APPLICABILITY OF ACCOUNTING STANDARDS

For the purpose of applicability of Accounting Standards (AS), enterprises are divided into three categories, viz; Level I, Level II, and Level III.

CRITERIA FOR CLASSIFICATION OF ENTERPRISES

Level I Enterprises

           
Enterprises which falls in any one or more of the following categories, at any point of time during the accounting period, are classified as Level I enterprises:

1. Enterprises whose equity or debt securities are listed whether in India or outside India.

2. Enterprises that are in the process of listing their equity or debt securities as evidenced by the board of director’s resolution in this regard.

3. Banks including co-operative banks.

4. Financial Institutions.

5. Enterprises carrying on Insurance business.

6. All commercial, industrial and business reporting enterprises, whose turnover for the immediately preceding accounting period on the basis of audited financial statements exceeds Rs. 50 crores. Turnover does not include “other income”.

7. All commercial, industrial and business reporting enterprises having borrowings, including public deposits, in excess of Rs. 10 crores at any time during the accounting period.

8. Holding and subsidiary enterprises of any one of the above at any time during the accounting period.

Level II Enterprises

Enterprises which are not Level I enterprises but fall in any one or more of the following categories are classified as Level II enterprises: 

1. All commercial, industrial and business reporting enterprises, whose turnover for the immediately preceding accounting period on the basis of audited financial statements exceeds Rs. 40 Lakhs but does not exceed Rs. 50 crores. Turnover does not include “other income”.

2. All commercial, industrial and business reporting enterprises having borrowings, including public deposits, in excess of Rs. 1 crores but not in excess of Rs. 10 crores at any time during the accounting period.

3. Holding and subsidiary enterprises of any one of the above at any time during the accounting period.

Level III Enterprises

Enterprises which are not covered under Level I and Level II are considered under Level III enterprises.


Level II and Level III enterprises are considered as SME’s. 


Level I enterprises are required to comply fully with all the accounting standards. In general no relaxations are given to Level II and Level III enterprises in respect of recognition and measurement principles. Relaxations are provided with regard to disclosure requirements. Accordingly, Level II and Level III enterprises are fully exempt from certain accounting standards which mainly lay down disclosure requirements.


In respect of certain other accounting standards, which lay down recognition, measurement and disclosure requirements, relaxations from certain disclosure requirements are given. 

AS	DESCRIPTION	LEVEL I	LEVEL II	LEVEL III
1	Disclosure of Accounting Policies	Applicable	Applicable	Applicable
2	Valuation of Inventories	Applicable	Applicable	Applicable
3	Cash Flow Statements	Applicable	Not Applicable	Not Applicable
4	Contingencies and Events Occurring after Balance Sheet Date	Applicable	Applicable	Applicable
5	Net Profit or Loss for the Period, Prior Period Items and changes in Accounting Policies	Applicable	Applicable	Applicable
6	Depreciation Accounting	Applicable	Applicable	Applicable
7	Construction Contracts	Applicable	Applicable	Applicable
8	Accounting for Research and Development [Note : This standard has been withdrawn]	NA	NA	NA
9	Revenue Recognition	Applicable	Applicable	Applicable
10	Accounting for Fixed Assets	Applicable	Applicable	Applicable
11	The Effects of Changes in Foreign Exchange Rates	Applicable	Applicable	Applicable
12	Accounting for Government Grants	Applicable	Applicable	Applicable
13	Accounting for Investments	Applicable	Applicable	Applicable
14	Accounting for Amalgamations	Applicable	Applicable	Applicable
15	Accounting for Retirement Benefits in the Financial Statements of Employers	Applicable	Applicable	Applicable
16	Borrowing Costs	Applicable	Applicable	Applicable
17	Segment Reporting	Applicable	Applicable with modifications	Applicable with modifications
18	Related Party Disclosures	Applicable	Applicable with modifications	Applicable with modifications
19	Leases	Applicable	Applicable with some modifications and Exemption from Disclosure Requirements	Applicable with some modifications and Exemption from Disclosure Requirements
20	Earnings Per Share	Applicable	Applicable with some modifications and Exemption from Disclosure Requirements [No need to disclose Diluted Earning Per Share and information required by Para 48]	Applicable with some modifications and Exemption from Disclosure Requirements [No need to disclose Diluted Earning Per Share and information required by Para 48]
21	Consolidated Financial Statements	Applicable	Not Applicable	Not Applicable
22	Accounting for Taxes on Income	Applicable except for non-corporate enterprises	Applicable except for non-corporate enterprises	Applicable except for non-corporate enterprises
23	Accounting for Investments in Associates in Consolidated Financial Statements	Applicable	Not Applicable	Not Applicable
24	Discontinuing Operations	Applicable	Not Applicable	Not Applicable
25	Interim Financial Reporting	Applicable [See Note]	Not Applicable	Not Applicable
26	Intangible Assets	Applicable	Applicable	Applicable
27	Financial Reporting of Interest in Joint Ventures	Applicable	Not Applicable to the extent of requirements relating to consolidated financial statements	Not Applicable to the extent of requirements relating to consolidated financial statements
28	Impairment of Assets	Applicable	Applicable	Applicable
29	Provisions, Contingent Liabilities and Contingent Assets	Applicable	Applicable, Disclosure requirements are not applicable	Applicable, Disclosure requirements are not applicable
30	Financial Instruments: Recognition and Measurement [Note: Mandatory from on or after 01/04/2011]	Applicable	Not Applicable	Not Applicable
31	Financial Instruments: Presentations [Note: Mandatory from on or after 01/04/2011]	Applicable	Not Applicable	Not Applicable
32	Financial Instruments: Disclosures [Note: Mandatory from on or after 01/04/2011]	Applicable	Not Applicable	Not Applicable

NOTES:

1. AS 25, Interim Financial Reporting, does not require any enterprise to present interim financial report. It is applicable only if an enterprise is required or elects to prepare and present an interim financial report. However, the recognition and measurement requirements contained in this Standard are applicable to interim financial reports; e.g. quarterly financial results required by the SEBI.