Introduction
Accounting Standards issued by the Institute of Chartered Accountants of India (ICAI) act as a pillar for sound financial reporting system of an entity. Accounting Standards prescribe recognition and measurement principles as well as presentation and disclosure requirements for the events, transactions and various elements of the financial statements. General Purpose Financial Statements prepared in accordance with the Accounting Standards provide relevant and reliable information about the entity to its stakeholders.+
The ICAI, through its Accounting Standards Board (ASB), formulates and recommends Accounting Standards (viz., Ind AS and AS) for companies to the Government of India for notification under section 133 of the Companies Act 2013, and also formulates and issues Accounting Standards for non-company entities. The ICAI also takes necessary initiatives to ensure effective and consistent application of these Standards.
In line with this, the Accounting Standards Board (ASB) of the ICAI had issued a Technical Guide on Financial Statements of Non-Corporate Entities recommending the formats of financial statements to strengthen and standardize the financial reporting formats to be followed by non-corporate entities.
The Accounting Standards Board of ICAI, in June 2022, had issued a Technical Guide on Financial Statements of Non-Corporate Entities recommending formats of financial statements of non-corporate entities so as to standardize the information to be presented in the financial statements of non-corporate entities. The Technical Guide also contained Illustrative formats of Financial Statements for the guidance of the stakeholders.
To further enhance the quality and comprehensiveness of financial statements of non-corporate entities and to prescribe authoritative guidance for the members of ICAI for the effective implementation of Accounting Standards for preparation of financial statements of such entities, the ASB has upgraded this Technical Guide into Guidance Note on Financial Statements of Non-Corporate Entities. Similar to the Technical Guide, the Guidance Note also includes Illustrative formats of Financial Statements for the ease of the stakeholders in the preparation of financial statements. The Guidance Note can be applied by all non-corporate entities except where relevant law/regulation/authority has prescribed any other specific formats for the concerned non-corporate entities and the Limited Liability Partnerships which are corporate form of entities.
Implementation Timeline
Although the guidance note was published in August 2023, the new balance sheet format became effective from FY 2024-25. It means that professionals and non-corporate entities are expected to adopt the prescribed formats in their financial statements from the financial year 2024-2025 onwards, prepared from 1st April 2025.
Do we need to prepare comparative financial statement as on 31st March 2025?
Yes we need to prepare comparative financial statements as on 31st March 2025 with financial statements as on 31st March 2024.
Whether applicable for non-corporate entities?
The Guidance Note can be applied by all non-corporate entities except where relevant law/regulation/authority has prescribed any other specific formats for the concerned non-corporate entities and the Limited Liability Partnerships which are corporate form of entities.
For e.g.-
|
Non-Corporate Entity |
Governing Law |
Authority |
Prescribed format |
|
Co-operative Bank |
Banking Regulation Act, 1949 |
Reserve Bank of India |
RBI prescribed format* |
On January 07, 2025 RBI released draft format of financial statements for co-operative banks with seeking feedback from stakeholders on these draft formats and the deadline for submitting comments was February 21, 2025.
The final formats will be issued after considering the feedback received. Until the draft is finalized and officially notified, the existing formats outlined in the Third Schedule of the Banking Regulation Act, 1949, remain applicable.
Objective and Scope
All Business or Professional Entities, other than Companies incorporated under Companies Act and Limited Liability Partnerships incorporated under Limited Liability Partnership Act are considered to be Non-Corporate entities. Corporate or Company form of legal structure is the most commonly used one for commercial or business activities. Entities for business, commercial or other economic and social activities can be established under variety of structures and the most common structures are as follows:
- Sole proprietorship firms
- Hindu Undivided Family
- Partnership Firms
i) Registered Partnership Firms
ii) Unregistered Partnership Firms
- Society registered under any law for the time being in force
- Trust (private or public) registered under any law for the time being in force or unregistered.
