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CA Intermediate · Advanced Accounting · Introduction to Accounting Standards

Mehta Pharma Ltd., an unlisted company with turnover of Rs. 180 crore and borrowings of Rs. 15 crore, has no securities listed and is not a bank, financial institution or insurer. Its net worth is Rs. 30 crore. Under the ICAI classification for applicability of Accounting Standards in the Companies (Accounting Standards) Rules, 2021, how is the company classified?

The company is a Small and Medium Sized Company. It is unlisted, not a bank, financial institution or insurer, and its turnover of Rs. 180 crore is within Rs. 250 crore while borrowings of Rs. 15 crore are within Rs. 50 crore, so SMC relaxations apply.

  1. ASmall and Medium Sized Company (SMC), since it is unlisted and its turnover is below Rs. 250 crore and borrowings below Rs. 50 croreCorrect
  2. BLevel I company, because turnover exceeds Rs. 100 crore
  3. CLevel I company, because every unlisted company must apply all standards
  4. DSmall company, because net worth is below Rs. 50 crore

Explanation

An SMC is a company whose securities are not listed, which is not a bank, FI or insurer, and whose turnover (excluding other income) does not exceed Rs. 250 crore and borrowings do not exceed Rs. 50 crore in the preceding year, and which is not a holding or subsidiary of a non-SMC. Turnover Rs. 180 crore is under 250 and borrowings Rs. 15 crore under 50, so it qualifies as an SMC. The Rs. 100 crore figure is the wrong threshold.

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