The Ministry of Corporate Affairs has notified the Companies (Accounting Standards) Rules, 2021 on June 23, 2021. The Accounting Standards shall come into effect in respect of accounting periods commencing on or after the 1st day of April 2021.
Key features of the Rules are as follows:
- The notification deals with small and medium companies to revise the turnover and borrowing limits and help in making disclosure requirements less onerous.
- The notification has included the revised definition of MSMEs. Under the revised SMC definition, the turnover limit has been increased from Rs 50 crore to not exceeding Rs 250 crore and with enhanced borrowing limits. This is in addition to the requirements that such entities should be unlisted companies, which are not banks, financial institutions, or insurance companies.
- Every company, other than companies on which Indian Accounting Standards as notified under Companies (Indian Accounting Standards) Rules, 2015 are applicable, and its auditor(s) shall comply with the Accounting Standards.
- The Accounting Standards shall be applied in the preparation of Financial Statements.
- The government instructed that he SMC which does not disclose certain information pursuant to the exemptions or relaxations given to it shall disclose (by way of a note to its financial statements) the fact that it is an SMC and has complied with the Accounting Standards insofar as they are applicable to an SMC on the lines, “The Company is a Small and Medium Sized Company (SMC) as defined in the Companies (Accounting Standards) Rules, 2021 notified under the Companies Act, 2013. Accordingly, the Company has complied with the Accounting Standards as applicable to a Small and Medium Sized Company.”
- “Where a company, being a SMC, has qualified for any exemption or relaxation previously but no longer qualifies for the relevant exemption or relaxation in the current accounting period, the relevant standards or requirements become applicable from the current period and the figures for the corresponding 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 had availed of the exemptions or relaxations available to SMCs shall be disclosed in the notes to the financial statements,” the MCA instructed.
*Tanvi Singh, Editorial Assistant has put this story together.