- Any form of organization that is engaged fully or partially in any Business or Professional activities.
The Accounting Standards Board has now prescribed the formats for the presentation of the financial statements of Non-corporate Entities in the form of Guidance Note, which were earlier issued as a part of Technical Guide. The objective is to standardize the formats of financial statements for these entities and to enhance the quality and comprehensiveness of the financial reporting by these entities.
Things changed in the new format
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Before |
After |
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Horizontal Form |
Vertical form |
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Fixed Assets |
PPE-Property Plant & Equipment |
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Debtors |
Trade Receivables |
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Creditors |
Trade Payables |
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Capital |
Owner Fund |
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Accounting Policies |
Significant Accounting Policies |
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Sales |
Revenue from the operation |
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Income tax |
Tax expense |
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P/L Account |
Statement of P/L |
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Rent |
Lease |
Some important things to consider
- Rounding off is not mandatory
- Offset of income/expenses or assets/liabilities not allowed
- Disclose Contingent Liabilities
Format of Balance Sheet
PART I - Form of BALANCE SHEET
Name of the Non-Corporate Entity…………….
Balance Sheet as at ………………
(Rupees in............. )
|
Particulars |
Note No |
Figures as at the end of (Current reporting period) (in Rs.) (DD/MM/YYYY) |
Figures as at the end of (Previous reporting period) (in Rs.) (DD/MM/YYYY) |
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1 |
2 |
3 |
4 |
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I. |
OWNERS' FUNDS AND LIABILITIES |
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(1) |
Owners' Fund |
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(a) Owners Capital Account (i) Owners'/Partners' Capital Account2 (ii) Owners'/Partners' Current Account2 |
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(b)Reserves and surplus |
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(2) |
Non-current liabilities |
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(a) Long-term borrowings |
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(b) Deferred tax liabilities (Net) |
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(c) Other Long term liabilities |
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(d) Long-term provisions |
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(3) |
Current liabilities |
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(a) Short-term borrowings |
2 Applicable, if relevant
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(b) Trade payables |
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(c) Other current liabilities |
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(d) Short-term provisions |
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TOTAL |
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II. |
ASSETS |
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(1) |
Non-Current Assets |
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(a) Property, Plant and Equipment and Intangible assets |
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(i) Property, Plant and Equipment |
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(ii) Intangible assets |
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(iii) Capital work-in- progress |
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(iv) Intangible assets under development |
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(b) Non-current investment |
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(c) Deferred tax assets (net) |
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(d) Long-term loans and advances |
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(e) Other non-current assets |
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(2) |
Current assets |
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(a) Current investments |
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(b) Inventories |
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(c) Trade receivables |
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(d) Cash and bank balances |
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(e) Short-term loans and advances |
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(f) Other current assets |
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TOTAL |
General Instructions for Preparation of Balance Sheet
1. An asset shall be classified as current when it satisfied any of the following criteria-:
- it is expected to be realized in, or is intended for sale or consumption in, the company's normal operating cycle;
- it is held primarily for the purpose of being traded;
- it is expected to be realized within twelve months after the reporting date; or
- it is cash or cash equivalent unless it is restricted from being exchanged or used to settle a liability for at least twelve months after the reporting date.
All other assets shall be classified as non-current
2. An operating cycle is the time between the acquisition of assets for processing and their realization in cash or cash equivalents. Where the normal operating cycle cannot be identified, it is assumed to have a duration of 12 months.
3. A liability shall be classified as current when it satisfies any of the following criteria:
- it is expected to be settled in the company's normal operating cycle;
- it is held primarily for the purpose of being traded;
- it is due to be settled within twelve months after the reporting date; or
- the Non-Corporate entity does not have an unconditional right to defer settlement of the liability for at least twelve months after the reporting date. Terms of a liability that could, at the option of the counterparty, result in its settlement by the issue of equity instruments do not affect its classification.
