.

1ccounting Standards are written documents, policy documents

issued by expert accounting body or-by Government or other
regulatories body covering the aspects of recognition, measure-
ment, treatment, presentation and disclosure of accounting transac-
tion in the financial statement. Accounting Standards in India are
recommended by the Institute of Chartered Accountants of India
. (/CAI) and notified by the Central Government.
Objective of Accounting Standards
1.1 Objective of Accounting Standards is to standardize the diverse
ac_£9~ting 2olicies and practices with a view to eliminate to the extent
possible the non-c~mpara@lity of financial statements and add the
reliability to the financial statements. . .
The Institute of Chartered Accountants of India, recognizing the need to
harmonize the diverse accounting policies and practices, constituted an
Accounting Standard Board (ASB) on 21st April, 1977.
1.2 Compliance with the Accounting Standards
The Accounting Standards will be ip.andatory from the respective
date(s) mentioned in the Accounting Standard(s). The mandatory
status of an Accounting Standard implies that while discharging
their attest functions, it will be the duty of the members of the
Institute to examine whether the Accounting Standard is complied
with in the presentation of financial statements covered by their
audit. In the event of any deviation fJ1!m.the.Accounting Standard,
it will be their duty to make a@91.!.~!~.9i.sc1osures in their audit
reports so that the users of financial statements may be aware of
such deviation. •
Ensuring compliance with the Accounting Standards while prepar-
ing the financial statements is the responsibility of the management
of the enterprise. Statutes governing certain enterprises requires
the enterprises that the financial statements should be prepared in
1
 Para 1.4 IN TRODUCTION 2
·compliance with the Accounting Standards, e.g., the Companies
Act, 2013 (section 133), and the Insurance Regulatory and Develop-
ment Authority (Preparation of Financial Statements and A_uditor's
Report of Insurance Companies) Regulations, 2000. .
Financial Statements ·cannot be described as complying with the
./ Accounting Standards unless they comply with all the require-
ments of each applicable Standard. .
1.2-1 Advantages and disadvantages of Accounting Standards - _The
setting of Accounting Standards has the following advantages:-
Standards reduce to a reas~~able exte~t or eliminate altogether
. confusing vari~tion in the accounting tr~atments used t~ prepare
the financial statements. . ' l. • I • •

There are certain area where important information are not

required by law to be disclosed, standards may call for disclosure
beyond that required by law. ·
--
~--~,._.....
•• ,. • •. i' •
•

It facilitates comparison of financial statements of clifferent com-

panies situated-atdiffereiit places.' . . ..
The disadvantages of setting accounting standards are:- .
4 t .; .. .. • f

. There may~ a trend towards ~gi_4itY-,ap.d ~way from flexibility in

applying accounting standards. __ _ -- -·:-~ .
Differences in accounting standards are
bound to be because of
differences in· the traditions and legal system from one country to
. another.
'
Accounting standards cannot override the law. The standards are
required to be framed williliflne ambit of prevailing statute even
though it is not an acceptable ~tandard. .,
The choice between better alternative Accounting treatment in a
. particular situation is eliminated. · ~---- ; .• - .
Accounting Standard and the Auditors • • •
•
. .
- 1.3 Auditors are duty bound while discharging their attest function to
• I

ensure the Accounting Standards issued and made mandatory by the

Central Government are complied with. Section 143(3)( e) of Companies
Act, 2013 requires that the auditors to report whether in his opinion the
financial statements comply with the Accounting Standards referred in
section 133 of Companies Act, 2013. , •
• • I
Accounting Standard and Board's Report
I ·•

I •

1.4 Section 134(S)(a) of Companies Act, 2013 states that Directors

responsibility statement should include that in the preparation· of the
. .
3. j

PROCEDURE FOR ISSUING ACCOUNTING STANDARDS BY ICAI Para 1.5 .-'

annual accounts the· applicable Accounting Standards had been fol-

lowed along with proper explanations relating to material departure.
Pro·cedure for· issuing Accounting Stand~rds by the Institute of Char-
tered Accountants of India (ICAI) . •
1.5 Broadly the following procedure is adopted for formulating the
•Accounting Standard : I • .: ••

.·, .• ~cco~ting. Standard Board (ASB) shall dete.rmine

the broad areas
which ·_Accounting Standards need to be formulated and t4e
• pri~rity in regard to the s·election thereof.
•In the preparation.of Accounting Standards, ASB will be assisted by
Study Groups constituted to consider spe.cific subjects.• In the
formation of Study Groups, the members of the Institute and others
will make provision, for wide part~cipation. · •
. ASB will also hold a dialogue with the' representatives of the
• Government, Public Sector Undertakings, Industry and qther orga- .
:• nizations for ascertaining their views.
. .

