ICAI has released Guidance Note 2023 to standardize ‘Financial Statements of Limited Liability Partnerships (LLPs)’, for comprehensive financial reporting, from FY 2024-25.
ICAI Guidance Note on ‘Financial Statements of LLPs’: August 2023 Edition
Guidance Note 2023 in place of Technical Guide 2022
In June 2022, the ICAI issued Technical Guides on “Financial Statements of LLPs” to address the applicability of Accounting Standards and recommend formats for their financial statements.
Now ICAI has prescribed the formats for presenting the financial statements of limited liability partnerships (LLPs) in the form of a Guidance Note 2023, which shall be applicable from April 1, 2024. This guidance note is aimed to further ensure that the prescribed formats of financial statement are followed in order to achieve standardisation and improve the quality of the financial reporting of LLPs.
ICAI Technical Guide on ‘Financial Statements of LLPs’ (June 2022 Edition)
Earlier in June 2022, the ICAI has issued a Technical Guide on ‘Financial Statements of Limited Liability Partnerships (LLPs)’ for the guidance of Members/other Stakeholders for compliance with applicable accounting standards and financial reporting requirements of these entities.
The LLP (Amendment) Act, 2021 stipulates that the Government, in consultation with the National Financial Reporting Authority (NFRA), may prescribe the accounting standards recommended by the Institute of Chartered Accountants of India (ICAI) for a class or classes of Limited Liability Partnerships (LLPs). The Government has not yet announced the Accounting Standards for LLPs, though. Consequently, LLPs are required to prepare their financial statements in accordance with the ICAI’s Accounting Standards.
ICAI has announced a scheme classifying non-company entities into four levels, namely Level I, Level II, Level III, and Level IV, for purposes of Accounting Standards applicability. Level I entities are large entities that must comply with all applicable standards. Certain exemptions/relaxations have been granted to Level IV, Level III, and Level II non-company entities, which are considered Micro, Small, and Medium Sized non-company Entities.
In spite of the fact that the Accounting Standards prescribe disclosures and presentation aspects for the events, transactions, and various elements of the financial statements, the formats for presentation of financial statements have not been prescribed. Therefore, the ICAI’s Accounting Standards Board (ASB) recognised the growing importance of the limited liability partnership (LLP) structure and consequently issued a separate Technical Guide to prescribe formats of financial statements for the preparation and presentation of LLPs’ financial statements. Financial statements of Limited Liability Partnerships should be prepared using the formats prescribed in the Technical Guide.
The ICAI’s Technical Guide on Financial Statements of LLPs is written in a way that makes it easy to understand the formats that should be used to help prepare and present the financial statements. Also, this Technical Guide has examples of how Financial Statements should be set up to help those who make them.
The ICAI Technical Guide on Financial Statements of LLPs should be read in conjunction with the applicable Accounting Standards, rather than as a replacement for them.
In conclusion, an LLP is required to maintain annual accounts that present a true and fair picture of its financial condition. Annually, each LLP must file a “Statement of Accounts and Solvency” in the prescribed format with the Registrar. This Technical Guide’s purpose is to address the applicability of Accounting Standards to LLPs and to prescribe the format of their financial statements.
ICAI Technical Guide on ‘Financial Statements of LLPs’ (June 2022 Edition)
Illustrative Financial Statements of LLPs by ICAI (Excel File)
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