New Delhi, Sept. 17: The Institute of Chartered Accountants of India (ICAI) has relaxed some accounting standards for small and medium-sized enterprises at its council meeting here.
The modifications would be effective for accounting periods commencing on or after April 1, 2004.
Enterprises have been classified into three levels for this purpose. Level-I enterprises would be required to comply with accounting standards in their entirety. It is the level-II and level- III enterprises that have been granted the exemptions.
A level-I enterprise is listed, or is in the process of listing its equity or debt securities. It includes banks, financial institutions, insurers and business enterprises whose turnover was over Rs 50 crore and borrowings (including public deposits) were more than Rs 10 crore in the preceding accounting year.
For level-II and level-III companies, ICAI has fully exempted four accounting standards. These are AS 3 which pertains to cash flow statements, AS 17 or segment reporting, AS 18 which pertains to party disclosures and AS 24 which relates to discontinuing operations.
A level-II enterprise’s turnover ranges between Rs 40 lakh and Rs 50 crore and its borrowings, including public deposits, is between Rs 1 crore and Rs 10 crore. All levels include holding and subsidiary enterprises of that level. Enterprises that are not covered under level-I and II are considered as level-III.
For level-II companies, ICAI has also relaxed the disclosure requirement of AS 19, which pertains to leases and AS 29, which is about contingent liabilities and assets.
Incidentally, this standard has been approved by the council at this meeting. The total number of accounting standards at present is 29.
The effective date of AS 28, pertaining to impairment of assets, has been extended to April 1, 2006, for level-II enterprises and April 1, 2008, for level-III ones. ICAI has also said there is no need to disclose diluted earnings per share (AS 20) by enterprises falling in these two levels.