On the basis of the work of the Study Groups and the dialogue with
_._the organizations referred to above, an exposure draft of the
proposed standard will be prepared and issued for comments by
. members of the Institute· and the public at large.
' .
The draft ~f the proposed standard will include the following basic
points: •
Statement of concepts and fundamental accounting prin-
ciples relating to the Standard. •
\:(Definitions of the terms used in the Standard.
- The manner in which the accounting principles have been
applied for formulating the Standard..
-· T}le presentation and disclosure requirements in complying
¼ith the standard. •
- ciass of entities to which the Standard will apply.
- Date from which the Standard will be effective.
After taking into consideration the comments received, the draft of
the proposed Standard will be finalised by ASB and submitted to
. the Council of the Institute. •
' : . .• \

The Council of the Institute will consider the final draft of the
proposed Standard, and if found necessary, modify the same in
consultation with ASB. The Accounting Standard on the relevant
subject will then be issued under the authority of the Council.
So. far !CAI has issued 29 Accounting St~dards. However AS-8 •on
"Research & Development" and AS-6 on Depreciation was withdrawn

r
r Para 1.5 4
INTRODUCTION I •

c_onsequent ·to issue of AS-26 and AS-1 o(Revised) ~respectively": Effec-

tively there are 27 Accounting Stand ards at presen t. However, only the
AS-1 to AS-5, AS-7 and AS-9 to AS-29 are notified by the ·Central
Gove rnme nt u/s 133 of the Companies Act, 2013. .. '
1.5-1 Scope:of Accou nting Stand ards- . ..
Effor ts will be made to issue Accounting Stand ards which are in
confo rmity with the provisions of the applicable l~ws, cu~toms,
usage s and business enviro nmen t in India. However, if a partic ular
Accou nting Stand ard is found to be not~ confo rmit~ with law, the
provisions of the said law will prevail and the financial statem ents
shoul d be prepa red in conformity with such law.·
The Accounting Stand ards by· their very natur e 'canno t an~ do not
overri de the local regulatio~s which gover n the prepa ration and
presentation· of financial statem ents in the count ry. Howe ver, the
ICAI will determ ine the exten t of disclosure to be made in financial
statem ents and the audito r's repor t thereo n. Such ~isclosure may
be by way of appropriate notes explaining the treatm ent of partic u-
lar items. Such explanatory notes will be only in the natur e of
clarification and theref ore need not be treate d as adver se com-
ments on the relate d financial statem ents.
The Accounting Stand ards are intend ed to apply only to items
which are material. Any limitations with regar d to the applicability
of a specific Accounting Stand ard will be made clear by the ICAI
from time to time. The date from which a partic ular Stand ard will
come into effect, as well as the class of entities to which it apply,
will also be specified by the ICAI. However, no stand ard will have
retroa ctive application, unless otherw ise stated . • -1
The Institu te will use its best endea vour to persu ade the-,Govem-
ment, appro priate authorities, indus trial and b1;1siness comm unity
to adopt the Accou nting Stand ards in order to achie ve unifo rmity
in prepa ration and prese ntatio n of financial stat~m ents.
In formu lation of Accou nting Stand ards, the emph asis would be on
laying down accou nting principles and not detail ed rules for appli-
cation and imple menta tion thereo f.
The Stand ards formu lated by the ASB includ e parag raphs in bold
italic type and plain type, which have equal autho rity. Parag raphs
in bold italic type indica te the main principles. An indivi dual stan-
dard shoul d be read in the conte xt of the objec tive stated in that
stand ard and the Preface.
1.5-2 National Advis ory Comm ittee on Accou nting Stand ard (NACAS) -
Unde r sectio n 21 OA of Comp anies Act, 1956, the Centr al Gove rnmen t by
s STATUS OF ACCOUNTING STANDARDS ISSUED BY ICAI Para 1.6

