ICAI asked to determine the regulatory impact of revised accounting standards for small businesses

NEW DELHI : The government has asked the accounting legislator, the Institute of Chartered Accountants of India (ICAI) to conduct an impact assessment of the revised accounting standards it is proposing for small businesses.

These are the companies that are not required to follow Indian Accounting Standards or Ind AS, which are based on International Financial Reporting Standards (IFRS), mandatory for listed companies and other large corporations.

The Department of Enterprise said in a statement citing the national financial reporting authority, the National Financial Reporting Authority (NFRA), that most of the companies to which the revised accounting standards of the ICAI will apply are corporations with limited liability, many of which have very low net worth or turnover or debt. or a combination of these.

They would mostly belong to small families, sometimes accompanied by a small circle of friends and relatives. Therefore, public interest in the general purpose financial statements (GPFS) of these companies would most likely be minimal, the ministry noted.

He also said that there are a number of revised accounting standards which are very broad and complex and may not be relevant and useful for the limited users of GPFS at these companies. In addition, the standard audit cost expected to perform an audit of reasonably good quality, carried out in accordance with the letter and spirit of the auditing standards, is significantly higher than the currently reported ranges of audit fees. A very large percentage of these companies reported payments to auditors of less than ??25,000, the ministry said.

Persuaded by the lack of public interest in the GPFS of these companies and the need to put in place a regulatory environment conducive to their economic growth, the NFRA recommended to the ICAI that a regulatory impact study be carried out on this proposal to revise the accounting standard, the ministry mentioned.

The ministry said a nationwide consultation should be conducted with micro, small and medium enterprises and small audit practitioners. The cost for these companies to comply with the revised accounting standards, the capacity of their technical resources and the likely benefits for all stakeholders should be considered, the ministry said.

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