The Corporate Affairs Ministry (MCA) has lightened the burden of corporate reporting for Small and Medium sized companies (SMCs), expanding the coverage of such companies who could adopt less onerous accounting standards.
It has come up with new set of Rules that enhances the limits on turnover and borrowings for SMCs that would be eligible to adopt a set of accounting standards, which are simpler than the Indian Accounting Standards (Ind AS).
Revised definition
As per the revised definition, in addition to SMC being an unlisted company which are not banks, or financial institutions or an insurance companies, the turnover limit has been enhanced from ₹50 crore to not exceeding ₹250 crore and with no borrowings in excess of ₹50 crore, as against ₹10 crore earlier.
Vikas Bagaria, Partner, Deloitte India, said that the latest MCA 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 SMC 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,” he added.
Sanjeev Singhal, Partner, S R Batliboi & Co, said that the increase in turnover and borrowing threshold for classification into the category of small and medium size company 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 and by ICAI for non-corporate entities. The revised criteria will help number of companies and will promote ease of doing business,” Singhal said.