The latest notification mirrors the accounting standards that were in force under the Companies Act, 1956, which is no more there, according to a senior official.
The government has notified the accounting standards for small and medium companies that revise the turnover and borrowing limits as well as help in making disclosure requirements less onerous. Besides, the definition of Small and Medium Sized Companies (SMCs) under the standards has been revised.
The Companies (Accounting Standards) Rules, 2021 have been notified by the corporate affairs ministry under the Companies Act, 2013. The latest notification mirrors the accounting standards that were in force under the Companies Act, 1956, which is no more there, according to a senior official. Among the changes, the revised definition of MSMEs has been included, the official added.
Under the revised SMC definition, the turnover limit has been increased from Rs 50 crore to not exceeding Rs 250 crore and with enhanced borrowing limits. This is in addition to the requirements that such entities should be unlisted companies, which are not banks, financial institutions or insurance companies.
Vikas Bagaria, Partner at Deloitte India, said the notification is a self-contained accounting standards of about 388 pages tailored for the needs and capabilities of smaller businesses and acts as a common set of accounting standards as has been applicable to SMCs in preparing its general purpose financial statements.
“The accounting standards for SMC which were notified in December 2006 and amended from time to time are much simpler as compared to Indian Accounting Standards (Ind AS). These accounting standards involve less complexity in its application including the number of required disclosures being less onerous,” Bagaria said.
Sanjeev Singhal, Partner at SR Batliboi & Co LLP, said the increase in turnover and borrowing thresholds for classification into the category of SMC for certain exemptions in application and disclosure of accounting standards is a welcome step.
“The limits are in line with a similar increase in threshold done by ICAI for non-corporate entities. The revised criteria will help a number of companies and will promote ease of doing business,” he noted.