notification has constituted a committee to advise the Central Govern-

ment on the formulation and lying down of accounting policies and
accounting standards for adoption by companies or class of companies
specified under the Act. Based on the recommendations of NACAS, the
Central Government has notified AS-1 to AS-5, AS-7 and AS-9 to AS-29
in December 2006 in the form of Companies (Accounting Standards)
Rules, 2006. • - • •
Section_l32 of the Companies Act, 2013 provides that a National Finan-
cial Reporting Authority (NFRA) will be constituted and Accounting
Standards will be notified by the Central Government in consultation
with National Financial Reporting Authority in place of NACAS. How-
ever till the NFRA is constituted under new Companies Act, 2013 the
Central Government may prescribe the Standard of Accounting as
recommended by the ICAI in consultation with NACAS constituted
llD:_der section 210A of the Companies Act, 1956. The Central Govt. has
reconstituted the NACAS in October 2016 till the NAFRA comes in force.
1.6 Status of the Accounting Standards issued by the Institute of
Chartered Accountants of India
Number of the Title of the Accounting· Date from which Entity to which
Accounting Standard mandatory (accounting applicable
Standard (AS) periods commencing
on or after)
Disclosure of Accounting
I
AS-1 1-4-1993 All
Policies
AS-2 (Revised) Valuation of Inventories 1-4-2016 All
AS-3 Cash Flow Statement 1-4-2001 All companies except
- . OPC and small, for
I other enterprise
whose turnover
. exceeds SO crores.
AS-4 (Revised) Contingencies and Events 1-4-2016 All
Occurring after the Balance
. Sheet Date . .
AS-5 Net Profit or Loss for the 1-4-1996 All
Period, Prior Period Items and
Changes in Accounting Policies
-. -

AS-7 , Construction Contracts 1-4-2002 All

AS-8 Withdrawn and included in - -
AS-26
AS-9 " Revenue Recognition 1-4-1993 All
AS-10 (Revised) Property, Plant and Equipment 1-4-2016 All, for non-corpo-
(PPE). rate entities 1-4-
2017
AS-11 (2003) The Effects of Changes in 1-4-2004 All . .
Foreign Exchange Rates
-
AS-12 Accounting for Govt. Grants 1-4-1994 All
AS-13 (Revised) Accounting for Investments 1-4-2016 All
Para 1.7 INTRODUCTION 6

Number of the Title of the Accounting Date from which <.

Entity to which ..
mandatory (accoun_ting applicable. ... •
.Accounting
Standard (AS)
Standard
periods commencing .
I•
.
on or after) • . ..
l

AS-14 (Revised) Accounting for Amalgamations 1-4-201,6 "l • '1•

All ..... '
>
Employees benefit 1-4-200Q All
AS-15 (2005) . ' I , '

AS-16 Borrowing Costs 1-4-2000 All . ', ..

AS-17 Segment Reporting 1-4-2001 Level-I and Non- '

I
• J ' I

·sMc
AS-18 Related Party Disclosures •• 1-4-2001 Level-I, Il and all
companies , .
AS-19 Leases ... , .1-4-2001 , All,
' I

AS-20 Earning Per Shares - ... 1-4-2001 11

All I

AS-21 (Revised) Consolidated Financial State- 1-4-2016 See Note-I

ments
AS-22 Accounting for Taxes on ·' • • 1-4-2001 - For Listed
Income ,.
Companies
:
1-4-2002 - Companies
'
other than listed
1-4-Z006· . ··:
.. --All ...
'
AS-23 Accounting for Investment in 1-4-2002 See Note -1 .-
Associates in Consolidated
I
Financial Statements .

AS-24 Discontinuing operations 1-4-2004 Level-( n and all •.

