Accounting Standards

Meaning of Accounting Standards

Accounting Standards are written policy documents issued by expert accounting body or by the government or other regulatory body covering the aspects of recognition, measurement, treatment, presentation, and disclosure of accounting transactions in financial statements.

Classification of Enterprises

The enterprises are classified and labeled as Level I, Level II and Level III companies. Based on this classification and the category in which they fall the Accounting standards are applicable to the enterprises

Level I Enterprises

Enterprises which fall under any one or more category below mentioned are termed as Level I Companies

1. Enterprises whose equity or debt securities are listed whether in India or outside India
2. Enterprises which are in the process of listing their equity or debt securities. Board of directors’ resolution must be available as an evidence
3. Banks including co-operative banks
4. Financial institutions
5. Enterprises carrying on insurance business
6. All commercial, industrial and business reporting enterprises, whose turnover not including ‘other income’ for the immediately preceding accounting period on the basis of audited financial statements exceeds Rs. 50 crore
7. All commercial, industrial and business reporting enterprises having borrowings, including public deposits, in excess of Rs. 10 crores at any time during the accounting period
8. Holding and subsidiary enterprises of any one of the above at any time during the accounting period

Level II Enterprises

Enterprises which fall under any one or more category below mentioned are termed as Level II Companies

1. All commercial, industrial and business reporting enterprises, whose turnover (excluding ‘other income’) for the immediately preceding accounting period on the basis of audited financial statements is greater than Rs. 40 lakhs but less than Rs. 50 crore
2. All commercial, industrial and business reporting enterprises having borrowings, including public deposits, is greater Rs. 1 crore but less than  Rs. 10 crores at any time during the accounting period
3. Holding and subsidiary enterprises of any one of the above at any time during the accounting period

Level III Enterprises

Enterprises which do not fall under Level I and Level II, are considered as Level III enterprises

Applicability of Accounting standards

AS 19 Leases

Paragraphs 22(c), (e) and (f); 25(a), (b) and (e); 37(a), (f) and (g); and 46(b), (d) and (e), of AS 19 does not apply to Level II and Level III enterprises

AS 20 Earnings Per Share

The provisions of Part IV of Schedule VI to the Companies Act, 1956 require all companies to disclose earning per share in their financial statements. AS 2o does not mandate disclosure of diluted earning per share and information required by paragraph 48 for Level II and Level III enterprises. Hence only Level I enterprises are required to apply AS 20 entirely without any relaxations.

AS 29, Provisions, Contingent Liabilities, and Contingent Assets

• Paragraph 67 does not apply to Level II enterprises
• Paragraphs 66 and 67 does not apply to Level II and Level III enterprises