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CA Intermediate · Advanced Accounting · Applicability of Accounting Standards

Tanvi Pharma Ltd is an unlisted SMC. Which of the following is correct regarding its compliance with Accounting Standards under the Companies (Accounting Standards) Rules, 2021, where an SMC avails an exemption or relaxation?

Tanvi Pharma Ltd must disclose that it is an SMC and that it has complied with the Accounting Standards insofar as they apply to SMCs. This disclosure accompanies the use of any exemption or relaxation; no auditor consent is required.

  1. AIt need not disclose anything about the exemption
  2. BIt must disclose that it is an SMC and that it has complied with Accounting Standards insofar as they are applicable to SMCsCorrect
  3. CIt must apply the relaxed standard only if the auditor consents in writing
  4. DIt must follow the full standard in the balance sheet and may relax only in the notes

Explanation

An SMC availing exemptions or relaxations must disclose that fact. The financial statements state that the company complies with the Accounting Standards insofar as they are applicable to a Small and Medium Sized Company. Auditor consent is not a condition for the relaxation, and the relaxation is not limited to notes.

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