Amendment to Ind AS-21 – Non-exchangeable currency and disclosure requirement

The Companies (Indian Accounting Standards) Amendment Rules, 2025 – Non-exchangeable currency and disclosure requirement 

Ministry of Corporate Affairs has notified the Companies (Indian Accounting Standards) Amendment Rules, 2025

The Companies (Indian Accounting Standards) Amendment Rules, 2025, notified by the Ministry of Corporate Affairs on May 8, 2025 has introduced amendments to the Indian Accounting Standards (Ind AS).

The amendments have been made to primarily to Ind AS-21 with respect to exchangeability of currency. The key changes, focus on enhancing the accounting treatment of foreign exchange transactions to improve financial reporting consistency and alignment with international standards. Specific details of the amendments include updates to the recognition and measurement of foreign currency transactions and the treatment of exchange differences, aiming to provide clearer guidance for entities operating in multiple currencies. These changes are applicable for annual reporting periods beginning on or after 1 April 2025.

The Exchangeable currency defined-It has been provided that 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.

As per the amendment, if an entity is able to obtain no more than an insignificant amount of the other currency at the measurement date for the specified purpose, the currency is not exchangeable into the other currency. In such cases, spot exchange rate to be measured.

When several exchange rates are available, the rate used is that at which the future cash flows represented by the transaction or balance could have been settled if those cash flows had occurred at the measurement date.

When an entity estimates a spot exchange rate, it shall disclose information that enables users of its financial statements to understand how the currency not being exchangeable into the other currency affects, or is expected to affect, the entity’s financial performance, financial position and cash flows. In applying Lack of Exchangeability, an entity shall not restate comparative information. Further, when the entity uses a presentation currency other than its functional currency, or translates the results and financial position of a foreign operation, and, at the date of initial application, concludes that its functional currency is not exchangeable into its presentation currency it shall translate affected assets and liabilities, affected equity items and recognise any effect of initially applying the amendments.

Download MCA Notification G.S.R. 291(E) dated 08.05.2025 >>

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