NEW DELHI: The Ministry of Corporate Affairs (MCA) has expanded the definition of small and
medium sized companies (SMCs) by raising their turnover and borrowing limits in a bid to simplify accounting processes and lessen compliance burden for small firms.
According to the new definition, an SMC is an unlisted company, which are not banks, financial institutions or insurance firms with sales of up to Rs 250 crore and borrowings up to Rs 50 crore. Earlier, companies with sales of Rs 50 crore and borrowings of Rs 10 crore under the general accounting standards were qualified to be called SMC. In a notification issued on Wednesday, the ministry said the Companies
(Accounting Standards) Rules, 2021, will be effective from April 1, 2021.
This means that all the companies with sales upto Rs 250 crore can now follow simplified accounting standards for making general purpose financial statements such as balance sheet, statement of profit and loss, cash flow statement and other statements and explanatory notes.
“These amendments are a welcome step as it will lessen the compliance burden faced by these companies,” said Vikas Gupta, Partner, Nangia & Co LLP. The condition to qualify as SMC is to be checked at the end of a relevant accounting period. For companies which have a turnover of less than Rs 500 crore and net worth of less than Rs 250 crore, the general purpose accounting standards of ICAI apply.