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CA Intermediate · Advanced Accounting · Applicability of Accounting Standards

Rohan Foods Ltd, an unlisted SMC, has been exempted from AS 17 Segment Reporting in its first year, as SMCs may be. In the following year, it gets its equity shares listed on a recognised stock exchange. In its financial statements for the year of listing, what is the position about the exemption?

Rohan Foods Ltd loses the SMC status once its shares are listed and must comply with AS 17 as a Non-SMC from that period. The earlier exemption cannot continue, and the company discloses that it availed the exemption in the previous period.

  1. AIt may continue the exemption for that year, as it was an SMC at the start of the year
  2. BIt must comply with AS 17 only from the next financial year
  3. CIt loses the exemption and must comply with AS 17 as a Non-SMC, with a disclosure that the exemption was previously availedCorrect
  4. DIt must comply with AS 17 only if its turnover exceeds Rs 250 crore

Explanation

If an SMC ceases to qualify, it does not qualify as an SMC for the current period and must comply fully with all standards. Listing makes it a Non-SMC. Its previous exemption does not continue, and the fact that comparatives may not have complied is disclosed. The turnover test is irrelevant once the company is listed.

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