companies
AS-25 Interim Financial Reporting 1-4-2002 Note-2
AS-26 Intangible Assets 1-4-2003 All
'
AS-27 Financial Reporting of Interests 1-4-2002 See Note-I
..
in Joint Ventures
Impairment of Assets ..
AS-28 1-4-2004 - Level-I ] and all
1-4-2006 - Level-II companies
1-4-2008 - Level-ID
AS-29 (Revised) Provisions, Contingent liabilities 1-4-2016 All
;
and Contingent Assets
. . .
Note 1 : AS-21, AS-23 and AS-27 (relating to consolidated financial
statements) are required to be complied with by an entity if ·the e·ntity,
pursuant to the requirements of a statute/ regulator or• voluntarily,
prepares and presents consolidated financial statements. The Compa-
nies Act, 2013 mandate to prepare consolidated financial statements.
Note 2: If an entity is required or elect to prepare and present an interim
financial report, it should comply with this standard. •
Applicability of Accounting Standards to N on-Corporate Entities· •
1.7 For the purpose of applicability of accounting standards entities are
classified into three categories by the ICAI, however this classification is
not applicable to companies covered by classification made by Compa-
nies (Accounting Standards) Rules, 2006.
 7
APPUCABillTY OF ACCOUNTING STANDARDS Para 1.7
-
Level I Entities - Non-corporate entities which fall in any one or more
of .the.f0 ~~wing categories, at the end of the relevant accounting period,
~e c1assified as Level I entities: . . , _
; t) ;Entities whose ~_glli!L.9r debt securities are listed or are in the
pro~ess of listing on any stock exchange, whether in India or outside
_ India. . • . .
( tt) ~anks (~eluding co-operative banks), financial institutions or enti-
. ties carrying on insurance business. 1 '
• •
( iit) All commercial, industrial ~d. b~ess r~rt~entities, whose
... turnover (excludin~filhWc~rh~j exc~ds rupies fifty crore in the
,'\. • immediately preceding accounting year. i
( iv) All commercial, industrial and business reporting entities having
borrowings (including public deposits) in excess of rupees ten crore
•. at any time during the µnmediately preceding accounting year.
( v) Holding and subsidiary entities of any one of the above.
f:,evel II Entiti'es (SMEs) - Non-corporate entities which are not Level i
~ntities. but fall in any one or more of the following categories are
cl3:ssified ~s Lev~l II entities from the _accounting year commencing on
or after April ot 2012: ' •
( z) All ~ommerciai,' industri_al and business reporting entities, whose
, turn<?ver (excluding other income) exceeds rupees one crore but
1
• . does not exceed rupees fifty crore in the immediately preceding
accounting year. •
.
•( it) All commercial, industrial and bu·siness reporting entities having
borrowings (including public deposits) in excess of rupees one crore
• , but not in excess of rupees ten cror~ at any time during the
immediately preceding accounting year.
(iii)~ Holding and subsidiary entities of any one of the above.
L~el Ill Entities (SMEs) - Non-corporate entities which are not cov-
ered under Level I and Level II are considered as Level ID entities.
1. 7-1 • Applicability' of Accounting Standard to Level I - 'All the 29
Accounting Standards are fully applicable to Level-I entities except AS
21, 23 and 27, unless the relevant regulators require compliance with
these three standards. I

1.7-2 Applicability of Accounting Standard to Levels II and III entities

(SME)- For the purpose of applicability of accounting standard to Level-
II_ ent~rprises ~he cas~ c~n be divided in~o three c':1~~gories:
• .Accounting standards fully applicable.
Para 1.8 P .. i. . .' 1 ,· -INTRODUCTION .• .:· :. • r ·, · 8

, : . Accounting standards applicable but relaxation from certain dis-

closure requirements~ :ir , , • . .• , ,. .. • . .. ·J •. , . : t ·,.

Accounting standards not applicable.: :' -· '. - , L 1 ... J ' • • - ; : ., • ; ., • •

~ccounting Sta71:dar,ds fully applica~le - ~S-1~ AS-~! AS-4, AS-5, ~AS~7,

AS-9, AS-10,'AS-l 1, AS-12;'AS-13, AS-14,.AS-15, AS-16; AS-22,.AS-26 and
AS-28. • ll, •

AS-28, "Impairment of Ass~ts" is applicable·: • J • ·:,

1
I • ' • y • 'l'

r '.
- For Level-I entities w.e.f. _1-~-200 4 ' •l r :
" . : .
' I
•

. ~· - For Level-II entities w~~-f.. 1-~-200 6, an~ • I

I •

- For Level-ID entities w.e.f. 1-4-2008. • 1

' •

Accounting Standards applicable but relaxation from certain disclo-

sures requirements - AS-19, AS-20 and AS-29. :, .- ._
1
.
Accounting Standards not applica ble -AS-3, A.S-17, AS-18 and AS-24.
AS-21, AS-23, AS-25 and _AS-27 are n~t applicable. be~ause of existing
regulation in India. . ,. ' .; I ' ,
1 1
' • '
• • .- f 1 I

Note: Consequent upon the issue of ~ompanies (Accounting Standards)

Rules, 2006, the applicability of the Accounting St~dar ds as announced
by the Institute of Chartered Accountants mentioned above is only for
the entities other than companies. For the companies the applicability of
Accounting Standards is as per •Companies {Accounting Standards)
Rules, 2006 detailed in para 1.1 i. • • :
Applicability !of Accoun,ting Standard to Co-operative Societies t •

1.8 The Institute of Chartered Accountants of In~a has explained that

the Acco~ ting Standards issued by the Institute shall applY. in respect
of financial statements of co-operative societies, which carry on com-
mercial, industrial -or business activities, and are subject to the attest
•
I

function of the members of the Institute. .

