ICAI issues Frequently Asked Questions (FAQs) on Guidance Note on Financial Statements of Non-Corporate Entities
The Accounting Standards Board of ICAI, last year 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 standardise the information to be presented in the financial statements of noncorporate 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 ICAI in 2023 issued a Guidance Note on Financial Statements of Non-Corporate Entities.
The Guidance Note issued by ICAI aims to provide standardised formats for financial statements of non-corporate entities to enhance the quality, understandability, relevance, reliability, comparability, consistency and comprehensiveness of financial statements prepared by entities to which the Guidance Note applies.
The Guidance Note prescribes the formats for financial statements as the presentation format for the non-corporate entities and is applicable for accounting periods beginning on or after April 1, 2024.
Today, ICAI has issued Frequently Asked Questions (FAQs) on Guidance Note on Financial Statements of Non-Corporate Entities to answer the various queries and dispel any doubts.
The Guidance note inter Alaia answers some important issues e.g.
Question: To whom is the Guidance Note applicable?
Answer: The Guidance note applies to all Business or Professional Entities including non profit organisations other than Companies incorporated under Companies Act and Limited Liability Partnerships incorporated under Limited Liability Partnership Act are considered to be Non-Corporate entities.
Question: What is the responsibility of the Auditor when a non-corporate entity (client) fails to comply with the presentation formats as specified in the Guidance Note?
Answer: In the above context, where the client does not furnish the financial statements in the presentation format or does not comply with the requirements prescribed in the Guidance Note, the auditor is required to disclose the same in his / her report. The auditor shall exercise his / her professional judgment in determining whether such non-adherence will result in a modified opinion as per the Standards on Auditing.
Question: Can additional line items be added in the Balance Sheet, or is it mandatory to strictly follow the line items prescribed in the Guidance Note?
Answer: This part set-outs the minimum requirements for disclosure on the face of the Balance Sheet, and the Statement of Profit and Loss (hereinafter referred to as “Financial Statements” for the purpose of the Format) and Notes. Line items, sub-line items and sub-totals shall be presented as an addition or substitution on the face of the Financial Statements when such presentation is relevant to an understanding of the Non-Corporate entity’s financial position or performance or to cater to industry/sector-specific disclosure requirements or when required for compliance with the amendments to the relevant statutes or under the Accounting Standards.
The Guidance note also gives the details of the Accounting Standards issued by the ICAI, as on April 1, 2024 and their applicability of Accounting Standards to Non-company Entities.
ABCAUS Note:
A common question that has been repeatedly asked is whether the financial statements of all the non-corporate entities must adhere to this Guidance Note? Please note that the Guidance note is applicable only to those corporate entities who are subject to audit and not otherwise though desirable.
Download ICAI FAQ on Guidance Note on Financial Statements of Non-Corporate Entities Click here >>
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