The National Financial Reporting Authority on Tuesday recommended to the chartered accountants' apex body ICAI to carry out a regulatory impact assessment with respect to proposed revision to certain accounting standards.
The Institute of Chartered Accountants of India (ICAI) had submitted to NFRA an approach paper for revision of existing accounting standards of companies that are not required to follow Indian Accounting Standards (Ind ASs).
Apart from conducting a regulatory impact assessment, NFRA noted that ICAI should reconsider the structure, form and contents of revised accounting standards for such companies.
The proposed texts of 18 revised Accounting Standards (ASs) out of a total of 32 revised ASs expected to be prescribed upon completion of the revision project was submitted by ICAI.
Most of the companies for which the proposed accounting standards would be applicable are private limited companies and many of them have very small net worth or turnover or indebtedness or a combination of these.
According to NFRA, such entities would be mostly owned by small families and public interest in their General Purpose Financial Statements (GPFSs) would most likely be minimal.
There are a number of revised ASs which are very large and complex and may not be relevant and useful to the limited users of GPFSs of these companies. Also, the watchdog noted that a very large percentage of AS companies have reported payment to auditors of less than Rs 25,000.
On these grounds, NFRA has recommended to ICAI to conduct a "Regulatory Impact Assessment" of the revision proposal, duly including all the standard features of such a process, an official release said on Tuesday.
NFRA said the approach paper should be developed in a transparent manner after extensive nationwide consultation with the primary stakeholders, which are preparers -- MSMCs (Micro, Small and Medium-size Companies) -- and auditors -- MSMPs (Micro, Small and Medium-size Practitioners.
"ICAI is requested to send NFRA the analysis of the public comments on the approach paper if ICAI had performed any such public consultation in the past.
"Comprehensive study and research should be undertaken on the costs to the preparers of compliance with these revised ASs and their technical resource capacity, which should be evaluated against the likely benefits to all the stakeholders of AS companies," the release said.
According to the release, ICAI should reconsider the structure, form and contents of revised ASs for AS companies. It should also be aligned with the nature, size and complexity of the ASs, to their commercial needs, business size, capacity to comply with the prescribed standards, and relevance to their primary users.
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