MCA, in consultation with NFRA, has clarified the concept of currency “exchangeability,” provided detailed guidance on estimating spot rates when currencies are non-exchangeable, and strengthened disclosure requirements in Ind AS 21 to improve transparency and alignment with IFRS practices.

Amendments:

Definition of Exchangeability – Para 8: Introduces a clear definition: a currency is exchangeable if an entity can obtain the other currency within a normal administrative delay through a market or exchange mechanism creating enforceable rights and obligations.

Assessment Guidance (paras 8A–8B; A2–A10):

New guidance on

(1) assessing exchangeability at each measurement date for specified purposes and

(2) determining insignificance thresholds when only limited amounts are available.

Estimating Spot Rate (para 19A; A11–A17): Requires entities to estimate a consistent spot exchange rate for non-exchangeable currencies, using either observable rates (unadjusted or first subsequent) or other estimation techniques reflecting prevailing economic conditions.

Disclosure Enhancements (paras 57A–57B; A19–A20): Mandates quantitative and qualitative disclosures, including the nature and financial effects of non-exchangeability, spot rates used, estimation methods, and related risks. Additional disclosures are specified for foreign operations whose functional or presentation currencies are non-exchangeable.

Measurement Date Selection (para 26): Clarifies that when multiple rates exist, entities must use the rate at which the future cash flows could have been settled at the measurement date.

Appendix A (Application Guidance): Replaces the existing appendix with a two-step diagram and detailed commentary covering both assessment and estimation phases.

Appendix C (References): New appendix highlighting cross-references in other Ind AS such as Ind AS 109, etc.

Ind AS 101 (First-Time Adoption): Updates para 31C to require disclosures on functional currency changes due to hyperinflation and non-exchangeability; inserts para 39AI and amends D27 to align first-time adopters with the new Ind AS 21 requirements.