Archive · 23 Jan 2026
NFRA Members Debate EBITDA in Financial Reporting
The National Financial Reporting Authority (NFRA) had a meeting where members discussed a new rule called Ind AS 118.
This rule is about how companies show their money information.
One member, R. Narayanaswamy, said that companies should not use EBITDA, which is a way to show earnings, in their main money reports.
He thinks it should be shown separately.
He also suggested that expenses should be grouped by what they are used for, like marketing or administration, instead of just listing them by type.
Other members, like Sanjay Kallapur and Sripriya Kumar, think both ways of grouping expenses should be allowed.
The rule is supposed to start being used in 2027.
The Institute of Chartered Accountants of India (ICAI) put out a draft of the rule in 2025, but not many people who use these reports gave their opinions during the discussion.
NFRA members debated the use of EBITDA in financial reporting under Ind AS 118.
R. Narayanaswamy argued that EBITDA should be excluded from financial statements and disclosed separately in management commentary.
Narayanaswamy proposed preferring functional classification of expenses over natural classification, aligning with global norms followed by major US and some Indian companies.
Sanjay Kallapur and Sripriya Kumar suggested retaining both functional and natural classification options in the new standards.
The proposed effective date for Ind AS 118 is April 1, 2027, with the exposure draft issued by ICAI in January 2025.
- Who
- Members of the National Financial Reporting Authority (NFRA), including R. Narayanaswamy, Sanjay Kallapur, and Sripriya Kumar, along with the Securities and Exchange Board of India (SEBI).
- What
- A debate over the use of EBITDA and the classification of expenses in financial reporting under Ind AS 118.
- When
- The debate occurred during the 22nd NFRA meeting in December, with the proposed effective date of Ind AS 118 being April 1, 2027.
- Where
- The debate took place within the NFRA and involved considerations of global reporting norms, particularly those followed by major US companies and some Indian firms with US presence.
- Why
- The debate arose from differing opinions on the relevance and utility of EBITDA and the classification of expenses in financial statements, aiming to align Indian reporting standards with global norms and improve the utility of financial information for users.
- Organization
- National Financial Reporting Authority (NFRA)
- Standard
- Ind AS 118
- Controversial Measure
- EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortisation)
- Proposed Effective Date
- April 1, 2027
- Exposure Draft Issued By
- Institute of Chartered Accountants of India (ICAI)
- Exposure Draft Issued Date
- January 2025
- Consultation Period
- 4 months
- Supporters of Functional Classification
- R. Narayanaswamy, Amazon, Microsoft, Walmart, Nvidia, Infosys, Dr Reddy’s
- Supporters of Both Classifications
- Sanjay Kallapur, Sripriya Kumar, Securities and Exchange Board of India (SEBI)