New definition of (SMCs) Small and Medium companies in Accounting Standards

New definition of (SMCs) Small and Medium companies in Accounting Standards

New definition of (SMCs) Small and Medium companies in Accounting Standards

Good News

New definition of (SMCs) Small and Medium companies in Accounting Standard

New Limit of Turnover : Rs 250 Crores

New Limit of Borrowings : Rs 50 Crores

 


Ministry has issued, The Companies (Accounting Standards) Amendment, Rules 2021 passed on 23rd June 2021. These Rules came into effect on 23rd June 2021.

Short Summary:

The ministry of corporate affairs (MCA) has raised the threshold turnover and borrowing limits in its definition of small and medium companies (SMCs) to align the applicable accounting standards rules with the latest definition as per the ministry of micro, small & medium enterprises.


OLD Definition:

Small and Medium-Sized Company (SMC) as defined in Clause 2(f) of the Companies (Accounting Standards) Rules, 2006: (f) “Small and Medium-Sized Company” (SMC) means, a company

  • whose equity or debt securities are not listed or are not in the process of listing on any stock exchange, whether in India or outside India;
  • which is not a bank, financial institution, or an insurance company;
  • whose turnover (excluding other income) does not exceed rupees fifty crores in the immediately preceding accounting year;
  • which does not have borrowings (including public deposits) in excess of rupees ten crores at any time during the immediately preceding accounting year; and
  • which is not a holding or subsidiary company of a company that is not a small and medium-sized company.

New Definition:

The 388-page notification has defined small and medium companies as :

whose equity or debt securities are not listed or are not in the process of listing on any stock exchange, whether in India or outside India;

which is not a bank, financial institution, or an insurance company;

Turnover below Rs 250 Crores  in the immediately preceding accounting year;

which does not have borrowings (including public deposits) in excess of rupees Fifty crores at any time during the immediately preceding accounting year; and

which is not a holding or subsidiary company of a company that is not a small and medium-sized company.


Applicability

https://taxguru.in/company-law/companies-accounting-standards-rules-2021.html

MCA has notified Companies (Accounting Standards) Rules, 2021 on 23rd June, 2021.

3. Accounting Standards.- (1) The Central Government hereby specifies Accounting Standards 1 to 5, 7 and 9 to 29 as recommended by the Institute of Chartered Accountants of India, which are specified in the Annexure to these rules.

(2) The Accounting Standards shall come into effect in respect of accounting periods commencing on or after the 1st day of April, 2021.


 

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