When is a payable really paid? Electronic payments and derecognition under amended Ind AS 109

Short answer: From FY 2026-27, a payable is gone when it is settled, not when you issue the instruction. If you pay through an electronic system you can elect an exception and derecognise earlier, but only if the payment can’t be cancelled, you can’t touch the cash, and settlement risk is insignificant. Cheques generally don’t qualify. For many Indian companies, that changes what the year-end balance sheet shows.

The general rule

The amended Ind AS 109 says it directly:

• a financial asset is derecognised when the rights to its cash flows expire, or when it is transferred; and
• a financial liability is derecognised on settlement date, when the obligation is discharged, cancelled or expires.

The electronic payment exception

A company can choose to derecognise a liability before settlement date when it pays through an electronic payment system and all three conditions are met:

1. it has no practical ability to withdraw, stop or cancel the payment instruction;
2. it has no practical ability to access the cash used for settlement; and
3. the settlement risk associated with the system is insignificant.

Settlement risk is usually insignificant when the process is standard and administrative, isn’t conditional on having cash on settlement date, and the gap between instruction and transfer is short.

The choice is made system by system and applied to every payment through that system. The standard doesn’t define “electronic payment system”, so you have to decide, and document, whether it means a whole scheme or individual payment types within it.

What it means in India

Domestic electronic payments. NEFT, RTGS, IMPS, UPI and card networks usually settle the same day. The window the exception targets is small, and for many companies the practical answer doesn’t change much. Bank cut-off times still matter: a NEFT batch initiated after the last cut-off on 31 March settles in April.

Cross-border payments. SWIFT and other international transfers can take days, and their cancellation terms vary. This is where the exception matters most, and where the three conditions need real evidence.

Cheques. Cheques are not electronic payment systems, so the general rule applies: the payable stays until the cheque is settled. Where companies reduce payables and bank balances when cheques are issued, that practice needs a hard look. The same logic is worth applying to cheques received but not yet cleared on the asset side.

Payment runs just before period end. Instructions released on the last day, bulk uploads awaiting approval in the bank portal, and payments held by the bank all need to be tested against the conditions, not assumed.

Transition

Retrospective, with prior periods restated only if possible without hindsight. Otherwise, the effect goes to opening equity at 1 April 2026. Because the rule is already in force for FY 2026-27, the half-year close is the first test.

The close checklist

• List every payment system and payment type used across the group, including foreign subsidiaries.
• For each, decide whether to elect the exception and record why the three conditions are or aren’t met.
• Check the bank cut-off times and cancellation windows in each banking arrangement.
• Review period-end cheques issued and not presented, and cheques received and not cleared.
• Align the bank reconciliation with the new rule, not the old habit.
• Update the accounting policy note.
• Brief the auditors before the half-year review.

Where Munshi fits

Much of this is evidence gathering: treasury confirms cut-offs, each subsidiary lists its unpresented cheques, banks confirm cancellation terms. Munshi, the close agent in FINAHQ, sends those requests to the right people with a reference in every subject, follows up on its own, and keeps the replies and approvals on record for the auditors. See how Munshi runs a close.

This article is general information, not professional advice. Refer to the notified text and your auditors.