Companies (Ind AS) Amendment Rules 2026: Green Power Contracts, ESG-Linked Loans and E-Payment Settlement Under G.S.R. 725(E)
Quick Summary: What the Companies (Ind AS) Amendment Rules 2026 Change
- The instrument: The Ministry of Corporate Affairs notified the Companies (Indian Accounting Standards) Amendment Rules, 2026 through G.S.R. 725(E) dated 12 August 2026, issued under sections 133 and 469 of the Companies Act, 2013 in consultation with the National Financial Reporting Authority (NFRA).
- What moved: Amendments touch Ind AS 109, Ind AS 107, Ind AS 101, Ind AS 110 and Ind AS 7, aligning Indian standards with the corresponding IASB changes to IFRS 9 and IFRS 7.
- Four practical themes: classification of financial instruments with contingent features (the SPPI test, with ESG-linked loans in scope), a new option to derecognise a financial liability settled through an electronic payment system, accounting and disclosure for contracts referencing nature-dependent (renewable) electricity, and a set of annual improvements.
- When it bites: most amendments apply for annual reporting periods beginning on or after 1 April 2026, so the FY 2026-27 financial statements are the first to carry them. Early application is permitted in defined cases.
- Who must act now: every company in the Ind AS net, its CFO and controller, and its statutory and internal auditors, plus any borrower with sustainability-linked debt or any buyer under a renewable power purchase agreement.
What the Companies Ind AS Amendment Rules 2026 Actually Do
If you prepare or audit Ind AS financial statements, the Companies (Indian Accounting Standards) Amendment Rules, 2026 are the most consequential accounting change of the year, and they land squarely on the FY 2026-27 accounts you are about to build. The Ministry of Corporate Affairs issued them via G.S.R. 725(E) on 12 August 2026 after consulting NFRA, mirroring the International Accounting Standards Board amendments that followed its post-implementation review of the classification and measurement rules in IFRS 9.
This is not a cosmetic re-write. Two of the four themes, sustainability-linked lending and renewable power contracts, are exactly the instruments that Indian corporates have been signing at speed over the last three years, often without a settled accounting answer. The amendments now supply that answer. Below is a senior-practitioner reading of what changed, who is affected, and what you must do before the audit season starts.
Theme 1: Financial Instruments With Contingent Features and the SPPI Test
The heart of the change sits in Ind AS 109, through new paragraphs B4.1.8A, B4.1.10A, B4.1.16A and B4.1.20A, with matching disclosures added to Ind AS 107 (new paragraphs 20B to 20D).
The Solely Payments of Principal and Interest test, the SPPI test, decides whether a financial asset can sit at amortised cost or at fair value through other comprehensive income, rather than being forced to fair value through profit or loss. The amendment sharpens how you apply that test when a loan carries a contingent trigger:
- Focus on what, not how much. Paragraph B4.1.8A confirms that the interest assessment is about what the lender is being compensated for, not merely how much. Cash flows indexed to non-lending variables, such as equity values, commodity prices or a share of the debtor’s revenue or profit, are inconsistent with a basic lending arrangement.
- ESG and carbon-linked loans get a clear rule. Paragraph B4.1.10A addresses the sustainability-linked loan directly. Where the contingent trigger, for example a carbon emission reduction target, does not itself relate to a change in credit risk, the asset can still pass SPPI only if, in all contractually possible scenarios, the contractual cash flows would not be significantly different from an otherwise identical instrument without the feature.
- Non-recourse and securitisation. Paragraph B4.1.16A defines a non-recourse feature, where the creditor’s claim is limited to the cash flows of a specified asset. Paragraph B4.1.20A separates ordinary credit enhancements from tranched securitisations with waterfall structures, which continue to follow the look-through rules.
The practical result: a company holding a sustainability-linked loan receivable, or a bank holding an ESG-linked loan, must now test each contingent term. If a small step-up or step-down in the margin passes the “not significantly different” screen, amortised cost survives. If the trigger imports equity, commodity or revenue-share economics, the instrument is likely pushed to fair value through profit or loss, with the volatility that follows.
