Environmental regulation in India is entering a new phase - one where compliance requirements are no longer confined to operational or sustainability functions but are increasingly shaping financial reporting outcomes. The expansion of Extended Producer Responsibility (EPR) regimes and emission-related frameworks is creating obligations that, in many cases, meet the definition of liabilities under Indian Accounting Standards. This raises important questions not only on recognition and measurement, but also on timing - particularly in identifying the obligating event that triggers a provision.
This edition of the Accounting and Auditing Update (AAU) examines these developments through the lens of Ind AS 37, Provisions, Contingent Liabilities and Contingent Assets, and Appendix C dealing with levies. As regulatory mechanisms evolve, entities are required to exercise significant judgement in determining whether and when such obligations crystallise. The discussion also considers the potential implications of the International Accounting Standards Board’s proposed amendments to IAS 37, Provisions, Contingent Liabilities and Contingent Assets. If adopted in India, these proposals could lead to earlier recognition of environmental obligations, thereby influencing reported performance and balance sheet positions.
This edition also presents a benchmarking analysis of related party disclosures by large listed companies in India, offering practical insights into current practices under Ind AS 24, Related Party Disclosures. Based on a study of financial statements of top 100 entities listed on the National Stock Exchange (NSE), by market capitalisation, the analysis highlights disclosure practices in areas such as aggregation versus disaggregation of transactions, articulation of materiality thresholds, and the extent of qualitative disclosures. It also examines practices around disclosure of arm’s length assertions, terms and conditions of transactions and key management personnel compensation.
The regulatory updates section provides an overview of key developments across Securities Exchange Board of India (SEBI), Reserve Bank of India (RBI), and other national and international regulatory and standard-setting bodies during the month.
SEBI introduced a series of important reforms across capital markets. These include relaxations for Not-for-Profit Organisations (NPOs) raising funds through the Social Stock Exchange (SSE), aimed at improving accessibility and participation. Amendments to the SEBI (Alternative Investment Funds (AIFs)) ( Amendment) Regulations, 2026 and the introduction of a fast-track mechanism for placement memorandums for AIFs other than Large Value Funds for Accredited Investors are expected to accelerate fundraising timelines and enhance operational flexibility. The RBI introduced wide-ranging regulatory changes, particularly in the areas of prudential norms and risk management. A key highlight is the issuance of the Reserve Bank of India (Commercial Banks - Asset Classification, Provisioning and Income Recognition) Directions, 2026, which transition banks towards an Expected Credit Loss (ECL) framework, aligned with global practices. Complementary amendments across various prudential and capital adequacy frameworks have also been notified to ensure consistency in implementation. From a financial reporting and audit perspective, the National Financial Reporting Authority (NFRA) updated its audit quality inspection guidelines, strengthening its risk-based inspection approach, while the Institute of Chartered Accountants of India issued its publications such as updated handbook on GST returns and payments, including exposure draft on Standard on Sustainability Assurance (SSA) 5000.
We would be delighted to receive feedback or suggestions from you on the topics we should cover in the forthcoming editions of the AAU.
For more information on this update, please write to aaupdate@kpmg.com.
