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The National Financial Reporting Authority wants the criteria for mandatory applicability of Indian Accounting Standards (Ind AS) changed and expanded to cover aspects like turnover and borrowings from banks.
It maybe recalled that Ind AS is mandated for public interest entities which satisfy the primary criteria of listing in stock exchanges and net worth of companies.
NFRA has now written to ICAI that turnover and borrowings from banks and financial institutions by the companies or overall indebtedness of companies is also an important feature indicating existence of public interest and therefore the CA Institute should consider including them also as a criteria for Ind AS applicability, sources said.
Impact assessment
Meanwhile, for companies that are not required to adopt Ind AS, the NFRA has recommended that a Regulatory Impact Assessment (RIA) be conducted on the revision proposal. ICAI had submitted an Approach Paper for revision of existing Accounting Standards of Companies that are not required to follow Ind AS and the proposed texts of 18 revised Accounting Standards (ASs) out of a total of 32 revised ASs expected to be prescribed upon completion of this AS revision project.
NFRA wants the Approach Paper be developed in a transparent manner after extensive nation-wide consultation. ICAI has been asked to send NFRA the analysis of the public comments on the approach paper if the ICAI had performed any such public consultation in the past.
Compliance costs
Also, NFRA has recommended that a comprehensive study be undertaken on the costs to the preparers of compliance with these revised standards and their technical resource capacity, which should be evaluated against the likely benefits to all the stakeholders of AS Companies.
Also read: KIOCL: Audit regulator flags flaws in financial statement preparation, presentation
NFRA noted that most of the companies to which these proposed revised standards will apply are private limited companies.
They would be mostly owned by small families, sometimes along with a small circle of friends and relatives. Therefore, public interest in the General Purpose Financial Statements of these companies would most likely be minimal. There are a number of revised standards which are very large and complex and may not be relevant and useful to the limited users of GPFSs of these Companies.
NFRA also noted that the expected standard audit cost to perform reasonably good quality audit, performed in compliance with the letter and spirit of the Standards on Auditing is significantly more than the presently reported audit fee ranges i.e., a very large percentage of AS Companies have reported Payment to Auditors of less than ₹25,000.
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