The Companies (Indian Accounting Standards) Second Amendment Rules, 2025: What You Need to Know

Executive Summary

The Ministry of Corporate Affairs (MCA) has notified the Companies (Indian Accounting Standards) Second Amendment Rules, 2025, introducing significant updates to India’s financial reporting framework. These changes align Indian GAAP more closely with international standards, improve transparency, and address emerging issues in accounting practices. This article breaks down the amendments, their impact on companies, and actionable steps for compliance.

Key Highlights of the Amendment

1. Alignment with International Standards

• Updates reflect recent IFRS developments to ensure Indian companies remain globally comparable.

• Greater clarity in recognition, measurement, and disclosure requirements.

2. Major Changes in Ind AS

• Revenue Recognition (Ind AS 115): Expanded guidance on variable consideration and contract modifications.

• Financial Instruments (Ind AS 109): Revised rules on expected credit loss (ECL) provisioning, especially for NBFCs and banks.

• Leases (Ind AS 116): Additional disclosure requirements for lease concessions.

• Business Combinations (Ind AS 103): Clarifications on treatment of common control transactions.

3. Industry-Specific Implications

• Financial Services: Stricter ECL provisioning could increase provisioning costs.

• Real Estate: Enhanced revenue recognition guidance impacts contract structuring.

• Manufacturing & Retail: Lease accounting updates affect balance sheet leverage ratios.

Data & Insights

Area of Change	Old Requirement	New Requirement (2025)	Expected Impact
Revenue Recognition	Limited guidance on variable consideration	Explicit rules on contract modifications & rebates	More consistent revenue reporting
Financial Instruments	ECL applied with flexibility	Stricter forward-looking ECL model	Higher provisioning for banks/NBFCs
Leases	Basic disclosures	Detailed lease concession disclosures	Greater transparency
Business Combinations	Limited guidance on restructuring	Specific rules for common control	Reduced structuring arbitrage

Real-World Implications

• Case Study – Banking Sector: A mid-sized NBFC may see a 15–20% increase in provisioning due to stricter ECL models.

• Case Study – Real Estate: A listed real estate developer will now need to defer recognition of revenue until performance obligations are more clearly met, reducing upfront revenue recognition.

Conclusion

The Companies (Indian Accounting Standards) Second Amendment Rules, 2025 bring Indian accounting closer to global benchmarks while ensuring greater reliability and transparency in financial reporting. Businesses must act quickly to assess impacts, update policies, and train staff. Early preparation will not only ensure compliance but also strengthen investor confidence in financial statements.

👉 Call-to-Action: Start your amendment readiness assessment today—engage your finance team and auditors to avoid last-minute surprises.