'
Acc~un ting St~dar ds made manda tory by the Institute, as specified in
the respective standards or made mandatory by separate announce-
ment, are also mandatory in respect of co-operative societies. ,, • .~ • I

The Institute of Chartered Accountants of India has further clarified

that even.if a ~ery_small proportion of the activities.~£ a co~operativ~
society is considered to be commercial, industrial or business in nature,
then it cannot claim exemption from the, application of, Ac~ounting
Standards. The Accounting Standards would apply to all its actiyities
including those, which are not commercial, industrial or business in
nature.
r 9 APPLICABILITY OF AccouNTINa STANDARDS FOR COMPANIES Para 1.11

By this the members of the Institute of Chartered Accountant~ of India

who are appointed as auditors of the co-operative societies have the
responsibility to qualify their reports in case the relevant accounting
s~~d~rds are not followed in the preparation and preseqtation of the
financial statements of the co-operative societies. . :
Appli_cability of Acco~ting Standards to Charitable Entities
1.9 Accounting Standard apply to commercial, industrial or business
enterprises. There£ore, they do not apply to purely charitable entities.
However, if a charitable entity is also engaged in business or commercial
activity (howsoever insignificant) then accounting standards would
apply to its entire activity, charitable and non_-charitable..
Applicability of Accounting Standard to partnership and proprietorship
1.10 The preface to the statement of Accounting Standard clarifies that
the Accounting Standards are issued "for use in the presentation of
general purpo~e financial statements issued to the public by such
commercial, industrial or business enterprises, as may be specified by
the Institute from tim~ to time and subject to the attest function of its
members. The term 'General Purpose Financial Statements' includes
balance sheet, statement of profit and loss and other statements and
explanatory notes, which form part thereof.· Thus, compliance with
accounting standards is required to be examined by an auditor in an
audit of financial statements of individuals and non-corporate enter-
prises ( viz., sole proprietary concerns, partnership firms, societies regis-
tered under Societies Registration Act, Trusts, Hindu undivided families,
and association of persons). Therefore, Accounting Standards are appli-
cable not only to limited companies but also to partnership firms or
proprietorships.
Applicability of Accounting Standards for Companies
1.11 At present there are two sets of Accounting Standards under
Companies Act as under:
(i) Accounting Standards (AS) as notified by the Companies (Account-
ing Standards) Rules, 2006. These are from AS-1 to AS-5, AS-7 and
AS-9 to AS-29, as amended by notification dated 30th March, 2016.
( ii) Indian Accounting Standards (Ind AS) as notified by the Companies
(Indian Accounting Standards) Rules, 2015. These are from Ind
AS-1 to Ind AS-41 and Ind AS-101 to Ind AS-115 as amended by
Companies (Ind AS) Amendment Rules, 2016 dated 30th March,
2016.
Para 1.11 INTRODUCTION 10

section 211(3C) of the

The Cen tral Govt. in exercise of powers und er
ounting Standards)
Companies Act, 1956 notified the Companies (Acc
period commencing
Rules, 2006 in the Official Gazette w.e.f. accounting
ounting Stan dard as
on or afte r 7-12-2006 (now deemed to be Acc
2013):
specified und er section 133 of the Companies Act,
5 & 7 and 9 to 29
The rules provide that Accounting Stan dard s 1 to
ountants of India
recommended by the Institute of Chartered Acc
as the "Notified
shall be the "Accounting Standards" (referre d to
ion 129(1) and
Accounting Standards") for the purposes of sect
section 143(3)(e) of the Companies Act, 2013.
, are a verbatim
The notified accounting standards for the most part
by the Institute
reproduction of the Accounting Standards as issued
of Chartered Accountants of India.
ed by Institute
All the 30 Accounting Standards Interpretations issu
rporated at the
of Chartered Accountants of India have been inco
ounting Stan-
relevant places by way of explanation except Acc
dards Interpretations 11, 12, 27 and 29.
ry for all compa-
The notified Accounting Standards are man dato
for SMCs.
nies and their auditors except as exempted/relaxed
panies (SMCs)
Exemptions/relaxations to Small and Medium Com
have been given.
nition of SMEs
The definition of SMCs is muc h simpler than the defi
of India (which
given by Institute of Cha rter ed Accountants
rprises, Level-II
involved classifying enterprises in Level-I Ente
Enterprises and Level-ill Enterprises).
of the new Companies
Transitional Provision und er Rule 7 of Chapter IX
specified und er the
Act, 2013 provides the standards of accounting as
to be the accounting
Companies Act, 1956 (1 of 1956) shall be deemed
ified by the Central
standards until accounting stan dard s are spec
Government und er section 133.
1.11-1 Applicability of Ind AS to specified companies
- Indian Accounting
of accounting stan-
Standards (abbreviated as Ind AS) are ano ther set
Government of India
dards notified by the Ministry of Corporate Affairs,
Reporting Stan dard s
which are converged with International Financial
ed by Accounting
(IFRS). These accounting stan dard s are formulat
tants of India.
Standards Board of Institute of Chartered Accoun
1l APPLICABILITY OF ACCOUNTING STANDARDS FOR COMPANIES Para 1.11

