements.
Payment timelines compared with normal trade payables.

Why this matters:

Investors and lenders can clearly see how much of a company’s trade payables are under financing.
Reduces the risk of “hidden debt” through supply chain financing.

3. Clear Rules on Loan Classification–Current vs. Non-Current (Ind AS 1)

This amendment resolves a long-standing confusion: When is a loan considered short-term, and when is it long-term?

Key provisions:

If a company has the right to extend repayment by 12 months or more, the loan can be shown as non-current.
If there is a breach of a loan covenant (condition) by the reporting date, the loan must be classified as current unless the lender provides a grace period extending 12 months.
Even if management intends to repay early, the classification depends only on legal rights at the reporting date, not intentions.

Example:

A company has a loan maturing in 6 months but also has a contractual right to roll it over for another 3 years. It must classify the loan as non-current, even if management plans to repay in 6 months.

If the company breaches a debt covenant on 31st March 2026, but the lender waives it in April 2026, the loan still has to be shown as current for FY 2025–26.

4. Revenue Standards Aligned (Ind AS 115)

Older references to Ind AS 17 (Leases) and Ind AS 18 (Revenue) have been officially replaced with Ind AS 116 and Ind AS 115, ensuring consistency in application.

5. Global Minimum Tax Disclosure (Ind AS 12 – Income Taxes)

India has adopted disclosure requirements linked to the OECD Pillar Two global minimum tax (15%). Companies falling under this regime must disclose:

Applicability of the rules.
Exposure to additional top-up taxes.
Likely effect on effective tax rates.

6. Other Technical Updates Across Standards

Ind AS 108 (Operating Segments): Reference corrected from “IFRS 108” to “IFRS 8.”
Ind AS 109 (Financial Instruments): Certain IFRS effective date provisions excluded as irrelevant in the Indian context.
Ind AS 28 (Investments in Associates): Clarifications aligned with global practices.
Ind AS 10 (Events after Reporting Period): Terminology updated – “provisions” replaced with “covenants.”

Companies (Indian Accounting Standards) Second Amendment Rules, 2025 Effective Dates

1st April 2025: Most amendments (leases, supplier finance, global tax disclosures) apply for financial years starting on or after this date.
1st April 2026: Some debt classification rules (Ind AS 1 & Ind AS 10) become mandatory from this date.

For reference, we have attached the official MCA notification on the Companies (Indian Accounting Standards) Second Amendment Rules, 2025.

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What Should Businesses Do Now?

Here are the key steps businesses should consider in response to the 2025 amendments:

Review Supplier Finance Programs: Companies using reverse factoring must prepare detailed disclosures.
Check Loan Covenants: Ensure debt agreements are reviewed with auditors to classify liabilities correctly.
Evaluate Global Tax Exposure: Multinationals must assess whether OECD Pillar Two affects them.
Train Finance Teams: Updates to lease and liability classification rules require staff awareness.
Update Accounting Policies: Replace old references (Ind AS 17 & 18) with new standards in official documents.

Conclusion

The Ind AS Amendments 2025 have introduced major changes that businesses must comply with. Lease accounting has been simplified for first-time adopters, making the transition easier. Companies using supplier finance arrangements like supply chain finance and reverse factoring must now make mandatory disclosures.

Loan classification rules have been clarified to clearly distinguish between current and non-current liabilities. Along with alignment of revenue standards and new global minimum tax disclosure requirements, technical updates have also been made across other standards, effective from April 2025, with some provisions from April 2026.

IndiaFilings: Your Compliance Partner for Ind AS and Beyond

At IndiaFilings, we help businesses stay compliant with changing laws—whether it’s Ind AS, MCA filings, GST, or global tax reporting. If your company falls under Ind AS, now is the time to review your financial policies, prepare disclosures, and avoid penalties.

If you are still confused about the Ind AS Amendments 2025 – Companies (Indian Accounting Standards) Second Amendment Rules, 2025, you can connect with our expert CAs for guidance.

Companies (Indian Accounting Standards) Second Amendment Rules, 2025.