NFRA asks ICAI to reconsider structure of its accounting standards proposal

Standards are for firms that are not required to follow Indian Accounting Standards. Most of these would be private, with very small net worth or turnover or indebtedness, according to NFRA

The National Financial Regulatory Authority (NFRA) has asked the Institute of Chartered Accountants of India (ICAI) to conduct a regulatory impact assessment of its proposed revisions to the existing accounting standards of companies.

These standards are for companies that are not required to follow Indian Accounting Standards. Most of these companies would be private, small with very small net worth or turnover or indebtedness, according to NFRA.    

The regulatory authority has asked ICAI to reconsider the structure, form and contents of revised accounting standards for such companies. It has asked that the standards should be aligned to the nature, size and complexity of these companies and  their commercial needs, business size, capacity to comply with the prescribed standards, and relevance to their primary users.

“Public interest in the General Purpose Financial Statements (GPFSs) of these Companies 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,” NFRA said in a statement.

NFRA said that it wants to promote a regulatory environment conducive for the economic growth of such companies.

The regulator said that the expected standard audit cost to perform reasonably good quality audit, performed in compliance with the letter and spirit of the Standards on Auditing (SAs) is significantly more than the presently reported audit fee range. “A very large percentage of AS Companies have reported Payment to Auditors of less than Rs 25,000,” NFRA said.

The authority has asked ICAI to develop an approach paper in a transparent manner after extensive nation-wide consultation with the primary stakeholders including micro, small and medium companies and auditors. “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,” NFRA has told ICAI.