New Delhi, Nov. 9: Separate accounting standards for small and medium enterprises will soon become mandatory. Not only the Institute of Chartered Accountants of India (ICAI) but also the Confederation of Asian and Pacific Accountants (CAPA) are working to formulate separate standards for SMEs.
“The CAPA is working on the recommendation of international trend-setters to formulate separate standards for accounting and financial reporting in case of SMEs. The new norms will keep in view the typical requirements of such enterprises so that these enterprises are able to contribute the maximum in the economic development of member countries,” said an official spokesperson of ICAI. This apex body for the accounting professionals in India recently hosted a meeting of CAPA in Delhi.
“SMEs absorb about 90 per cent of total labour force in the business and their requirements of accounting services cannot be compared with the big companies,” a recent CAPA study says.
ICAI president R. Bupathy says, “Some relaxations in applicability of accounting standards is to be given to SMEs in view of the cost consideration and the skills to implement the accounting standards.”
The institute has relaxed the applicability of some accounting standards to SMEs at its recent council meeting. These modifications will be effective for accounting periods commencing on or after April 1, 2004.
For the purpose, all enterprises are classified into three levels. Level I enterprises will be required to comply with accounting standards in their entirety. It is the level II and level III enterprise which have been given the exemptions.
Level I firms are the listed ones or which will list their equity or debt securities. It comprises banks, FIs, insurance firms and enterprises whose turnover for the previous accounting period exceeds Rs 50 crore or borrowings, including public deposits, is in excess of Rs 10 crore.