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CA Intermediate · Advanced Accounting · Applicability of Accounting Standards

Sagar Textiles Ltd is an unlisted company with no securities in the process of listing. Its turnover for the year is Rs 180 crore, borrowings from banks are Rs 40 crore, and it is not a bank, insurance company or financial institution. Net worth is Rs 30 crore. Under the ICAI applicability criteria for companies, how should the company be classified?

Sagar Textiles is a Level II company. It is unlisted and not a bank or insurer, and its turnover of Rs 180 crore and borrowings of Rs 40 crore are within the Rs 250 crore and Rs 50 crore limits, so Level I does not apply. Its turnover exceeds Rs 50 crore, so it is not Level III.

  1. ALevel I company, since it must follow all Accounting Standards
  2. BLevel II company, since it is non-listed with turnover not above Rs 250 crore and borrowings not above Rs 50 croreCorrect
  3. CLevel III company, since its turnover exceeds Rs 50 crore
  4. DSmall and Medium Sized Company, since its turnover is below Rs 250 crore regardless of borrowings

Explanation

Level I covers listed or to-be-listed companies, banks, insurers, and non-listed companies with turnover above Rs 250 crore or borrowings above Rs 50 crore. Sagar is unlisted with turnover Rs 180 crore and borrowings Rs 40 crore, both within limits, so it is not Level I. Since turnover is above Rs 50 crore, it is Level II, not Level III.

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