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CA Intermediate · Advanced Accounting · Applicability of Accounting Standards

Kaveri Textiles Ltd is an unlisted company. It has no securities listed or in the process of listing, is not a bank, financial institution or insurance company, and is not a holding or subsidiary of any listed entity. Its turnover for the year is Rs 80 crore, borrowings are Rs 15 crore, and it has no other triggering feature. Under the ICAI classification for Accounting Standards, Kaveri Textiles Ltd is a:

Kaveri Textiles Ltd is a Level II entity. It is unlisted, not a bank or insurer, and its turnover of Rs 80 crore and borrowings of Rs 15 crore are below the Level I thresholds of Rs 250 crore and Rs 50 crore. So it follows the Level II standards.

  1. ALevel I company, because turnover exceeds Rs 50 crore
  2. BLevel II company, because turnover is Rs 80 crore and borrowings are Rs 15 crore, both within the Level II limitsCorrect
  3. CLevel III company, because it is unlisted
  4. DLevel I company, because it is a company registered under the Companies Act

Explanation

Level I covers listed or to-be-listed entities, banks, insurers and entities with turnover above Rs 250 crore or borrowings above Rs 50 crore, plus their holding and subsidiary companies. Kaveri has none of these, so it is not Level I. Level II (non-SMC) limits are turnover up to Rs 250 crore and borrowings up to Rs 50 crore, which Kaveri satisfies. The Rs 50 crore turnover idea in option A is wrong because the threshold is Rs 250 crore.

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