Date of Approval – 23 June 2021
• Effective Date of Implementation of Accounting Rules – 1 April 2021
• Legal Framework – The Companies Act 2013 | Companies (Accounting Standards) Rules, 2021
• Government Authority – Ministry of Corporate Affairs (MCA), Government of India
• Web-link – Copy of Accounting Rules in India
Key Client Questions
• Who is a Small & Medium Sized Company (SMC) in India?
– The new definition of SMC – Unlisted company having following financial thresholds:
– Sales / Turnover – Upto INR 2.5 Billion (Old rule – INR 500 Million)
– Borrowings – Upto INR 500 Million (Old rule – INR 100 Million)
– The thresholds are to be considered as at the end of previous accounting year for application in
the current year.
– The Company should not be a holding or subsidiary of a non-SMC company
– Not applicable on SMCs which are banks, financial institutions, insurance firms or holding
• Why there was a need for a new definition of SMC?
– With the introduction of new micro, small and medium enterprises (MSME) rules in India, there
was a need to align the definitions of small and medium enterprises under the Company law with the
definition under the MSME law.
– The updated definition of SMC in the Company law has made accounting and financial reporting
easier of SMC / MSMEs.
• What does it mean for Japanese and other non-Japanese companies in India?
– Simple and less complex accounting rules and standards
– Financial disclosure requirements in the annual financial statements are lesser for SMCs.
– Relaxation in accounting compliance requirements and therefore, there will be an ease of doing
business in India for Japanese and non-Japanese companies falling under the definition of SMC.