MCA Notifies Companies (Indian Accounting Standards) Amendment Rules, 2026 — Ind AS 101, 107, 109, 110 and 7 Amended

If your company has a solar power purchase agreement, a sustainability-linked loan, or simply prepares consolidated financial statements under Ind AS, the Companies (Indian Accounting Standards) Amendment Rules, 2026 just changed how you account for it. Notified by the Ministry of Corporate Affairs on 12 August 2026 through G.S.R. 725(E), the amendment touches five standards at once — Ind AS 101, 107, 109, 110 and 7 — and brings Indian accounting broadly in line with recent IFRS updates on financial instrument classification, green-power contracts, and cash flow statements.

The changes aren't cosmetic. The biggest chunk sits inside Ind AS 109, where MCA has built an entirely new sub-framework for "contracts referencing nature-dependent electricity" — the accounting jargon for renewable energy PPAs where the seller can't guarantee how much power actually gets generated because it depends on the weather. Alongside that, there's fresh guidance on when an ESG-linked loan's interest-rate step-up still counts as a plain-vanilla lending arrangement, and a practical relief for companies settling liabilities through electronic payment rails.

None of this is optional reading for CS and CA professionals working with Ind AS-applicable companies. Most of it lands on financial statements for periods beginning 1 April 2026 — so FY 2026-27 is the deadline that matters, even though the rules are already in force.

What Changed in Ind AS 101 (First-time Adoption)?

Ind AS 101 governs how a company adopts Ind AS for the first time. The amendment inserts new transition paragraphs and rewrites the hedge-accounting guidance a first-time adopter must follow.

Restated Hedge Accounting Guidance (Appendix B, Paras B5–B6)

The substituted B5 clarifies that a first-time adopter generally cannot reflect a hedging relationship in its opening Ind AS balance sheet if that relationship wouldn't qualify for hedge accounting under Ind AS 109 — for example, where the hedging instrument is a stand-alone written option. A narrow exception lets an entity that had designated a net position as a hedged item under its previous GAAP redesignate an individual item within that net position, provided it does so no later than the transition date. B6 requires an entity to discontinue hedge accounting (applying Ind AS 109 paragraphs 6.5.6–6.5.7) for any pre-transition hedge that fails the qualifying criteria, and bars retrospective hedge designation for transactions entered into before the transition date.

Appendix 1, Paragraph 14 Restated

This is a technical numbering-consistency note: it explains why certain IFRS 1 paragraphs (34 to 39W, 39Y to 39AB, 39AD, and now 39AJ) are excluded from Ind AS 101, while their paragraph numbers are retained for cross-reference purposes. Paragraph 39AJ specifically relates to IFRS 18 (Presentation and Disclosure in Financial Statements), for which the corresponding Ind AS is still under formulation by NFRA.

What New Disclosures Does Ind AS 107 Require?

Ind AS 107 (Financial Instruments: Disclosures) picks up three new disclosure blocks, largely mirroring the new measurement guidance inserted into Ind AS 109.

Appendix B paragraph B38 is also restated to clarify derecognition disclosures where fair value measurements involved significant unobservable inputs (cross-referencing Ind AS 113 paragraphs 72–73), and Appendix 1 paragraph 5 is updated to explain further paragraph-numbering exclusions tied to the pending Ind AS 118 (corresponding to IFRS 18).

Ind AS 109: The Core of This Amendment

This is where the amendment does the heavy lifting. Four distinct threads run through the Ind AS 109 changes: lease liability derecognition, a new green-power contract framework, refined SPPI (solely payments of principal and interest) guidance for contingent-rate loans, and a practical fix for electronic payment settlements.

1. Lease Liability Derecognition (Para 2.1(b)(ii))

A minor but important cross-reference fix: lease liabilities recognised by a lessee are now explicitly stated to be subject to the derecognition requirements in Ind AS 109 paragraphs 3.3.1 and 3.3.3 — closing a gap that previously left this point ambiguous.

2. New Framework: Contracts Referencing Nature-Dependent Electricity

New paragraphs 2.3A–2.3B define the scope: contracts that expose an entity to variability in electricity volume because the generation source depends on uncontrollable natural conditions — the textbook example being a solar or wind power purchase agreement (PPA). These contracts fall outside normal "own-use" contract treatment in specific circumstances, and Appendix B paragraphs B2.7–B2.8 give the operative test.

The amendment also folds this framework into the general "own-use" contract test: restated paragraph 2.6 and new paragraph 2.8 confirm that contracts referencing nature-dependent electricity are evaluated under the same expected-purchase-or-usage lens as any other own-use contract, using the B2.7–B2.8 mechanics above.

New paragraphs 6.10.1–6.10.2 extend hedge accounting to these contracts: an entity may designate a variable nominal amount of forecast electricity purchases as the hedged item — aligned with the variable renewable output — and such forecast transactions are presumed "highly probable" for hedge-accounting purposes. Disclosure obligations for these contracts flow through to the new Ind AS 107 paragraphs discussed above.

3. SPPI Guidance for ESG and Carbon-Linked Loans

Perhaps the change with the widest practical reach: new paragraph B4.1.8A directs an entity assessing whether a loan's cash flows are consistent with a "basic lending arrangement" to look at what the lender is being compensated for, not just how much. New paragraph B4.1.10A then deals squarely with contingent, ESG-style rate adjustments — for example, an interest rate that drops if the borrower hits a carbon-emissions-reduction target.

The distinction matters because SPPI-failing loans generally cannot be measured at amortised cost — they get pushed to fair value through profit or loss, which changes the volatility a lender reports on its balance sheet.

