The Ministry of Corporate Affair (“MCA”) has issued Companies (Indian Accounting Standards) Second Amendment Rules, 2025 amending the Companies (Indian Accounting Standards) Rules, 2015. These rules are made by the Central Government in consultation with the National Financial Reporting Authority.

Key Highlights:

1. Entities now have the right to defer settlement of a liability for at least twelve months after the reporting period must have substance and must exist at the end of the reporting period.
2. If an entity has the right, at the end of the reporting period, to roll over an obligation for at least twelve months after the reporting period under an existing loan facility, it can classify the obligation as noncurrent, even if it would otherwise be due within a shorter period. If the entity has no such right then the entity does not consider the potential to refinance the obligation and classifies the obligation as current.
3. If there is a breach of a material covenant of a long-term loan arrangement on or before the end of the reporting period with the effect that the liability becomes payable on demand on the reporting date the entity cannot classify the liability as current, if the lender agreed, after the reporting period and before the approval of the financial statements for issue, not to demand payment as a consequence of the breach.
4. Classification of a liability is unaffected by the likelihood that the entity will exercise its right to defer settlement of the liability for at least twelve months after the reporting period. If a liability meets the criteria in paragraph 69 for classification as non-current, it is classified as non-current even if management intends or expects the entity to settle the liability within twelve months after the reporting period.
5. An entity might classify liabilities arising from loan arrangements as non-current when the entity’s right to defer settlement of those liabilities is subject to the entity complying with covenants within twelve months after the reporting period. In such situations, the entity shall disclose information in the notes that enables users of financial statements to understand the risk that the liabilities could become repayable within twelve months after the reporting period.

Source: Ministry of Corporate Affairs

Share this: