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ICAI Issues Exposure Draft on Accounting Standards for LLPs

Background

The ICAI issues Exposure Draft on Accounting Standards for Limited Liability Partnership on the following aspects:

  • Applicability of AS and Criteria for classification of LLPs for applicability of AS
  • Applicability of AS to LLPs following cash basis
  • Following AS applicable to LLPs like AS 1, 2, 3, 4, 5, 9 to19, and 21 to 29
  • AS 20 – Earning per share shall be exempted to LLPs

Key Highlight of Draft

  • LLP which is a subsidiary, joint venture or associate of another entity which is applying Ind AS is
    permitted to prepare its financial statements in accordance with Ind AS since such an LLP is already
    preparing financial statements under Ind AS for the purpose of consolidation.
  • Level I LLPs are required to comply in full with AS 1 to 5, 7, 9 to 19 and 21 to 29. Exemptions/ relaxations are provided to MSMLLPs.
  • For the purpose of applicability of Accounting Standards, LLPs shall be classified into four categories,
    viz., Level I, Level II, Level III and Level IV. Level I LLPs will be large size Limited Liability Partnerships,
    Level II LLPs will be medium size Limited Liability Partnerships, Level III LLPs will be Small size Limited
    Liability Partnerships and Level IV LLPs will be Micro size Limited Liability Partnerships. Level IV, Level
    III and Level II LLPs shall be referred to as Micro, Small and Medium sized Limited Liability Partnerships (MSMLLPs).

Criteria for classification of Limited Liability Partnerships
Level I Limited Liability Partnerships
(A) All LLPs engaged in commercial, industrial or business activities, whose turnover (excluding other
income) exceeds rupees two-fifty crore in the immediately preceding accounting year.
(B) All LLPs engaged in commercial, industrial or business activities having borrowings in excess of
rupees ten crore but not in excess of rupees fifty crore at any time during the immediately preceding
accounting year.
(C) Holding and subsidiary LLPs of any one of the above.
Level II Limited Liability Partnerships
(A) All LLPs engaged in commercial, industrial or business activities, whose turnover (excluding other
income) exceeds rupees fifty crore but does not exceed rupees two-fifty crore in the immediately
preceding accounting year
(B) All LLPs engaged in commercial, industrial or business activities having borrowings in excess of
rupees two crore but does not exceed rupees ten crore at any time during the immediately preceding
accounting year.
(C) Holding and subsidiary LLPs of any one of the above.
Level III Limited Liability Partnerships
(A) All LLPs engaged in commercial, industrial or business activities, whose turnover (excluding other
income) exceeds rupees ten crore but does not exceed rupees fifty crore in the immediately
preceding accounting year.
(B) All LLPs engaged in commercial, industrial or business activities having borrowings in excess of
rupees two crore but does not exceed rupees ten crore at any time during the immediately
preceding accounting year.
(C) Holding and subsidiary LLPs of any one of the above
Level IV Limited Liability Partnerships
Limited Liability Partnerships which are not covered under Level I, Level II and Level III are considered
as Level IV LLPs.
Accounting Standards applicable to Limited Liability Partnerships

ASLEVEL IILEVEL IIILEVEL IV
AS-1MandatoryMandatoryMandatory
AS-2MandatoryMandatoryMandatory
AS-3 Not Mandatory Not Mandatory Not Mandatory
AS-4MandatoryMandatoryMandatory
AS-5MandatoryMandatoryMandatory
AS-7MandatoryMandatoryMandatory
AS-9MandatoryMandatoryMandatory
AS-10MandatoryMandatory with disclosure exemptionMandatory with disclosure exemption
AS-11MandatoryMandatory with disclosure exemptionMandatory with disclosure exemption
AS-12MandatoryMandatoryMandatory
AS-13MandatoryMandatoryMandatory with disclosure exemption
AS-14MandatoryMandatoryMandatory
AS-15Mandatory with disclosure exemptionMandatory with disclosure exemptionMandatory with disclosure exemption
AS-16MandatoryMandatoryMandatory
AS-17 Not Mandatory Not Mandatory Not Mandatory
AS-18MandatoryMandatoryMandatory
AS-19Mandatory with disclosure exemptionMandatory with disclosure exemptionMandatory with disclosure exemption
AS-21MandatoryMandatoryMandatory
AS-22MandatoryMandatoryMandatory
AS-23MandatoryMandatoryMandatory
AS-24Mandatory Not Mandatory Not Mandatory
AS-25MandatoryMandatoryMandatory
AS-26MandatoryMandatory Mandatory with disclosure exemption
AS-27MandatoryMandatoryMandatory
AS-28Mandatory with disclosure exemptionMandatory with disclosure exemption Not Mandatory
AS-29Mandatory with disclosure exemptionMandatory with disclosure exemptionMandatory with disclosure exemption

SW Remark: The

Catalyst for Success
 

 SW Remark: The Exposure Draft clarifies the applicability of the accounting standard to the LLP.  ICAI has invited comments on this exposure draft by November 27, 2023.

Umang Mittal, Audit Associate, SW India

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