Economy

In relief to micro-enterprises, ICAI softens accounting standards blow

KR Srivats New Delhi | Updated on April 04, 2021

Non-company entities have been classified into 4 categories   -  Andrii Yalanskyi

A special category has been created

The Institute of Chartered Accountants of India (ICAI) has exempted micro-enterprises from the adoption of certain accounting standards mandated for non-corporate entities.

This was decided at a recent meeting of the central council held on March 18-19, where the matter relating to applicability of accounting standards issued by the ICAI to non-company entities (enterprises) was considered, sources said.

Specific category created

For the purpose of applicability of accounting standards, non-company entities have been classified into four categories—Level-I; Level-II; Level -III and Level -IV. The new scheme will come into effect for accounting periods commencing on or after April 1, 2020.

The main change now is that a special category (Level IV) has been created for micro-enterprises and the ICAI has specified that complex accounting standards related to segment reporting, party transactions, and impairment of assets will not be applicable to them. As the Level-IV entities are those with annual turnover less than ₹10 crore and borrowings less than ₹2 crore, they will not be subjected to the adoption of these accounting standards, sources added.

The ICAI also revised the turnover and borrowing limits for deciding the criteria for classification of non-company entities for the applicability of accounting standards. This follows the government’s revision of the definition of MSME last year. In tune with the changed MSME definition, the ICAI has also changed the turnover and borrowing limits in deciding the categories of non-corporate entities, they said.

However, the latest relaxations/exemptions will not apply to non-corporate entities which may also be required to follow Ind AS as per the relevant regulatory requirements applicable to such entities, the CA Institute said.

Published on April 04, 2021

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