"All other liabilities shall be classified as non-current"
Format of Statement of P&L Account
PART II - Form of STATEMENT OF PROFIT AND LOSS
Name of the Non-Corporate Entity…………………….
Statement of Profit and Loss for the year ended ………………………
(Rupees in............. )
|
Particulars |
Note |
Figures for the current reporting period (in) From (DD/MM/YYYY) To (DD/MM/YYYY) |
Figures for the previous reporting period (in) From (DD/MM/YYYY) To (DD/MM/YYYY) |
|
|
1 |
2 |
3 |
4 |
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I. |
Revenue from operations |
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II. |
Other income |
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III. |
Total Income (I + II) |
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IV. |
Expenses |
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Cost of Material Consumed |
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Purchases of Stock-in-Trade |
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Changes in inventories of finished goods |
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Work-in-progress and Stock-in-Trade |
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Employee benefits expense |
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Depreciation and amortization expense |
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Finance Cost |
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Other expenses |
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Total expenses |
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V |
Profit before exceptional and extraordinary items, partners' remuneration and tax (III-IV) |
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VI |
Exceptional items |
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VII |
Profit before extraordinary items, partners' remuneration and tax (V - VI) |
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VIII |
Extraordinary Items |
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IX |
Profit before partners' remuneration and tax (VII- VIII) |
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X |
Partners' remuneration3 |
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XI |
Profit before tax (IX- X) |
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XII |
Tax expense: |
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(i) |
Current tax |
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(ii) |
Deferred tax |
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XIII |
Profit (Loss) for the period from continuing operations (XI-XII) |
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XIV |
Profit/(loss) from discontinuing operations |
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XV |
Tax expense of discontinuing operations |
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XVI |
Profit/(loss) from Discontinuing operations (after tax) (XIV-XV) |
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XVII |
Profit/ (Loss) (XIII + XVI) |
General instructions forthe preparation of Statement of profit and loss account
Revenue from operations shall disclose separately in the notes revenue from-
(a) Sale of products;
Less: Excise duty
(b) Sale of services;
(c) Other operating revenues;
In respect of a finance Non-Corporate entity, revenue from operations shall include revenue from-
(a) Interest; and
(b) Other financial services.
Finance costs shall be classified as:
(a) Interest expense (other than interest on partners'/members' capital);
(b) Interest on partners'/members' capital;
(c) Other borrowing costs;
(d) Applicable net gain/loss on foreign currency transactions and translation.
Other income shall be classified as:
(a) Interest Income;
(b) Dividend Income;
(c) Net gain/loss on sale of investments;
(d) Other non-operating income (net of expenses directly attributable to
such income).
The following shall be disclosed by way of notes regarding aggregate expenditure and income on the following items-:
- Employee Expense showing separately (i) salaries and wages, Contribution Benefits of provident and other funds, (iii) staff welfare expenses;
- Any item of income or expenditure which exceeds one per cent of the revenue from operations or Rs.1,00,000 whichever is higher;
- Adjustments to the carrying amount of investments;
- Net gain or loss on foreign currency transactions and translation (other than Considered as finance cost);
- Details of items of exceptional and extraordinary nature; Prior period items.
Conclusion
The issuance of the Guidance Note on Financial Statements of Non-Corporate Entities by the ICAI marks a significant step towards enhancing consistency, transparency, and comparability in financial reporting among non-corporate entities. By prescribing standardized formats and updated terminology aligned with contemporary accounting practices, the Guidance Note not only simplifies the preparation of financial statements but also ensures greater clarity and reliability of financial information for stakeholders. With its applicability from the financial year 2024-25 onwards, it is imperative for professionals and non-corporate entities to familiarize themselves with the new formats and disclosure requirements to ensure timely and accurate compliance. While exceptions apply where other regulatory authorities prescribe specific formats, the Guidance Note serves as a comprehensive and authoritative reference for all other non-corporate entities aiming to present their financials in a structured and informed manner.
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