The Ind AS are named and numbered in the same way as the corre~
sponcling IFRS. The MCA has notified 41 Ind ASs as Companies (Indian
Accounting Standards) Rules, 2015 as amended by Companies (Indian
Ac~ounting Standards) Amendments Rules, 2016 with following roadmap
of unplementation:

Phase - I 1st April 2015 or thereafter: Voluntary Basis for all compa-
nies (with Comparatives)
1st April 2016: Mandatory Basis
(a) Companies listed/in process of listing on Stock
Exchanges in India or Outside India having net worth
> INR 5 Billion
( b) Unlisted Companies having net worth> INR 5 Billion
- (c) Parent, Subsidiary, Associate and J.V of above
Phase - II 1st April 2017: Mandatory Basis
(a) All companies which are listed/ or in process of listing
inside or outside India on Stock Exchanges not
covered in Phase I (other than companies listed on
SME Exchanges)
(b) Unlisted companies· having net worth of INR 2.5
Billion or more
(c) Parent, Subsidiary, Associate and J.V of above
Companies listed on SME exchange not required to apply
Ind AS
Once Ind ASs are applicable, an entity shall be required to
follow the Ind AS for all the subsequent financial state-
ments.
Companies not covered by the above roadmap shall continue to apply
existing Accounting Standards notified in Companies (Accounting Stan-
dards) Rules, 2006. •
1.11-2 Roadmaps on Ind AS for banks, insurance companies and NBFCs -
All scheduled commercial banks (except RRBs), all-India term-lending
refinancing institutions, insurers/insurance companies and NBFCs (all
listed and unlisted companies having a net worth of Rs. 250 crore or
more) will be required to adopt Ind AS. Ind AS will be applicable to both
consolidated and individual financial statements. • •

(.
 12
Para 1.11 · INTRODUCTION,
1s t Ap ril 2 0l8
s beginning from,
Mandatory for·accounting period •
onwards .
. '
•'
luding RRBs)
Scheduled commercial banks (exc
tions (ie. Exiin ~ank, ~ABARD,
India term-lending refinancing institu
NHB and SIDBI) •
- , .
Insurers/insurance companies of sched-
.d. . t ven
m· ture or ass. ociate companies ',
Holding, SUbSI Iar y,JO .

uled commercial banks .

· f.ormatio
· em •e
•· n requrr• d for the period ending 31st March
Comparativ •
2018 or thereafter pare Ind .AS based financial
to pre
N BFCs: N BFCs will be required
•
statements in two phases
ase Mand atory for acc ou nti ng per iod s beginning from 1st Ap ril
Ph J:
2018 onwards •
crore or more~ -
NBFCs having a net worth of Rs. 500
·or associate companies of the
Holding, subsidiary, joint venture
already covered un de r the
above, other. than those companies
by MCA.
. corporate roadmap announced
tive inf orm atio n req uir ed for the period ending 31st March
Comp ara -
2018 or thereafter ril
ng per iod s beginning from 1 Ap
Phase 2: Mandatory for accounti
2019 onwards
securities are listed or are in the
NBFCs whose equity an d/ or deb t
hange in India· or outside India
process of listing on any stock exc
n Rs. 500 crore.
• and having a net worth less tha
, having a ne t wo rth of Rs. 250
NBFCs that are unlisted companies - • ...
crore.
crore or more bu t less tha n Rs. 500
.

or associate companies of com-

Holding, subsidiary, joint ven tur e
se companies alr ead y cov ere d
panies covered above, oth er tha n tho
ou nce d by MCA.
under the corporate roa dm ap ann
for the per iod ending 31st Ma tch
Comparative information required
2019 or thereafter.
Voluntary adoption no t permitted.
in the roa dm ap
Companies/entities no t covered
FC s hav ing a net wo rth ·be low Rs. 250 cro re an d no t cov ere d
• NB
continue to apply Accounting
un der the above provisions shall
13 APPLICABILITY OF ACCOUNTING STANDARDS FOR COMPANIES Para 1.11

