The Ministry of Corporate Affairs (MCA) has increased the threshold limits on turnover and borrowing in its definition of small and medium companies (SMCs) to align the applicable accounting standards rules with the latest definition as per the ministry of micro, small & medium enterprises.
As per the notification on 23rd June, 2021, SMCs have been defined as unlisted firms with a turnover not exceeding Rs 250 crore and with no borrowings in excess of Rs 50 crore. While, earlier the thresholds for SMCs as firms were turnover not exceeding Rs 50 crore and no borrowings in excess of Rs 10 crore.
“The main objective was to mirror the existing accounting standards under the Companies Act, 1956, in the 2013 act, and while doing so, the SMC definition, which has since been revised, has also been revised in the accounting standards,” a government official said.
However, SMCs which are banks, financial institutions, insurance firms or holding companies are excluded from the definition within these rules.