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.
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.