Context and Scope of the Discussion

Expected Credit Loss (ECL) represents a probability-weighted estimate of credit losses over the expected life of a financial instrument, measured as the present value of cash shortfalls. In simple terms, it reflects the weighted average of possible credit loss outcomes, with the likelihood of default driving the weighting.

The Directions introduce an Expected Credit Loss (ECL)-based impairment framework along with the Effective Interest Rate (EIR) method for income recognition and measurement of financial assets at amortized cost post-initial recognition. The framework also provides detailed guidance on the staging of financial assets, assessment of Significant Increase in Credit Risk (SICR), model-based provisioning, governance, and related control requirements.

The Directions retain the existing concepts relating to identification and classification of NPAs, including borrower-level NPA classification, aging categories, and reporting requirements. Banks will continue to compute and disclose Gross Advances, Net Advances, Gross NPAs, and Net NPAs in the prescribed format. However, while NPA classification continues from a prudential and reporting perspective, the impairment framework itself now moves away from prescribed provisioning percentages linked to asset classification towards a more forward-looking, risk-based ECL approach.

Although banks are not yet required to adopt Ind AS, the Directions introduce concepts closely aligned with Ind AS 109 / IFRS 9, particularly in impairment, amortized cost measurement, and EIR-based income recognition.

This requirement follows SEBI’s earlier mandate that AIF units be issued in dematerialized form. Since AIF units are now held through depositories, SEBI has required that the NAV for each ISIN be made available within the depository system, rather than remaining only in fund-level records and investor communications.

Under the circular, AIFs, through their Registrars and Transfer Agents (RTAs), must upload the latest available NAV for each ISIN before 01 May 2026, or within 30 days of the valuation date of the investment portfolio, whichever is later. The valuation date will be the valuation report date for an independent valuer, or the date of formal internal documentation for an inhouse valuation.

The responsibility for the timely and accurate uploading of NAV rests with the AIF Manager. Depositories such as National Securities Depository Limited and Central Depository Services (India) Limited are required to establish the necessary system infrastructure to facilitate NAV uploads and to display the NAV along with a prescribed disclaimer clarifying that it is based on the valuation methodology and accounting practices followed by the respective AIF.

Trustees or sponsors must ensure that compliance with this circular is specifically covered in the Compliance Test Report under the Master Circular for AIFs.

In the Statement on Developmental and Regulatory Policies dated October 01, 2025, the RBI proposed rationalizing the ECB framework. The amendments now notified implement this by linking borrowing limits to financial strength, requiring that borrowing costs be in line with prevailing market conditions, mandating arm’s length pricing for related party ECB, simplifying end-use and maturity norms, expanding the eligible borrower and lender base, and streamlining reporting requirements.

Communication between auditors and those charged with governance (TCWG) is a critical element of audit quality, particularly in areas such as audit planning, risk assessment, and significant judgements. Recent regulatory reviews have brought renewed focus to how these long-standing requirements are being applied in practice. The NFRA circular issued on 7 January 2026 is a timely reminder in this context. It does not introduce new obligations. Instead, it draws attention back to a standard that applies to every audit, across listed and unlisted entities, alike SA 260. This article revisits SA 260 through the lens of the NFRA circular and recent regulatory observations, focusing on how communication between auditors and those charged with governance is expected to be structured, the roles envisaged for Boards and Audit Committees in enabling this communication, and why renewed attention to this area is timely.

In an earlier article, Segment Reporting: A Window into Business Realities, we discussed how segment reporting under IFRS 8 and Ind AS 108, anchored in the management approach, enables investors to understand business performance through management’s lens. The article examined why segment reporting is a meaningful disclosure, how it reflects internal decision-making, and highlighted certain common observations from practice, including those discussed by the FRRB.

Building on that foundation, this article shifts the focus to a related and increasingly relevant dimension: why segment reporting is drawing greater attention from securities regulators globally. It also considers observations and comment trends from regulators such as the U.S. Securities and Exchange Commission (SEC), and what these signals mean for preparers and users of financial statements in the USA as well as across the globe.

The use of external experts is now standard in audits, reviews, other assurance engagements, and related services engagements. As financial reporting, assurance scopes and regulatory expectations continue to evolve, the use of external experts has become integral to addressing areas that involve significant judgment, estimation uncertainty, and specialized technical knowledge. Auditors increasingly draw on valuation experts, actuaries, engineers, legal and tax specialists, environmental and sustainability experts, and other specialists in areas such as the valuation of complex assets and liabilities (including financial instruments, land and buildings, plant and machinery, intangible assets, employee benefit obligations and litigation-related liabilities), estimation of oil and gas reserves, and interpretation of contracts, laws and regulations. Expert involvement is also increasingly relevant in sustainability-related engagements, including the calculation of greenhouse gas emissions, measurement of pollutants, assessment of decarbonisation plans, use of offsetting mechanisms, and valuation of products designed for a sustainable economy.