Accounting Standards (AS) issued by the Institute of Chartered Accountants of India (ICAI) are applicable to Non-company entities to whom Ind AS are not applicable. For applicability of AS, the ICAI in 2004, prescribed the criteria classifying entities as Level I, Level II and Level III, wherein subsequently minor revisions were made. Level II and Level III non-company entities were classified as Small and Medium sized Entities (SME) to whom certain exemptions/relaxations were provided.

In July 2020, the threshold limits for classification of Micro, Small and Medium Enterprises (MSMEs) under the Micro, Small and Medium Enterprises Development (MSMED) Act, 2006, had been substantially revised. Considering this change, the inflation, and that the criteria for classification of Non-company entities was laid down long back, the Accounting Standards Board (ASB) of ICAI considered, through due process, including outreach, the revision the criteria to achieve simplification and ease of doing business by Micro and Small non-company entities. The ICAI has issued an Announcement revising the criteria for classification of Non-company entities into four Levels, viz., Level I, Level II, Level III and Level IV which is applicable in respect of accounting periods commencing on or after April 1, 2020. Level IV, Level III and Level II entities are referred to as Micro, Small and Medium size entities (MSMEs). The Announcement includes details of exemptions/relaxations to MSMEs and the guidance on transitioning between levels. The Announcement has been included as Appendix 1 of this Publication.

In accordance with the Announcement, following is the list of Accounting Standards that are generally applicable to Level IV entities, viz., Micro Non-company entities (MiNCE)) for the accounting periods beginning on or after April 1, 2020:

AS 1, Disclosure of Accounting Policies AS 2, Valuation of Inventories
AS 4, Contingencies and Events Occurring After the Balance Sheet Date AS 5, Net Profit or Loss for the Period, Prior Period Items and Changes in Accounting Policies
AS 7, Construction Contracts AS 9, Revenue Recognition
AS 10, Property, Plant and Equipment

(Applicable with disclosures exemption)

AS 11, The Effects of Changes in Foreign Exchange Rates

(Applicable with disclosures exemption)

AS 12, Government Grants AS 13, Accounting for Investments

(Applicable with disclosures exemption)

AS 15, Employee Benefits

(Applicable with exemptions)

AS 16, Borrowing Costs
AS 19, Leases

(Applicable with disclosures exemption)

AS 22, Accounting for Taxes

(Applicable only for current tax related provisions)

AS 26, Intangible Assets

(Applicable with disclosures exemption)

AS 29, Provisions, Contingent Liabilities and Contingent Assets

(Applicable with disclosures exemption)

This Publication has two Parts, viz, Part I and Part II. Part I provides an overview of recognition and measurement related provisions prescribed in AS applicable to MiNCE and Part II include Disclosures Checklist under AS applicable to these entities. It is pertinent to note that the full text of ASs should be referred for comprehensive knowledge on the subject.

This Publication covers recognition, measurements and disclosure requirements under above stated AS. Certain other AS, namely, AS 14, Accounting for Amalgamations, AS 21, Consolidated Financial Statements, AS 23, Accounting for Investments in Associates in Consolidated Financial Statements, AS 25, Interim Financial Statements, AS 27, Financial Reporting for Interests in Joint Ventures, are not covered in the Publication since in case of micro non-company entities generally there are no such transactions. However, if there are such transactions covered under these standards, the entities shall apply the requirements of these standards. Further, AS 3, Cash Flow Statements, AS 17, Segment Reporting, AS 18, Related Party Disclosures, AS 20, Earnings Per Share, AS 24, Discontinued Operations, AS 28, Impairment of Assets, are also not covered in this Publication since these are not applicable to MiNCE. Also, references to these AS, which are not applicable to MiNCE, have not been included in the AS applicable to these entities, e.g., requirements regarding impairment of assets referred in AS 10, reference to intangible assets acquired in amalgamation transactions referred in AS 26, etc. have not been included. AS 22, Accounting for Incomes Taxes, shall apply to MNCE for Current tax requirements only.

For the complete text of the applicable/relevant ASs mentioned in above paragraph, please refer publications of the Accounting Standards Board; Compendium of Accounting Standards, Accounting Standards: Quick Referencer and Accounting Standards: Disclosure Checklist (Revised February 2020).

Download Accounting Standards: Quick Referencer for Micro Non-company entities

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June 2021