Theme 2: Derecognising a Liability Settled Through an Electronic Payment System
Ind AS 109 gains a new paragraph B3.3.8 that resolves a question every treasury team has faced: when a payment is initiated electronically but does not settle until a later date, when can you take the liability off the books?
The amendment permits derecognition of a financial liability before the settlement date if all three conditions are met:
- the entity has no practical ability to withdraw, stop or cancel the payment instruction;
- the entity has no practical ability to access the cash to be used for settlement; and
- the settlement risk associated with the electronic payment system is insignificant.
Paragraph B3.3.9 explains that settlement risk is insignificant where completion follows a standard administrative process with a short window between initiation and cash delivery. Paragraph B3.3.10 makes the election an accounting-policy choice that must be applied uniformly to all settlements through the same electronic payment system. You cannot cherry-pick.
Theme 3: Contracts Referencing Nature-Dependent (Renewable) Electricity
This is the amendment that renewable power buyers have been waiting for. New paragraph 2.3A of Ind AS 109 defines contracts referencing nature-dependent electricity: contracts that expose the entity to variability in the electricity volume because generation depends on uncontrollable natural conditions such as wind, sun or water. It captures both physical purchase and sale contracts and financial instruments referencing such electricity.
Two reliefs follow, and both matter for any company signing a solar or wind power purchase agreement (PPA):
- Own-use scope exception (paragraphs B2.7 to B2.8). A renewable electricity purchase contract can be held outside the Ind AS 109 fair value net, treated as an own-use executory contract, where the entity is a net purchaser of that electricity over a reasonable period not exceeding 12 months. Net purchaser status is judged using past, current and expected future transactions.
- Hedge accounting relief (paragraph 6.10.1). An entity may designate as the hedged item a variable nominal amount of forecast electricity transactions, aligned to the variable amount of nature-dependent electricity expected to be delivered by the referenced generation facility. This finally lets the hedge match the physics of intermittent generation.
Disclosure is consolidated into new Ind AS 107 paragraphs 30A to 30C: the contractual features exposing the entity to volume and delivery-timing risk, any unrecognised commitments and onerous-contract assessment, and the period’s financial performance from the contracts, including electricity costs, unused purchases and resale proceeds.
Theme 4: Annual Improvements to Ind AS 101, 110 and 7
| Standard | What changed | Why it matters |
|---|---|---|
| Ind AS 101 (First-time Adoption) | Hedge accounting on transition (paragraphs B5 to B6): a first-time adopter cannot reflect a hedge that does not qualify; previously designated net positions may be re-designated individually if they meet current requirements. | Relevant to any entity moving onto Ind AS for the first time. |
| Ind AS 110 (Consolidated Financial Statements) | De facto agent definition (paragraph B74): the agency relationship need not be contractual; an investor assesses a de facto agent’s decision rights and variable-return exposure together with its own when testing control. | Can change consolidation conclusions in group and promoter structures. |
| Ind AS 7 (Statement of Cash Flows) | Paragraph 37: an investor accounting for associates, joint ventures or subsidiaries at cost reports only the cash flows between itself and the investee, for example dividends and advances. | Cleaner, more comparable cash-flow presentation. |
Effective Date and Transition: What Applies to FY 2026-27
| Amendment | Application | Transition |
|---|---|---|
| General (most amendments) | Annual reporting periods beginning on or after 1 April 2026 | As specified in each standard |
| Classification and measurement of financial instruments | 1 April 2026 | Retrospective, with defined exceptions; no restatement where hindsight would be needed; opening equity adjusted |
| Nature-dependent electricity contracts | 1 April 2026 | Retrospective using the facts at the date of initial application; comparatives need not be restated; certain contracts may be irrevocably designated at fair value through profit or loss |
In plain terms, the accounts for the year ending 31 March 2027 are the first statutory Ind AS financial statements that must carry these rules, and companies with a calendar or other year already beginning on or after 1 April 2026 are affected from that period.
Who Is Affected, and What They Should Do
For CFOs and controllers
- Build an inventory of every financial instrument with a contingent or ESG-linked feature and run the sharpened SPPI test on each; flag any that migrate to fair value through profit or loss.
