The government has amended rules pertaining to various Indian Accounting Standards (Ind AS), including those related to interest rate benchmark reform. Ind AS are converged with the International Financial Reporting Standards (IFRS).

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On Friday, the corporate affairs ministry notified the Companies (Indian Accounting Standards) Rules, 2021. The changes have been made after consultations with the National Financial Reporting Authority (NFRA).

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Sandip Khetan, Partner and National Leader, Financial Accounting Advisory Services (FAAS) at EY India, said the ministry has issued the second phase amendments to interest rate benchmark reform and "has consequently made amendments to Ind AS 109, Ind AS 107, Ind AS 104 and Ind AS 116".

"Where the Phase 2 amendments introduce new areas of judgement, entities need to ensure they have appropriate accounting policies and governance in place. For the additional disclosures, entities must ensure they can gather and present compliant information," he noted.

Under the revised rules, entities are required to make additional disclosures related to interest rate benchmark reform. These dislcosures are to enable users of financial statements to understand the effect of interest rate benchmark reform on an entity's financial instruments and risk management strategy.

Entities would have to disclose the nature and extent of risks to which they are exposed arising from financial instruments subject to interest rate benchmark reform, and how the entities the manage these risks.
Among others, there are changes in the basis for determining the contractual cash flows as a result of interest rate benchmark reform.

Prateek Agarwal, Partner at Nangia & Co LLP, said the disclosures will enable users of financial statements to understand the effect of these changes, including an entity's progress in completing the transition to alternative benchmark rates.