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CA Intermediate · Advanced Accounting · Introduction to Accounting Standards

Gupta Foods Ltd. is an SMC. It prepares its accounts for the year ended 31 March. Which of the following statements about its use of Accounting Standards is correct under the ICAI exemptions and relaxations for SMCs?

An SMC like Gupta Foods Ltd. enjoys exemption from AS 3 Cash Flow Statement and AS 17 Segment Reporting, but must still follow AS 1, along with other applicable standards with relaxations. It is neither fully exempt nor bound by every requirement.

  1. AIt is totally exempt from all Accounting Standards
  2. BIt need not comply with AS 3 Cash Flow Statement and AS 17 Segment Reporting, but must comply with AS 1Correct
  3. CIt must comply fully with every Accounting Standard exactly as a Level I company
  4. DIt need not comply with AS 1 but must comply with AS 3

Explanation

SMCs are exempt from AS 3 (Cash Flow Statement) and AS 17 (Segment Reporting), among other relaxations, but AS 1 applies as a basic standard. Hence a total exemption is wrong, and full compliance as Level I is also wrong.

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