GS PAPER III: Indian Economy and issues relating to Planning, Mobilization of Resources, Growth, Development and Employment.

Context: The ministry of corporate affairs has expanded the definition of small and medium sized companies (SMCs), making applicable the simplified accounting regime for companies with up to Rs250 crore in sales.

• As per the new definition, an SMC is an unlisted listed company, a bank, an insurance or a financial institution, with sales of up to Rs250 crores and borrowings up to Rs50 crores. The earlier threshold for sales was Rs50 crore and that for borrowings was Rs10 crore.
• As per the new definition, effective July 2020, businesses with investment in plant and machinery up to Rs50 crore and annual sales of not more than Rs250 crore are defined as medium-sized companies in the manufacturing sector.
• An SMC 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.
• Larger companies follow the Ind AS, which are modelled on International Financial Reporting Standards.
• The Accounting Standards for SMC which were notified in December 2006 and amended from time to time are much simpler as compared to Indian Accounting Standards (Ind AS).
• These accounting standards involve less complexity in its application including the number of required disclosures being less onerous.
• The expansion in the scope of the simpler accounting regime for SMCs follows redefinition of small and medium enterprises in the country.
• The increase in turnover and borrowing threshold is expected to help a number of companies and promote ease of doing business.

https://www.livemint.com/industry/retail/what-india-s-new-rules-mean-for-emarketplaces-11624467195267.html

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