·' . Standards specified in Annexure to Companies (Accounting Stan-

r • , dards) Rules, 2006 • .. ·
. Urban cooperative banks (U CBs) and RRBs shall not be required to
, apply Ind AS and shall· continue to comply with the existing
- . Account!ng Standards for the present.
1.~ 1-~ S~ll and Mediu~ Compani~s (SMCs) -- Small and Medium
Co~pani~s •(SMCs) has been defined as in rule· 2(-f) o{ Companies
(Acc~unting Standards) Rules, 2006 issued~der Companies Act 1956,
as per the rule, company which satisfies all the following five conditions
as at the end of the accounting ·period shall be called SMC : •
•(a) 'the eqtrity debt securities of the company are not listed or are not
in the process of listing of any stock exchange, whether in India or
. •· outside India • . - ••
( b) ·_ th~ company·· is not a bank. or financial institution or insurance
company .•
: ' '
(c). th~ company's turnover (eichiding other income) does not exceed
Rs. 50 crores in the immediately preceding accounting year
I l J ' • I

(d) the.company does not have borrowing (including public deposits)

exceeding Rs. 10 crores at any time during the immediately preced-
7 .
'
flg accoupting year and . . .
.
.... . .
i
._.

(e) the company is not a holding company or subsidiary of a non-SMC.

1.11-4 Enterprise - Rul~. 2(e) h~s given the new definition of "enterprise"
which means a company.as defined in section 3 of the Companies Act,
1956. Wherever the word "enterprise" has been used in notified account-
ing standards this will mean company registered under Companies Act.
I • • •

1.11-S Exemptions/relaxations to SMCs - The SMCs are given the

fallowing ~elaxation iri complyjng the notified accounting standards.:_
1. J I • •

SMCs need not to disclose the segment reporting as per AS-17. As

_. : per section 2(40) of Companies Act, 2013, AS-3 is not mandatory for
- one person company, small company [Sec. 2(85)] and dormant
company. • , , ,
1 The SMCs have been given following relaxation as regards AS-15
. "Employee Ben~fits" : '
- SMCs ne~d not comply paras 11 to 16 of AS-15 to extent they
dealwithrecognitionandmeasurementofshort-termaccumu-
lated compensating absences.
 Para 1.11 INTRODUCTION • 14

- Discounting the amoun t payable after 12 month s of balance

sheet as regards defined contribution plans and termination
benefits. '
• ••

- Recognition, measurement and disclosure principles in re-

spect of defined benefit plans and other long-term employee
benefits plan. However such enterprises sh~uld provi~e and
disclose the accrued liability in respect of defined benefit plan
and other long-term employee benefit plan as per actuarial
valuation_ based on projected unit credit metho d and disco1;lilt
rate based on yield on Government bo~ds. _ . ,
SMCs need not disclose diluted EPS as per AS-20 "Earning _Per
Share". •
SMCs need _not comply with disclosure requirements regarding
operating leases of sub-paras (b) & (d) of para 46 and sub-paras (a),
( b) & (e) of para 25 of AS-19 "Leases" and sub-paras (a) & (f) of para
37 and sub-paras (c), (e) & (f) of para 22 of AS-1_9 regarding
disclosure for finance lease by the lessor and lessee respectively.
. :. ' .
Value in use has been differently defined for SMCs which provides
and alternate to calculate· value in use based on a reasonable
estimate of future cash flows. -
SMCs ·are exempt from disclosure requirements of paras 66 and 67
I
of AS-29 regarding provisions and its descriptions. •
I
! 1.11 ~6 AS-18 "Related Party Disclos.ures "will now apply to all companies
including SMCs and as no exemptions/relaxations has been given by
Companies (Accounting Standards) Rules, 2006.
1.11-7 Change in status of the company
(a) From SMC to Non-SMC - Where a company, being an SMC, has
qualified for any exemption or relaxation previously but no longer
qualifies for the relevant exemption or relaxation in the curren t
accounting period, the relevant standa rds or requirements become
applicable from the curren t period and the figures for the corres-
ponding period of the previous accounting period need not be
revised merely by reason of its having ceased to be an SMC. The fact
that the company was an SMC in the previous period and it has
availed of the exemptions or relaxations available to SMC shall be
disclose4 in the notes to the financial statements.
15 APPLICABILITY OF ACCOUNTING STANDARDS FOR COMPANIES Para 1.11

