PDF · Notes
Revised Criteria for Classification of Non-Company Entities for Accounting Standards (CA Inter Advanced Accounting)
- Shared by
- CA H.
- Course
- CA Inter
- Subject
- Advanced Accounting
- Added
- 1 Nov 2026
Part of: CA InterAdv Accounting
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This note covers the ICAI announcement on revised criteria for classifying non-company entities as Micro, Small and Medium Sized Entities (MSMEs) or Large entities for applicability of Accounting Standards. It sets out the turnover, borrowing and listing conditions for MSME status, the rule that the older Level II, III and IV labels now read as MSME, and the additional disclosure requirements for entities that take advantage of exemptions. It is useful for CA Inter students preparing Advanced Accounting for the January 2027 examination, particularly for questions on applicability of standards.
What the notes cover
The note first explains the revised scheme effective for accounting periods starting on or after April 1, 2024. It lists the five conditions a non-company entity must meet to qualify as an MSME, including the limits on turnover of two hundred and fifty crore rupees and borrowings of fifty crore rupees, and the exclusion of listed entities, banks, financial institutions and insurance companies. It then explains that large entities must comply fully with all Accounting Standards, while MSMEs get certain exemptions or relaxations. The announcement also supersedes the earlier March 2021 criteria and notes that the changes will be reflected in the updated Compendium of Accounting Standards.
How to use these notes for revision
Read the MSME definition clause by clause and practise applying each condition to sample entity data, since examiners often test whether an entity qualifies at the end of the accounting period. Make a short table of the additional requirements, such as the disclosure note needed when an MSME avails an exemption, the treatment when an entity ceases to be an MSME, and the two-consecutive-year rule for newly qualifying entities. Writing these conditions from memory will help with theory questions on applicability.
Key topics in these notes
- MSME definition and conditions
- Turnover and borrowing limits
- Large entity classification
- Exemptions and relaxations for MSMEs
- Disclosure requirements for MSMEs
- Transition when MSME status changes
- Applicability of Accounting Standards to non-company entities
Related notes
- CA Inter Advanced Accounting – Model Test Paper Analysis (MTP 1–8)
- CA Akash Kandoi Sir's May 2027 Board Notes
- GROUP 1 MCQs
- Past year analysis upto may 26
- Praveen Jindal sir handwritten Notes ✅
- AS 2 Tejas Suchak Sir Handwritten Notes ✅
- AS 7 Tejas Suchak Sir Handwritten Notes ✅
- AS 9 Tejas Suchak Sir Handwritten Notes ✅
Frequently asked questions
What turnover limit applies to an MSME under the revised ICAI criteria?
As per the announcement, a non-company entity qualifies as an MSME only if its turnover, excluding other income, does not exceed two hundred and fifty crore rupees in the immediately preceding accounting year.
Which entities are excluded from being classified as MSMEs?
Entities whose securities are listed or in the process of listing, banks, financial institutions, insurance companies, and holding or subsidiary entities of a non-MSME are excluded from MSME classification.
What must an MSME disclose when it uses exemptions?
It must disclose by way of a note to its financial statements that it is an MSME and has complied with the Accounting Standards as applicable to an MSME.
Does this note replace the earlier ICAI criteria?
Yes, the announcement supersedes the earlier ICAI announcement on criteria for classification of non-company entities issued in March 2021.
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