The Institute of Chartered Accountants of India (ICAI) had earlier issued the Guidance Note on Financial Statements of Non-Corporate Entities to prescribe standardised formats for financial statements of various non-corporate entities, including sole proprietorships, partnerships, HUFs, societies, trusts, and other organisations engaged in business or professional activities. The objective was to enhance the understandability, reliability, comparability, and consistency in financial reporting across such entities. The Guidance Note, effective for accounting periods beginning on or after April 1, 2024, supersedes the earlier Technical Guide issued in 2022 and provides a more authoritative framework for members of the ICAI.
In furtherance of this initiative, ICAI has now released a detailed Frequently Asked Questions (FAQs) document to provide additional clarity on the practical implementation of the Guidance Note. The FAQs has been issued jointly by the Accounting Standards Board and the Auditing and Assurance Standards Board of the Institute of Chartered Accountants of India (ICAI).The FAQs address key issues, including the applicability of the Guidance Note, the treatment of comparative figures, flexibility in presentation formats, and auditor responsibilities in the event of non-compliance. The document reiterates that while Guidance Notes are recommendatory in nature, they carry significant weight, and any departure from the prescribed formats by an entity must be suitably evaluated and disclosed by the auditor in accordance with the Standards on Auditing.
The FAQs also clarify specific applicability scenarios; for instance, Not-for-Profit Organisations are required to follow the Technical Guide on Accounting for NPOs, rather than the general Guidance Note. Additionally, the note provides operational guidance on items such as the omission of line items with nil balances across periods and the inclusion of comparative information. These clarifications are intended to support preparers and auditors in ensuring compliance while maintaining the relevance and accuracy of the financial statements.
Further, the FAQs reference the revised criteria for classification of non-company entities for the applicability of Accounting Standards from April 1, 2024. Entities are now classified as either Micro, Small and Medium-Sized Entities (MSMEs) or Large entities. The classification has implications for exemptions and relaxations in accounting standards compliance, and the FAQs highlight disclosure requirements for MSMEs availing such benefits. Overall, the FAQs serve as a practical supplement to the Guidance Note, aiming to ensure smoother and more uniform adoption across a wide range of non-corporate entities.
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