Accounting Standards Applicability

For the purpose of compliance of the accounting Standards, the ICAI had earlier issued an announcement on ‘Criteria for Classification of Entities and Accounting Standards Applicability’. As per the announcement, entities were classified into three levels.

Level II entities and Level III entities as per the said announcement were considered to be Small and Medium Entities (SMEs).

However, when the accounting standards were notified by the Central Government in consultation with the National Advisory Committee on Accounting Standards, the Central Government also issued the ‘Criteria for Classification of Entities and Applicability of Accounting Standards’ for the companies.

Accounting Standards Applicability

According to the ‘Criteria for Classification of Entities and Accounting Standards Applicability ’ as issued by the Government, there are two levels, namely, Small and Medium-sized Companies (SMCs) as defined in the Companies (Accounting Standards) Rules, 2006 and companies other than SMCs. Non-SMCs are required to comply with all the Accounting Standards in their entirety, while certain exemptions/ relaxations have been given to SMCs.

According to the ‘Criteria for Classification of Entities and Accounting Standards Applicability ’ as issued by the Government, Consequent to certain differences in the criteria for classification of the levels of entities as issued by the ICAI and as notified by the Central Government for companies, the Accounting Standard Board of the ICAI decided to revise its ‘‘Criteria for Classification of Entities and Applicability of Accounting Standards’ and make the same applicable only to non-corporate entities. Though the classification criteria and applicability of accounting standards has been largely aligned with the criteria prescribed for corporate entities, it was decided to continue with the three levels of entities for non-corporate entities vis-à-vis two levels prescribed forcorporate entities as per the government notification.

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Accounting Standards Applicability

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