NFRA Approves Major Amendments to Ind AS 109 for Enhanced Financial Reporting, ETCFO
India’s independent audit watchdog, the National Financial Reporting Authority (NFRA), has approved key amendments to Indian Accounting Standard (Ind AS) 109—the country’s accounting standard for financial instruments—at its board meeting held on Thursday, June 10, 2025. The approved proposal will now be sent to the Ministry of Corporate Affairs (MCA) and, if notified, the revised standards will come into effect from April 1, 2026, a person close to NFRA told ETCFO on condition of anonymity.
The NFRA Board met at its headquarters in New Delhi to review and approve amendments to seven Indian Accounting Standards, with the most significant changes made to Ind AS 109. All proposals received unanimous approval, the person said.
The meeting was attended by NFRA Chairperson Ravneet Kaur, Professor R. Narayanaswamy, Professor Sanjay Kallapur, Institute of Chartered Accountants of India (ICAI) President Charanjot Singh Nanda, along with the heads of the Accounting Standards Board and the Auditing and Assurance Standards Board. Representatives from the Securities and Exchange Board of India (SEBI), the Reserve Bank of India (RBI), and the Comptroller and Auditor General of India (CAG) also participated.
ETCFO has written to NFRA seeking confirmation, but the query remained unanswered till the time of publication.
According to the person cited above, the key amendments to Ind AS 109 focus on two critical areas. “One major change relates to the derecognition of financial liabilities when settlements take place through electronic payment systems,” the person said. “Another important amendment clarifies the criteria used to determine whether financial assets can be classified under amortised cost measurement,” the person added.
The changes aim to bring Indian standards more closely in line with global accounting practices, ensuring greater consistency and transparency in financial reporting, the person said.
What is Ind AS 109?
Indian Accounting Standard (Ind AS) 109 sets out the principles for the recognition, classification, measurement, presentation, and disclosure of financial instruments, including financial assets, financial liabilities, and derivatives. The standard is India’s equivalent of the global International Financial Reporting Standard (IFRS) 9.
Ind AS 109 applies to a wide array of instruments such as loans, trade receivables, investments, borrowings, creditors, and derivatives like futures, options, and swaps. It requires companies to classify these instruments based on their business model and contractual cash flow characteristics, determining whether they are measured at amortised cost, fair value through other comprehensive income (FVOCI), or fair value through profit or loss (FVTPL).
A key feature of Ind AS 109 is the introduction of a forward-looking expected credit loss (ECL) model for the impairment of financial assets, which replaced the earlier incurred loss approach, leading to earlier recognition of credit risks. The standard also includes guidance on hedge accounting, enabling entities to better reflect their financial risk management strategies in their financial statements.
While Ind AS 109 is often associated with the banking and financial services sector, it applies equally to non-financial companies—such as those in manufacturing, infrastructure, technology, and services—that hold financial instruments, making it a cornerstone of India’s financial reporting framework.
