Professor_Tax (a modern accounting professor) and Late G. P. Kapadia (the first President of ICAI and first Chartered Accountant of India), discussing the most recent changes in IFRS / Ind-AS. It tries to reflect what their viewpoints might be (Professor more up to date with recent changes; Kapadia bringing in wisdom, principles, and concern for implementation).

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Scene: Under the shade of an old banyan tree near ICAI Bhawan in New Delhi. Late G. P. Kapadia sits in his crisp white kurta, a notebook in hand. Professor_Tax, in suit and with spectacles, arrives carrying recent amendments and drafts. The ICAI logo gleams in the background. They start their conversation about IFRS/Ind AS recent changes.

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Professor_Tax: Good afternoon, Mr. Kapadia. I’m pleased to sit with you and share how the international and Indian accounting standards are evolving. There are some notable amendments to IFRS / Ind AS that I believe you’ll find very interesting.

G. P. Kapadia: Good afternoon. I always believed that accounting must walk with time, but never lose its principles. Tell me, what are these new waves?

Professor_Tax: Let me begin with some changes at the international level:

1. The IASB has issued amendments to IFRS 19 – Subsidiaries without Public Accountability: Disclosures. The recent changes (in mid-2025) complete its “catch-up” work, reducing disclosure requirements for eligible subsidiaries. These include standards or amendments issued between February 2021 and May 2024: e.g. Supplier Finance Arrangements, Pillar Two Model Rules under income taxes, Lack of Exchangeability, and classification/measurement amendments of financial instruments.

2. There are also Annual Improvements made to IFRS (Volume 11) that clarify wording, remove unintended consequences, align definitions, etc. These affect IFRS 1, IFRS 7, IFRS 9, IFRS 10, and IAS 7. Effective from 1 January 2026, though earlier adoption is permitted.

3. Also, the tax accounting rules under IAS 12 have been amended in response to international tax reforms (especially OECD Pillar Two). There’s a temporary exception for accounting for deferred tax arising from jurisdictions implementing the global minimum tax rules, to reduce uncertainty.

4. Another important change is the classification of liabilities as current or non-current under IAS 1 (Presentation of Financial Statements), particularly when covenants are involved. The substance of the right to defer must exist at the end of the reporting period. Also, if there are covenants that have to be complied with within 12 months, even if assessed later, that can affect classification. Disclosures must be made if non-current liabilities are subject to such covenants.

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G. P. Kapadia: Very thorough. And what about in India? How are these being adopted, and what new amendments have we enshrined in Ind AS?

Professor_Tax: In India, there has been significant alignment:

1. Companies (Indian Accounting Standards) Second Amendment Rules, 2025, notified by the Ministry of Corporate Affairs (MCA), incorporate some of these changes. Key among them:

Aligning classification of liabilities as current or non-current and non-current liabilities with covenants under Ind AS 1, in line with amendments to IAS 1.

Disclosure of supplier finance arrangements under Ind AS 7 (Statement of Cash Flows) and Ind AS 107 (Financial Instruments: Disclosures).

The international tax reform — specifically the Pillar Two Model Rules — under Ind AS 12 (Income Taxes).

These are effective from 1 April 2025 for many of the amended accounting standards.

2. There’s also an Exposure Draft issued by ICAI’s Accounting Standards Board (ASB) relating to classification and measurement of financial instruments (Ind AS 109 & Ind AS 107), including transitional arrangements, non-restatement options, disclosures for changes in measurement categories, etc. Effective date projected around 1 April 2026, subject to final notifications.

3. An exposure draft has been released for the “Lack of Exchangeability” amendments to Ind AS 21, to reflect changes in foreign exchange standards consistent with IFRS amendments.

4. Also, MCA has notified other amendments related to insurance accounting (Ind AS 117 replacing Ind AS 104), and consequential amendments to other Ind AS like Ind AS 103, 105, 107, 109, 115, to align with insurance contracts standard.

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G. P. Kapadia: Fascinating. I remember when even bringing in new standards was a herculean task. These seem more frequent and more technical. But tell me: what challenges do you see in these for Indian companies, especially smaller ones?

Professor_Tax:

Yes, there are several areas of concern or challenge:

Readiness and capacity: Smaller companies may not have resources to assess complex changes, especially those requiring sophisticated judgments — e.g. classification of liabilities with covenants, or measuring financial instruments with new disclosure requirements.

Systems and data: Some changes require gathering information that’s historically not collected, e.g. about supplier finance arrangements, or assessing deferred tax in jurisdictions impacted by Pillar Two.

Transitional provisions: Each amendment includes how and when to apply them — retrospective vs prospective, whether restatement of comparatives is needed, etc. Companies must carefully plan so that disclosures are clear and comparables are meaningful.

Regulatory / Tax consequences: Sometimes accounting changes feed into taxation or regulatory compliance. For instance, classification of current vs non-current liabilities may affect working capital metrics, covenant compliance, etc., which investors or financiers watch carefully.

Understanding substance vs form: The amendment to IAS 1 emphasizes that the right to defer settlement must have substance and exist at the end of the period. So even if you believe you will comply with a covenant or get waiver after period end, if it’s not binding or enforceable at period end, you may classify differently. That raises legal, contract, and documentation issues.

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G. P. Kapadia: Indeed, substance is key. Now, in my time, clarity and simplicity were virtues. Do you think all stakeholders — auditors, companies, regulators — are well-prepared for these changes? What needs to happen so that the transition is smooth and faithful to the principles of trust, transparency, and comparability?

Professor_Tax: I believe we need action on several fronts:

1. Capacity building / Education: Training for CFOs, financial controllers, reporting teams, auditors, so that these new standards are understood, not just technically but practically. Case studies, workshops.

2. Guidance and illustrative disclosures: The ICAI, ASB, and auditing firms need to publish clear implementation guidance, sample formats, Q&A on tricky areas.

3. Strong audit oversight: Auditors will need to be especially diligent about judgments, disclosures, consistency, and documentation. The audit authorities like NFRA in India will also have to monitor how these are being adopted. I note that NFRA has approved amendments in Ind AS 109 recently to enhance financial reporting of financial instruments.

4. Stakeholder engagement: Feedback from smaller companies, from sectors with constrained resources, to see where reliefs, simplifications, or phased implementation may be necessary.

5. Regulatory clarity: Ensuring that tax law / corporate law / financial regulation align or at least do not conflict with accounting changes. Sometimes, an accounting change may affect tax liabilities, or affect covenant compliance, which may have legal or financial consequences.

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G. P. Kapadia: Very well-said. If I may offer my own old perspective: while convergence with global standards is important, we must always ensure that the standards are suited to our economic context. What works in one country may need careful adaptation in another. The morality of accounting demands not just compliance, but fairness and usefulness. Would you, for example, advocate different treatment for smaller Indian enterprises vs larger ones under these changes?

Professor_Tax: Yes, and indeed some of the changes already try to give relief:

The standard IFRS 19 Subsidiaries without Public Accountability: Disclosures (and related Ind AS implementation) is designed for subsidiaries that do not have public accountability, allowing them reduced disclosure burdens.

Similarly, exposure drafts sometimes propose non-restatement options or phased implementation to ease burden.

But more could be done: thresholds, clear definitions of what constitutes “public accountability,” perhaps simplified disclosure templates for smaller players, etc.

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G. P. Kapadia: Thank you, Professor. It pleases me to see the profession moving with both ambition and careful thought. I trust the foundation stays strong, that accountants will keep their commitment to truth, that the numbers tell the story they should, not the story we want.

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