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CA Final · Financial Reporting · Introduction to Indian Accounting Standards

Meghdoot Textiles Ltd, an unlisted company, has a net worth of Rs 180 crore as at 31 March of the previous year and has no listed debt or equity and no holding or subsidiary that is covered by Ind AS. It is not a bank, insurance company or NBFC. Under the Companies (Indian Accounting Standards) Rules, which statement is correct about its accounting framework?

The company is not mandatorily covered because its net worth is below Rs 250 crore and it has no listed securities or covered holding company or subsidiary. It may voluntarily adopt Ind AS, but once it does so, it must continue applying Ind AS in all later periods.

  1. AIt must apply Ind AS because its net worth exceeds Rs 250 crore
  2. BIt must apply Ind AS because it is a company incorporated under the Companies Act
  3. CIt may voluntarily apply Ind AS, and if it does, it must apply them to all subsequent periodsCorrect
  4. DIt must apply Accounting Standards (AS) and cannot adopt Ind AS even voluntarily

Explanation

Unlisted companies with net worth below Rs 250 crore, not otherwise covered, are not mandatorily required to apply Ind AS. However, they may voluntarily adopt Ind AS. Once adopted, the company must continue to apply Ind AS for all subsequent financial statements and cannot revert. Option A is wrong as net worth is Rs 180 crore, below the threshold.

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