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CA Intermediate · Advanced Accounting · Applicability of Accounting Standards

Sagar Textiles Ltd, an unlisted company, is not in the process of listing its securities. In the preceding year its turnover was Rs 180 crore, borrowings Rs 15 crore, and it has no foreign subsidiary. Under the ICAI classification for Accounting Standards applicability, how is the company classified?

Sagar Textiles is a Level II company. It is unlisted, not planning to list, and its turnover of Rs 180 crore and borrowings of Rs 15 crore are below the Rs 250 crore and Rs 50 crore limits that would make it a Level I company.

  1. ALevel I company, because it exceeds the turnover limit of Rs 50 crore
  2. BLevel II company, because turnover is below Rs 250 crore and borrowings are below Rs 50 croreCorrect
  3. CLevel III company, because it is unlisted
  4. DLevel I company, because its borrowings exceed Rs 10 crore

Explanation

A Level I entity is listed or in the process of listing, a bank or insurer, or has turnover above Rs 250 crore or borrowings above Rs 50 crore. Sagar is unlisted with turnover Rs 180 crore and borrowings Rs 15 crore, so it is below both limits and is a non-Level I (Level II) company. Option A uses a wrong turnover limit.

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