The Institute of Chartered Accountants of India ( ICAI ) has revised the criteria for classification of the non-company entities for the applicability of the accounting standards. In its 433rd meeting, the council considered the same. The revised scheme will commence on or after April 1, 2024, which is as under: 1.For the purpose of applicability of Accounting Standards, Non-company entities are classified into two categories, viz., Micro, Small and Medium Sized Entities (MSMEs) and Large entities.

MSME Dues? Recover Easily, No Court Required – Click here 2.Micro, Small and Medium Sized Entity (MSME) means, a non-company entity: (i) 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; (ii) which is not a bank, financial institution or an insurance company; (iii) whose turnover (excluding other income) does not exceed two hundred and fifty crore rupees in the immediately preceding accounting year; (iv) which does not have borrowings in excess of fifty crore rupees at any time during the immediately preceding accounting year; and (v) which is not a holding or subsidiary of an entity which is not a micro, small and medium-sized entity. Explanation.- For the purposes of this clause, a non-company entity shall qualify as a Micro, Small and Medium Sized entity, if the conditions mentioned therein are satisfied as at the end of the relevant accounting period.

The announcement stated that a ‘Large’ entity is defined as a non-company entity that does not qualify as an MSME (Micro, Small, and Medium-sized Enterprise). MSME Dues? Recover Easily, No Court Required – Click here The terms ‘Small and Medium Enterprise’ (SME) used in the Accounting Standards will now be referred to as ‘Micro, Small, and Medium-sized entity’ (MSME). Similarly, the terms Level II, Level III, and Level IV entities in the Accounting Standards will be interpreted as ‘Micro, Small, and Medium Sized Entity,’ while a Level I entity will now be recognized as a ‘Large’ entity. Large entities are required to comply fully with all the Accounting Standards.

On the other hand, specific exemptions and relaxations have been provided to Micro, Small, and Medium-sized Entities (MSMEs), with the applicable standards and these exemptions detailed in Annexure 1 (given in the announcement). This announcement supersedes the earlier ICAI Announcement on the ‘Criteria for classification of Non-company entities for applicability of Accounting Standards’ issued in March 2021. However, this new announcement  does not apply to non-company entities that must adhere to Indian Accounting Standards (Ind AS) or Accounting Standards (AS) based on their relevant regulatory requirements. All changes from this announcement will be reflected in the updated Compendium of Accounting Standards