The standards are intended to guide non-company entities in their financial reporting. Credit: ARMMY PICCA/Shutterstock.

The Institute of Chartered Accountants of India (ICAI) has introduced a major update to its Accounting Standards framework to enhance the transparency and standardisation of financial reporting in India.  

The revised Classification Criteria for Non-Company Entities, approved during the ICAI Council’s 433rd meeting held on 13–15 August 2024, introduces new requirements that will shape how different non-company entities are audited. 

This change, set to take effect from 1 April 2024, includes disclosure of accounting policies, valuation of inventories, cash flow statements, contingencies and events occurring after the balance sheet date, among others.  

For the purpose of applicability of Accounting Standards, non-company entities are classified into two categories: micro, small and medium-sized entities (MSMEs) and large entities.  

Large entities are required to comply fully with all the Accounting Standards.  

In contrast, certain exemptions and relaxations are provided to MSMEs. 

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The Accounting Standards state that: “Accounting Standards not applicable to all MSMEs in their entirety: AS 3, Cash Flow Statements; AS 17, Segment Reporting; AS 24, Discontinuing Operations. 

“AS 18, Related Party Disclosures and AS 28, Impairment of Assets not applicable in their entirety to MSMEs.” 

An entity that was previously not classified as an MSME but subsequently qualifies will not be eligible for the exemptions or relaxations available to MSMEs until it has maintained that classification for two consecutive years.  

The changes arising from this announcement will be incorporated into the Accounting Standards when publishing the updated Compendium of Accounting Standards.  

Earlier this month, the ICAI declared the results for the Chartered Accountants Intermediate and Foundation examinations conducted in September 2024.  

In September, nearly 139,646 candidates participated in the Intermediate exam across 459 centres.