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CA Intermediate · Advanced Accounting · Applicability of Accounting Standards

Ravi Pharma Ltd has turnover of Rs 300 crore and is unlisted, with borrowings of Rs 20 crore. Under the ICAI classification used for Accounting Standards, which statement is correct for this company?

Ravi Pharma is a Level I company because its turnover of Rs 300 crore exceeds the Rs 250 crore limit. Either the turnover test or the borrowing test alone is enough, so low borrowings and lack of listing do not move it to a lower level.

  1. AIt is a Level I company because turnover exceeds Rs 250 croreCorrect
  2. BIt is a Level II company because it is unlisted
  3. CIt is a Level III company because borrowings are below Rs 50 crore
  4. DIt is a Level II company because borrowings are below Rs 50 crore

Explanation

Level I includes any entity whose turnover exceeds Rs 250 crore, regardless of listing. Ravi Pharma's turnover of Rs 300 crore crosses this limit, so it is Level I even though borrowings are only Rs 20 crore, below the Rs 50 crore borrowing test. Being unlisted does not put it in Level II.

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