MCA Amends Ind AS 21 to Address Currency Exchangeability Issues

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  • Last Updated on 12 May, 2025

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Ind AS 21 Currency Exchangeability

Notification No. G.S.R 291(E); Dated: 07.05.2025

The Ministry of Corporate Affairs (MCA), in consultation with the National Financial Reporting Authority (NFRA), has notified amendments to the Companies (Indian Accounting Standards) Rules, 2015, revising Indian Accounting Standard (Ind AS) 21: The Effects of Changes in Foreign Exchange Rates. These changes are aimed at providing clarity in situations where a currency is not exchangeable.

1. Key Objectives of the Amendment to Ind AS 21

The amendments to Ind AS 21 seek to provide comprehensive guidance on –

  • Assessing exchangeability of a currency – Entities are now required to evaluate whether a currency can be exchanged into another in a timely manner and at a quoted exchange rate, without any undue restrictions.
  • Estimating the spot exchange rate – In situations where a currency is determined to be not exchangeable, the entity must use an estimated exchange rate that would have applied if the currency were exchangeable.
  • Ensuring relevant financial disclosures – Entities must disclose assumptions, estimation methods, and the financial impact arising from the use of estimated exchange rates to ensure transparency and comparability in financial statements.

2. Ind AS 101 Also Amended for First-Time Adoption

To ensure consistency, Ind AS 101 – First-time Adoption of Indian Accounting Standards has also been revised to incorporate the impact of these changes for entities transitioning to Ind AS for the first time. The amendment ensures that first-time adopters apply the same principles for dealing with non-exchangeable currencies.

3. Effective Date and Background

These amendments are a result of deliberations held during the 20th meeting of the NFRA on 24 February 2025 and are set to come into force for annual reporting periods beginning on or after 1 April 2025.

4. Implications for Companies

  • Enhanced financial accuracy – The changes will improve the representation of foreign operations in cases where exchange controls or other barriers limit currency convertibility.
  • Greater comparability – Uniform guidance ensures consistent treatment across entities operating in similar environments.
  • Compliance readiness – Companies should begin reviewing their currency risk assessment processes and prepare to update their financial reporting systems accordingly.
Click Here To Read The Full Notification

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Author: Taxmann

Taxmann Publications has a dedicated in-house Research & Editorial Team. This team consists of a team of Chartered Accountants, Company Secretaries, and Lawyers. This team works under the guidance and supervision of editor-in-chief Mr Rakesh Bhargava.

The Research and Editorial Team is responsible for developing reliable and accurate content for the readers. The team follows the six-sigma approach to achieve the benchmark of zero error in its publications and research platforms. The team ensures that the following publication guidelines are thoroughly followed while developing the content:

  • The statutory material is obtained only from the authorized and reliable sources
  • All the latest developments in the judicial and legislative fields are covered
  • Prepare the analytical write-ups on current, controversial, and important issues to help the readers to understand the concept and its implications
  • Every content published by Taxmann is complete, accurate and lucid
  • All evidence-based statements are supported with proper reference to Section, Circular No., Notification No. or citations
  • The golden rules of grammar, style and consistency are thoroughly followed
  • Font and size that's easy to read and remain consistent across all imprint and digital publications are applied