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CMA Intermediate · Financial Accounting · Introduction to Accounting Standards (GAAP, AS and Convergence to Ind AS)

Rohini Textiles Ltd is unlisted, is not a bank, financial institution or insurance company, and has no holding or subsidiary relationship with a non-SMC. It reports the following for the previous year: turnover (excluding other income) Rs 240 crore; highest borrowings at any time Rs 55 crore. Which classification applies under the Companies (Accounting Standards) Rules, 2021?

Rohini Textiles is a Non-SMC. Although turnover of Rs 240 crore is within the Rs 250 crore limit, the SMC definition bars borrowings above Rs 50 crore at any time in the preceding year, and Rs 55 crore breaches that condition.

  1. ASMC, because turnover is below Rs 250 crore
  2. BNon-SMC, because borrowings exceeded Rs 50 crore at one timeCorrect
  3. CSMC, because average borrowings are below Rs 50 crore
  4. DNon-SMC, because turnover exceeds Rs 200 crore

Explanation

All SMC conditions must be met. Turnover of Rs 240 crore is within the Rs 250 crore limit, but borrowings were Rs 55 crore at some time, exceeding Rs 50 crore. So condition (iv) fails and the company is a Non-SMC. Option A ignores the borrowings test.

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