4. Non-Recourse Loans and Contractually Linked Instruments (Tranches)

Paragraphs B4.1.16, B4.1.16A and B4.1.17 are restated to sharpen the "look-through" test for financial assets with non-recourse features — where a lender's right to cash flows is contractually limited to specific underlying assets rather than the borrower's general creditworthiness. Paragraphs B4.1.20, B4.1.20A, B4.1.21 and B4.1.23 similarly restate the treatment of tranched (waterfall-structured) instruments, and now explicitly distinguish genuine multi-tranche structures from lending arrangements dressed up with senior/junior debt merely to enhance credit protection for a single creditor — the latter get simpler treatment under paragraphs B4.1.7–B4.1.19 instead of the tranche-specific rules.

5. Trade Receivables Measurement (Para 5.1.3)

Restated to confirm that, despite the general initial-recognition rule, trade receivables without a significant financing component are measured at the transaction price determined under Ind AS 115 — including where the practical expedient in Ind AS 115 paragraph 63 is applied.

6. Electronic Payment Settlement — A Practical Operational Relief

New paragraphs B3.3.8–B3.3.10 address a real-world timing gap: normally, a financial liability is derecognised only on the actual settlement date. The amendment permits an entity to treat a liability (or part of it) as discharged before the settlement date when paying via an electronic payment system — but only if all three conditions below are met.

An entity that elects this treatment for one liability settled through a given electronic payment system must apply it consistently to all settlements through that same system (Para B3.3.10) — no cherry-picking.

Note: this relief sits on top of the general rule in new paragraph B3.1.2A, which confirms a financial liability is otherwise derecognised only on the actual settlement date. A handful of other purely definitional and numbering cross-references (Appendix A, Appendix 1 para 3 of Ind AS 109, and Appendix 1 para 3 of Ind AS 110) were also updated for consistency but carry no independent compliance impact.

Effective Dates and Transition — Ind AS 109

What Changed in Ind AS 110 (Consolidated Financial Statements)?

Two changes here, both narrower in scope than the Ind AS 109 overhaul.

De Facto Agent Guidance Restated (Appendix B, Para B74)

The restated paragraph confirms that a "de facto agent" relationship — relevant to assessing control over an investee — doesn't require a formal contractual arrangement. A party can be a de facto agent simply by having the practical ability to act on an investor's behalf, and the investor must factor in that agent's decision-making rights and indirect exposure to variable returns when assessing control.

Restructured Effective-Date Appendix and New Appendix D

Appendix C (effective date and transition) is restructured, adding paragraph C1E to confirm the Annual Improvements 2024 change to B74 applies from annual periods beginning on/after 1 April 2026. A brand-new Appendix D is inserted, cross-referencing Ind AS 10 (distribution of non-cash assets to owners) and Ind AS 37 (decommissioning/environmental rehabilitation funds) provisions that also touch Ind AS 110.

What Changed in Ind AS 7 (Statement of Cash Flows)?

A focused but consequential change for group accounting. Restated paragraph 37 now states that when an investor accounts for an associate, joint venture, or subsidiary at cost, it restricts its cash flow statement reporting for that investment to actual cash flows between itself and the investee — such as dividends received and advances. The earlier reference to using the equity method for this purpose is removed, because Ind AS 27 (Separate Financial Statements) does not permit the equity-method option in separate financial statements in the first place — the old cross-reference was effectively a dead end. New paragraph 65 confirms this amendment applies for annual periods beginning on/after 1 April 2026, and two new explanatory notes are added to Appendix 1 clarifying paragraph-numbering consistency with IAS 7.

Old vs New: Key Parameter Changes at a Glance

Compliance Checklist: Action Items Before 1 April 2026

Frequently Asked Questions

CorpLawUpdates Analysis

The most significant thread in this amendment isn't any single paragraph — it's the direction of travel. MCA has, in one notification, built accounting plumbing for two of the biggest trends in Indian corporate finance right now: renewable energy procurement and ESG-linked lending. Companies have been signing solar and wind PPAs, and banks have been writing sustainability-linked loan covenants, for years without a purpose-built Ind AS framework to account for either cleanly. This amendment closes that gap, and it does so by importing IASB's own recent IFRS 9/IFRS 7 amendments almost paragraph-for-paragraph — which is worth noting for multinational groups reconciling Ind AS and IFRS reporting.

The practical compliance challenge will sit with treasury and structured-finance teams more than with routine bookkeeping. The SPPI reassessment for ESG-linked loans (Instrument EA vs Instrument I) requires genuine judgment — "in all contractually possible scenarios" is a phrase that will generate real debate between preparers and auditors over how wide a scenario range to model. Companies with green bonds, sustainability-linked revolving credit facilities, or step-up/step-down rate loans tied to KPIs should expect this to be a live discussion in their FY 2026-27 audit planning.

Watch, too, for how NFRA and ICAI's Ind AS technical committees interpret the "reasonable amount of time" cap of 12 months in the net-purchaser test for electricity contracts (Para B2.8) — this is exactly the kind of judgment-heavy threshold that tends to generate implementation guidance or FAQs within a year of notification. Practitioners handling power-sector or manufacturing clients with captive renewable capacity should track NFRA outputs closely.

Looking ahead, the repeated cross-references to IFRS 18 (Presentation and Disclosure in Financial Statements) across Ind AS 101, 107 and 109 — each time noting "corresponding Ind AS is under formulation" — is a clear signal that a further, more disruptive Ind AS amendment on financial statement presentation is coming. Preparers should treat this notification as a precursor, not the final word, on MCA's current standard-setting cycle.