More firms to come under ambit of small and medium sized companies

In a bid to enable more and more companies to avail greater flexibility in the accounting standard, the Ministry of Corporate Affairs (MCA) has expanded the ambit of small and medium companies (SMC) and has raised their turnover and borrowing limits.

In a notification, the ministry defined a small and medium-sized company as an entity whose equity or debt securities are not listed or are not in the process of listing on any stock exchange, whether in India or outside India.

As per the enhanced definition, the turnover of SMCs excluding other income does not exceed Rs 250 crore in the immediately preceding accounting year and their borrowings, including public deposits, are not in excess of Rs 50 crore at any time during the immediately preceding accounting year.

According to corporate experts, the amendments would lead to less complexity in the application of the accounting standards in terms of the number of required disclosures and make the process less complicated.