Companies AS Rules 2021: Accounting Standards Rules

Companies AS Rules 2021: The Companies (Accounting Standards) Rules, 2021 is applicable from 25th June 2021.

Chapter IX (Sections 128 to 138 ) of the Companies Act, 2013 deals with the provisions related to accounts of companies. You should read the provisions of section 133 “Central Government to prescribe accounting standards” and section 469 of the Companies Act 2013.

The Central Government (CG) has now specified Accounting Standards (AS) 1 to 5, 7 and 9 to 29 as recommended by the Institute of Chartered Accountants of India (ICAI). These Accounting Standards is applicable with in respect of accounting periods commencing on or after the 1st day of April, 2021.

There are 27 Companies AS (Accounting Standards) has been notified. Following Accounting Standards has been specified by CG vide Notification G.S.R. 432(E) dated 23.06.2021 published in the Official Gazette on 25-June-2021:

AS-1: Disclosure of Accounting Policies
AS-2: Valuation of Inventories
AS-3: Cash Flow Statements
AS-4: Contingencies and Events Occurring After the Balance Sheet Date
AS-5: Net Profit or Loss for the Period, Prior Period Items and Changes in Accounting Policies
AS-7: Construction Contracts
AS-9: Revenue Recognition
AS-10: Property, Plant and Equipment
AS-11: The Effects of Changes in Foreign Exchange Rates
AS-12: Accounting for Government Grants
AS-13: Accounting for Investments
AS-14: Accounting for Amalgamations
AS-15: Employee Benefits
AS-16: Borrowing Costs
AS-17: Segment Reporting
AS-18: Related Party Disclosures
AS-19: Leases
AS-20: Earnings Per Share
AS-21: Consolidated Financial Statements (CFS)
AS-22: Accounting for Taxes on Income
AS-23: Accounting for Investments in Associates in Consolidated Financial Statements
AS-24: Discontinuing Operations
AS-25: Interim Financial Reporting
AS-26: Intangible Assets
AS-27: Financial Reporting of Interests in Joint Ventures
AS-28: Impairment of Assets
AS-29: Provisions, Contingent Liabilities and Contingent Assets

Table of Contents

The Companies (Accounting Standards) Rules, 2021

[Published vide G.S.R. 432(E), dated 23-06-2021}

In exercise of the powers conferred by section 133 read with section 469 of the Companies Act, 2013 (18 of 2013) and in supersession of the Companies (Accounting Standards) Rules, 2006, published in the Gazette of India, Extraordinary, Part II, Section 3, Sub-section (i), vide number G.S.R. 739 (E), dated the 07th December, 2006 [and amended from time to time vide numbers G.S.R. No. 212(E), dated the 27th March, 2008, G.S.R. 225(E), dated the 31st March, 2009, G.S.R. 378(E), dated the 11th May, 2011, G.S.R. 913(E), dated the 29th December, 2011, G.S.R. 914(E), dated the 29th December, 2011, G.S.R. 364(E), dated the 30th March, 2016 and G.S.R. 569(E) dated the 18th June, 2018], except as respects things done or omitted to be done before such supersession, the Central Government, after consultation with the National Financial Reporting Authority constituted under section 132 of the said Act, hereby makes the following rules, namely:—

Rule-1: Short title and commencement

(1) These rules may be called the Companies (Accounting Standards) Rules, 2021.

(2) They shall come into force on the date of their publication in the Official Gazette.

Rule-2: Definitions

(1) In these rules, unless the context otherwise requires,-

(a) “Accounting Standards” means the standards of accounting or any addendum thereto as specified in rule 3;
(b) “Act” means the Companies Act, 2013 (18 of 2013);
(c) “Annexure” in relation to these rules means the Annexure containing the Accounting Standards (AS) appended to these rules;
(d) “Enterprise” means a ‘company’ as defined in clause (20) of section 2 of the Act;
(e) “Small and Medium Sized Company” (SMC) means, a company-
- (i) 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;
- (ii) which is not a bank, financial institution or an insurance company;
- (iii) whose turnover (excluding other income) does not exceed two hundred and fifty crore rupees in the immediately preceding accounting year;
- (iv) which does not have borrowings (including public deposits) in excess of fifty crore rupees at any time during the immediately preceding accounting year; and
- (v) which is not a holding or subsidiary company of a company which is not a small and medium-sized company.

