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CA Intermediate · Advanced Accounting · Introduction to Accounting Standards

Kaveri Foods Ltd. is a company whose equity shares are listed on a recognised stock exchange in India. Its net worth is Rs. 40 crore and turnover is Rs. 150 crore. The company has no overseas operations. Under the Companies (Accounting Standards) Rules, 2006, how would Kaveri Foods be classified for applying Accounting Standards?

Kaveri Foods is a Non-SMC because its equity shares are listed on a recognised stock exchange. Listed companies are excluded from the Small and Medium Sized Company category irrespective of turnover or net worth, so they must follow all Accounting Standards in full.

  1. ASmall and Medium Sized Company, because turnover is below Rs. 250 crore
  2. BNon-SMC, because its equity shares are listed on a recognised stock exchange in IndiaCorrect
  3. CSmall and Medium Sized Company, because net worth is below Rs. 50 crore
  4. DSmall and Medium Sized Company, because it has no overseas operations

Explanation

A company whose equity or debt securities are listed or in the process of listing on any stock exchange in India (or outside) is not an SMC, regardless of size. Hence Kaveri Foods must comply fully with all Accounting Standards. The size-based options ignore that listing alone disqualifies a company from SMC status.

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