- Decide the electronic-payment-settlement derecognition policy and document it as a uniform accounting-policy choice per payment system.
- Map every renewable PPA and decide whether the own-use exception applies, and whether the new variable-volume hedge designation is worth electing.
- Quantify the opening-equity adjustment on transition and brief the audit committee before the year closes, not after.
For statutory and internal auditors
- Update the Ind AS disclosure checklist for the new Ind AS 107 paragraphs 20B to 20D and 30A to 30C.
- Test management’s SPPI conclusions on sustainability-linked exposures and the net-purchaser judgment on PPAs.
- Reconcile the accounting treatment with the tax computation, because a fair value swing recognised in profit or loss can create book-to-tax differences that flow into the tax audit.
For borrowers and treasury teams
If you are negotiating a sustainability-linked loan, the margin ratchet you agree now decides your accounting later. A large contingent step could push the whole instrument to fair value on the lender’s books and change how they price it. Model the accounting before you sign.
Frequently Asked Questions
What is the notification number and date for the Ind AS 2026 amendments?
The Companies (Indian Accounting Standards) Amendment Rules, 2026 were notified by the Ministry of Corporate Affairs through G.S.R. 725(E) dated 12 August 2026, under sections 133 and 469 of the Companies Act, 2013 in consultation with NFRA.
From which financial year do the Ind AS 2026 amendments apply?
Most amendments apply for annual reporting periods beginning on or after 1 April 2026. For most Indian companies that means the FY 2026-27 financial statements, ending 31 March 2027, are the first to reflect them.
Do the amendments change how ESG-linked loans are classified?
Yes. Under new paragraph B4.1.10A of Ind AS 109, a financial asset with a sustainability or ESG contingent trigger can remain at amortised cost only if, in all contractually possible scenarios, its cash flows would not be significantly different from an otherwise identical instrument without the feature. Otherwise it moves to fair value through profit or loss.
Can a company keep a renewable power purchase agreement off fair value?
Often, yes. New paragraphs B2.7 to B2.8 of Ind AS 109 allow the own-use scope exception where the entity is a net purchaser of the nature-dependent electricity over a period not exceeding 12 months, so the PPA is accounted for as an executory contract rather than a derivative.
When can a liability be derecognised before the payment settles?
New paragraph B3.3.8 of Ind AS 109 permits derecognition before the settlement date when the entity cannot stop or cancel the payment instruction, cannot access the cash for settlement, and the settlement risk of the electronic payment system is insignificant. The policy must be applied uniformly across a given payment system.
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- FY 2025-26 Tax Audit Practitioner Sprint Under Section 44AB
Source and Verification
Source: Companies (Indian Accounting Standards) Amendment Rules, 2026, notified by the Ministry of Corporate Affairs via G.S.R. 725(E) dated 12 August 2026 under sections 133 and 469 of the Companies Act, 2013 in consultation with NFRA. Retrieved 1 September 2026. The MCA notification-listing route confirmed the instrument, number and date; the operative rule text was corroborated across the CAIRR (ca2013.com) MCA-notification mirror, the KPMG India First Notes analysis and independent professional-firm summaries, given that the MCA document-body viewer returns no extractable text. Paragraph references (Ind AS 109 B4.1.8A, B4.1.10A, B4.1.16A, B4.1.20A, B3.3.8 to B3.3.10, 2.3A, B2.7 to B2.8, 6.10.1; Ind AS 107 paragraphs 20B to 20D and 30A to 30C) reflect the amended standards as summarised in those sources.
Talk to an Expert
Sustainability-linked debt and renewable PPAs are being signed faster than most finance teams can account for them. If you want a clear read on how the Companies (Ind AS) Amendment Rules 2026 affect your FY 2026-27 financial statements, your SPPI conclusions or your hedge documentation, schedule a strategy session with Tax Update India and we will walk through your specific instruments before the audit season starts.
Disclaimer: This article is for general information only and does not constitute accounting, tax or legal advice. Ind AS application is judgment-intensive and fact-specific. Verify the operative text of G.S.R. 725(E) dated 12 August 2026 and the amended standards, and consult a qualified professional before acting on any position.
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