Explanation: For the purposes of this clause, a company shall qualify as a Small and Medium Sized Company, if the conditions mentioned therein are satisfied as at the end of the relevant accounting period.

(2) Words and expressions used and not defined in these rules but defined in the Act shall have the meanings respectively assigned to them in the Act.

Rule-3: Accounting Standards

(1) The Central Government hereby specifies Accounting Standards 1 to 5, 7 and 9 to 29 as recommended by the Institute of Chartered Accountants of India, which are specified in the Annexure to these rules.
(2) The Accounting Standards shall come into effect in respect of accounting periods commencing on or after the 1st day of April, 2021.

Rule-4: Obligation to comply with Accounting Standards

(1) Every company, other than companies on which Indian Accounting Standards as notified under Companies (Indian Accounting Standards) Rules, 2015 are applicable, and its auditor(s) shall comply with the Accounting Standards in the manner specified in the Annexure.
(2) The Accounting Standards shall be applied in the preparation of Financial Statements.

Rule-5: Qualification for exemption or relaxation in respect of SMC

An existing company, which was proviously not a Small and Medium Sized Company (SMC) an subsequently becomes a SMC, shall not be qualified for exemption or relaxation in respect of Accounting Standards available to a SMC until the company remains a SMC for two consecutive accounting periods.

ANNEXURE
(See rule 3)
ACCOUNTING STANDARDS

A. General Instructions

SMCs shall follow the following instructions while complying with Accounting Standards under these rules:-
1.1 the SMC which does not disclose certain information pursuant to the exemptions or relaxations given to it shall disclose (by way of a note to its financial statements) the fact that it is an SMC and has complied with the Accounting Standards insofar as they are applicable to an SMC on the following lines:
“The Company is a Small and Medium Sized Company (SMC) as defined in the Companies (Accounting Standards) Rules, 2021 notified under the Companies Act, 2013. Accordingly, the Company has complied with the Accounting Standards as applicable to a Small and Medium Sized Company.”
1.2 Where a company, being a SMC, has qualified for any exemption or relaxation previously but no longer qualifies for the relevant exemption or relaxation in the current accounting period, the relevant standards or requirements become applicable from the current period and the figures for the corresponding period of the previous accounting period need not be revised merely by reason of its having ceased to be an SMC. The fact that the company was an SMC in the previous period and it had availed of the exemptions or relaxations available to SMCs shall be disclosed in the notes to the financial statements.
1.3 If an SMC opts not to avail of the exemptions or relaxations available to an SMC in respect of any but not all of the Accounting Standards, it shall disclose the standard(s) in respect of which it has availed the exemption or relaxation.
1.4 If an SMC desires to disclose the information not required to be disclosed pursuant to the exemptions or relaxations available to the SMCs, it shall disclose that information in compliance with the relevant accounting standard.
1.5 The SMC may opt for availing certain exemptions or relaxations from compliance with the requirements prescribed in an Accounting Standard: Provided that such a partial exemption or relaxation and disclosure shall not be permitted to mislead any person or public.
Accounting Standards, which are prescribed, are intended to be in conformity with the provisions of applicable laws. However, if due to subsequent amendments in the law, a particular accounting standard is found to be not in conformity with such law, the provisions of the said law will prevail and the financial statements shall be prepared in conformity with such law.
Accounting Standards are intended to apply only to items which are material.
The accounting standards include paragraphs set in bold italic type and plain type, which have equal authority. Paragraphs in bold italic type indicate the main principles. An individual accounting standard shall be read in the context of the objective, if stated, in that accounting standard and in accordance with these General Instructions.

You may download complete official notification G.S.R. 432(E) dated the 23rd June, 2021.