( ~) From Non-SMC to SMC - An existing company, which was previ-

• ously not an SMC and subsequently becomes an SMC, shall not be
qualified for exemption or relaxation in respect of accounting
st~dards_ available .to an SMC until the company remains an SMC
for two consecutive accounting periods.
1.l 1-8 Disclosure by SMC - Companies (Accounting Standards) Rules,
2006 provides that SMC should make the following disclosures by way
of notes to accounts : •
• The SMC which does not disclose certain information pursuant to
the exemptions or relaxations give1i'to its shall disclose the fact that
it is an SMC and has complied with the accounting standards
insofar as they are applicable to an SMC on the following :
• "The company is an SMC as defined in the general instruction
in respect of accounting standards notified under the Compa-
• • • nies Act. Accordingly, the company has complied with the
accounting standards. as applicable to an SMC."
'
If an SMC opts not to avails of the exemptions or relaxations
• •available to an SMC in respect of any b~t not all of accounting
:_ . standards, it shall disclose the standard(s) in respect of which it has
availed the exemptions or relaxations.
• If an SMC desires to disclose the information not required to be
disclosed pursuant to the exemptions or relaxations available to the
SMCs, it shall disclose that information in compliance with the
1
relevant accounting standards.
The SMC may opt for availing certain exemptions or relaxations
from compliances with the requirements prescribed in an account-
ing standard provided that such a partial exemptions o~ relaxations
and disciosures shall not be permitted to mislead any person or
.. _public. ,
 , J. . 16
Para 1.11
. . •
•INTRODUCTION :
mpa~ies
of Accounting Standards to C~
Flo w chart for Applicability . •• • •
:-
other than covered by IN D AS
cess
Is the company listed/ un~er pr~
of listing or listed outside India

All the AS are applicable

Is it a Banking/Insurance/ but refer flow chart for IND
Financial Institution?/NBFC ' AS for specified companies

No

All the AS are applicable

Is turnover more than 50 but.refer flow chart for
crores in previous year or • IND AS for specified
borrowing more .than 10 com~anies
crore?

No

All the AS are

Is the company a holding/ applicable
subsidiary of any of these
above?

No

AS 17 is ftilly exempt All the AS are

whereas, AS 15, applicable
I 19, 20, 28, 29 are
partially exempt•
of Compa-
*AS-3 is exempt only to 'small
company' as defined u/ s 2(85)
any an d do rm an t compan y.
nies Act, 2013, on e person comp
17 APPLICABILITY OF ACCOUNTING STANDARDS FOR COMPANIES Para 1.11

Flow chart for Applicability of Ind AS

Which category the company/ entity belongs

I
Is the company in insurance, Other than insurance, banking or
banking or NBFC industry? NBFC industry

I /
I
Is it Scheduled Is company's net
commercial worth less than
bank (exclud- Rs. 500 crores
ing RRB), Is company's net but equal or
worth equal or greater than
N ABARD, Exim
bank and
Is it NBFC?
greater than
No~
. Rs. 250 crore?
SIDBI, Rs. 500 crore? Or whose equity
Insurance or debt securi-
Companies? ties are listed or
in process of
listing
' Yes No

(w.e.f. from l51 April 20181 (w.e.f. from 1st April 2016 w.e.f. from 1st April 2017]

/
Is company's net
worth less than
Rs. 500 crores but
Is company's net
equal or greater No
worth equal or
than Rs. 250 crore?
greater than
or whose equity or
Rs. 500 crore?
debt securities are
listed or in process
,I
of listing
,I

Yes Yes

w.e.f. fr~m 1st April 2018 w.e.f. from 151 April 2019
I

No
. Continue to apply existing AS .
(refer applicability of AS)
 INTRODUCTION 18

1.11-9 Financial statements -As per section 2( 40) of the Companies Act,
2013 in relation to a company, includes :
( t) A balance sheet as at the end of the financial year;
(it) A profit and loss account or in the case of a company carrying on
any activity not for profit and income and expenditure account for
the financial year;
(iii) Cash flow statement for the financial year;
(i1:1) A statement of changes in• equity, if applicable; and
( v) Any explanatory note annexed to, or forming part of finan~ial
statements :
Provided that the financial statement, with respect to One Person Com-
pany, Small Company and Dormant Company /inactive company, may
I
not include cash flow statement.
1.11-10 What is a Small Company?
~I . 'Small Company' means a company, other than a public company:
(1) eaid-up_sh~ capital of which does not exceed fifty la~s rupees or
such higher amount as may be prescribed which shall not be more
than five crore rupees; and
( ii) turnover of which as per its last profit and loss account does not
exceed twocrore rupees or such higher amount as may be pre-
scribed whidrsruillnot be more than twenty crore rupees.

PROBLEMS

1. What are Accounting Standards?

2. What are the advantages of setting Accounting Standards? (CA Final May 2002)
3. Is it possible to harmonize the accounting practices?
4. How is Accounting Standard developed in India?
~- Company r~gistered under Indian Companies Ac~ has to comply with Account-
mg Standard ISsued by ICAI is it true?
6. Who prescribes accounting standard for the company?
7. Accounting Standard compliance is mandatory only for Auditors not for'
Company. Comment.
8. What are general purpose financial statements as described in Accounting
Standards Rules?