Accounting Standards Applicability

Introduction

Two Set of accounting standards were notified by the Ministry of Corporate Affairs of India for companies.

• Existing Accounting Standards under Companies (Accounting Standards) Rule 2006
• Indian accounting Standards (Ind AS) companies specified in rule 4 of (Indian accounting standard) rules 2015

Click Here to understand the Ind AS applicability 

This Article is primarily meant for understanding the Existing Accounting Standards applicability to various entities.

• Total Accounting Standards is 31 (Excluding As-8)
• AS-1 to 7 and 9 to 29 was notified by the MCA
• And rest of the standards 30, 31, 32 not yet notified.

Applicability of the Accounting Standards may not be same for all entities.

How the classification has been done?

Non Corporate

Level I :

Non corporate entities which fall in any one of the following categories at the end of relevant accounting year are called as level-1 entities:

• Entities whose equity or debt securities are listed or in the process of listing with any stock exchange whether in India or abroad.
• Banks, financial institutions or entities carrying in insurance business
• All commercial, industrial and business reporting entities whose turnover is greater than 50 crores in the immediately preceding accounting period. Here other income is to be ignored in calculation of turnover.
• All commercial, industrial and business reporting entities whose borrowings including public deposits in excess of 10 crores at any time during the immediately preceding accounting year.
• Subsidiary or holding entities of any of the above

Level II (SME):

Non corporate entities which are not covered in any of the above categories and fall any one of the following categories are level-2 entities.

• All industrial, commercial and business reporting entities whose turnover exceeds rupees 10 crores but doesn’t exceed rupees 50 crores in the immediately preceding accounting year.
• Borrowings including public deposits are above 1 crore but doesn’t exceed 10 crores at any time during the immediately preceding accounting year.
• Holding and subsidiary entities of any one of the above

Level III (SME) :

Non corporate entities which are not covered under level-1 and level-2 are considered as level-3 entities

Important Points:

• Applicability of AS to level I & Level II enterprises divided into following Categories.
  1. AS Fully applicable (AS-1, 2, 4 ,5, 6 ,7, 9, 10, 11, 12, 13, 14, 15, 16, 22, 26, 28)
  2. AS applicable but relaxation from certain disclosure requirements (AS-19, 20, 29)
  3. AS not applicable (AS- 3, 17, 18, 24)

Corporate

Small and medium scale companies SMCs) :

Entities which satisfies all of the following categories at the end of relevant accounting year

• Entities whose equity or debt securities are not listed or in the process of listing with any stock exchange whether in India or abroad.
• Company is not a bank, financial institution or entities carrying in insurance business
• Turnover(excluding other income) < 50 crores in the immediately preceding accounting period
• Borrowings(including public deposits) < 10 crores at any time during the immediately preceding accounting year.
• Company is not a Subsidiary or holding company of on non SMC

Non SMCs:

Other than Small and medium scale companies

Important Points:

• Exemptions and relaxations provided to SMCs from certain disclosure requirements.

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