Direct administrative effect appraisal for bookkeeping norms modification: NFRA tells ICAI

Bookkeeping norms modification

Did you know that the Institute of Chartered Accountants of India (ICAI) had submitted to NFRA a methodology paper for correction of existing bookkeeping guidelines of organizations that are not needed to adhere to Indian Accounting Guidelines?

Yes, The National Financial Reporting Authority told the Institute of Chartered Accountants in India that they need to do a regulatory impact assessment for their accounting standards revision.

Apart from doing a regulatory impact assessment, the National Financial Reporting Authority (NFRA) said that ICAI should rethink the structure, form, and contents of the revised accounting standards for these companies. 18 of 32 revised Accounting Standards (ASs) were submitted by ICAI.

NFRA says that private limited companies are the majority of companies for which these proposed accounting standards would be applicable. Most of those companies have a small net worth or turnover, and they owe money to people. Because of this low number, there will not be much interest in their General Purpose Financial Statements (GPFSs).

When a company reports to an auditor that they paid less than Rs. 25,000, the NFRA recommends the ICAI conduct a “Regulatory Impact Assessment” on revising ASs. The NFRA reasons that companies with low audit fees are less likely to have complex or relevant revisions for GPFSs of these companies.

NFRA said the approach paper should be developed transparently, after consultation with people who have prepared and audited it.

A comprehensive study should be done on the cost to preparers of compliance with the new ASs and how this will affect their resource capacity. This study should also look at how this will affect all stakeholders, like companies.

Conclusion :

As per the delivery, ICAI ought to reevaluate the construction, structure and substance of amended ASs for AS organizations. They ought to be coordinated to the business size, ability to satisfy guidelines and significance to essential clients.

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