The Chartered Accountants Association, Surat (CAAS), submitted a representation to the President of ICAI requesting that the mandatory applicability threshold for the Guidance Note on Financial Statements of Non-Corporate Entities and the Guidance Note on Financial Statements of Limited Liability Partnerships be increased from Rs. 5 crore to Rs. 10 crore turnover. While acknowledging ICAI’s objective of improving uniformity and transparency in financial reporting, CAAS argued that the current threshold would impose disproportionate compliance burdens on MSMEs, LLPs, and small professional clients, particularly in tier-2 and tier-3 cities. The representation highlighted concerns relating to increased disclosure requirements, higher compliance costs, practical implementation difficulties, limited accounting infrastructure, and the need to align the threshold with the Rs. 10 crore tax audit threshold under the Income-tax Act applicable in specified circumstances. CAAS proposed a calibrated approach whereby mandatory compliance would apply only to entities exceeding Rs. 10 crore turnover, while smaller entities could adopt the framework voluntarily.
Chartered Accountants Association, Surat
Ref: CAAS/Representations/2026-27/04 | Date: 09-06-2026
To,
The President,
The Institute of Chartered Accountants of India,
ICAI Bhawan,
Indraprastha Marg,
New Delhi – 110002.
Subject: Request to Elevate the Guidance Note Applicability Threshold from Rs.5 Crore to Rs.10
Crore
Respected Sir,
The Chartered Accountants Association Surat (CAAS) respectfully submits this representation for the kind consideration of the Institute of Chartered Accountants of India in relation to the phased mandatory applicability of the Guidance Note on Financial Statements of Non-Corporate Entities and the Guidance Note on Financial Statements of Limited Liability Partnerships.
At the outset, we appreciate and acknowledge the objective of ICAI in bringing greater uniformity, transparency, comparability and discipline in the preparation and presentation of financial statements of non-corporate entities and LLPs. The intent behind standardising financial statement presentation is undoubtedly in the larger interest of the profession, stakeholders, lenders and users of financial statements.
However, based on representations received from our members and considering the practical realities faced by small and medium non-corporate entities, particularly in tier-2 and tier-3 cities, we humbly request ICAI to reconsider the present threshold of Rs.5 crore and enhance the threshold for mandatory applicability to Rs.10 crore turnover, on a permanent basis or at least as a long-term calibrated threshold.
As per the recent announcement of ICAI, the Guidance Notes have been made mandatorily applicable in a phased manner, beginning with entities having turnover exceeding Rs.5 crore for accounting periods beginning on or after 1 April 2025, followed by wider applicability thereafter. In our respectful view, the present threshold may require reconsideration in light of the following practical, professional and policy considerations.
1. Alignment with the tax audit threshold under the Income-tax Act
The Income-tax Act already recognises a higher threshold of up to Rs.10 crore for tax audit in cases where cash receipts and cash payments are within the prescribed limits. In the present environment, where the Government is encouraging digital transactions and easing compliance for MSMEs, aligning the threshold for mandatory financial statement presentation framework with the tax audit threshold would bring consistency, certainty and practical ease.
A Rs.10 crore threshold would also avoid a situation where relatively small business entities, which are otherwise treated as lower-risk from a tax audit threshold perspective due to their digital transaction profile, are subjected to a disproportionately detailed financial statement presentation framework.
2. Increased compliance burden on MSMEs and small professional clients
The revised financial statement presentation framework requires enhanced presentation, regrouping and disclosure requirements. While these requirements may be appropriate for larger entities, their immediate mandatory application to smaller proprietorships, partnership firms and LLPs is likely to create significant compliance burden.
The additional requirements may include, among others, detailed ageing schedules, enhanced notes to accounts, related party disclosures, classification of financial and non-financial items, additional reconciliations, comparative information and structured presentation of financial statements.
For many MSMEs, these requirements will not merely be a formatting change. They will require deeper data extraction from accounting systems, restructuring of records, training of accounting staff and increased professional time. This will directly translate into higher compliance cost for small businesses.
3. Practical difficulties in implementation at ground level
A large number of non-corporate entities operate with basic accounting systems and limited internal accounting manpower. Many such entities maintain books primarily for tax, banking and business purposes, and may not have the systems necessary to readily generate the level of information contemplated under the revised framework.
In tier-2 and tier-3 cities, the transition will be even more difficult due to limited availability of trained accounting staff, incomplete automation, diverse accounting practices and delayed finalisation of books by smaller clients. The burden will ultimately fall on practising Chartered Accountants, who will be required to bridge the gap between the revised presentation requirements and the actual record-keeping practices of small entities.
4. Ease of doing business and reduction of compliance cost
The Government of India has consistently emphasised ease of doing business, simplification of compliances and reduction of regulatory burden on MSMEs. ICAI, being a premier statutory body and trusted partner in nation-building, may kindly consider aligning the implementation roadmap with this broader policy objective.
A higher mandatory threshold of Rs.10 crore would strike a reasonable and rational balance between improving the quality of financial reporting and avoiding excessive compliance burden on smaller businesses. Entities below the threshold may still be encouraged to adopt the framework voluntarily, wherever feasible, but mandatory application may be restricted to entities of a larger scale.
5. Need for calibrated implementation rather than sudden universal applicability
The revised framework represents a substantial shift in presentation and disclosure practices for non-corporate entities. Therefore, a calibrated and permanent threshold-based approach would be more effective than extending mandatory applicability to all entities within a short period.
In our respectful view, the framework may be made:
1. Mandatory for entities having turnover exceeding Rs.10 crore; and
2. Recommendatory or voluntary for entities having turnover up to Rs.10 crore, at least until adequate implementation experience, software readiness, training and stakeholder awareness are achieved.
Such an approach would allow the profession and the business community to gradually adapt to the revised framework without compromising on the long-term objective of improved financial reporting.
6. Suggested relief
In view of the above, CAAS humbly requests ICAI to kindly consider the following:
a. Enhance the threshold for mandatory applicability of the Guidance Note on Financial Statements of Non-Corporate Entities and the Guidance Note on Financial Statements of Limited Liability Partnerships from 5 crore to Rs.10 crore turnover;
b. Clarify that entities having turnover up to Rs.10 crore may follow the Guidance Notes on a voluntary or recommendatory basis;
c. Reconsider the proposed universal applicability to all entities and retain a reasonable threshold-based framework;
d. Issue suitable clarification, FAQs and implementation guidance for practical application by small and medium practitioners; and
e. Provide adequate transition time, especially for MSME clients and practising members in smaller cities.
The above request is not intended to dilute the importance of standardisation of financial statements. It is only a request for practical calibration, so that the objective of quality financial reporting is achieved without imposing disproportionate compliance costs on small businesses and MSMEs.
We therefore earnestly request your good office to place this matter before the appropriate Committee / Council of ICAI and consider issuing a suitable relaxation or modification in the applicability threshold in the larger interest of the profession, MSME sector and ease of doing business.
We shall be grateful for your kind consideration.
Regards,
For Chartered Accountants Association, Surat.
