Applicability of Guidance Notes on Financial Statements
Applicability of Guidance Notes on Financial Statements for NCEs and LLPs from FY 2025-26 Onwards
The Institute of Chartered Accountants of India (ICAI) has issued an important announcement regarding the implementation of two key guidance notes:
- Guidance Note on Financial Statements of Non-Corporate Entities (NCEs)
- Guidance Note on Financial Statements of Limited Liability Partnerships (LLPs)
These guidance notes were originally released in August 2023 to provide a structured framework for preparing and presenting financial statements for entities that do not fall under the corporate reporting framework.
Recently, during its 451st Council Meeting held on 30–31 March 2026, ICAI clarified the phased applicability of these guidance notes for annual reporting periods starting from the financial year 2025-26 onwards.
Purpose of the Guidance Notes
The guidance notes aim to bring greater consistency, transparency, and comparability in the financial reporting practices of:
- Non-Corporate Entities (such as proprietorships and partnership firms)
- Limited Liability Partnership (LLPs)
They provide practical direction on the format, presentation, and disclosure requirements for financial statements, helping professionals and entities align with sound accounting practices.
Phased Implementation Plan
ICAI has decided to introduce the guidance notes in two phases to allow entities and professionals adequate time to transition.
Phase I – Large Entities: Applicable for accounting periods beginning on or after 1 April 2025
This phase will apply to:
- Non-Corporate Entities and LLPs
- Having annual turnover exceeding ₹5 crore
Large entities are expected to adopt the framework earlier due to their relatively higher scale of operations and reporting needs.
Phase II – All Remaining Entities: Applicable for accounting periods beginning on or after 1 April 2026
In this phase, the guidance notes will apply to all remaining Non-Corporate Entities and LLPs, regardless of turnover.
This ensures that eventually all such entities follow a standardized financial reporting framework.
What This Means for Professionals: For Chartered Accountants and accounting professionals, this development means:
- Financial statements of eligible entities must be prepared following the formats and disclosures suggested in the guidance notes.
- Firms with turnover above ₹5 crore should already be preparing for implementation from FY 2025-26.
- Smaller entities will need to comply starting FY 2026-27.
Professionals should also update their financial statement templates, reporting formats, and audit documentation accordingly.
Why This Change Matters: The phased adoption of these guidance notes is expected to:
- Improve clarity and uniformity in financial statements
- Enhance credibility of financial reporting for non-corporate businesses
- Help stakeholders such as lenders, investors, and regulators better understand financial information
- Align reporting practices with evolving professional standards
Final Thoughts: The decision by the Institute of Chartered Accountants of India marks a significant step toward strengthening the financial reporting framework for Non-Corporate Entities and LLPs in India.
Entities falling under the ₹5 crore turnover threshold should ensure that their accounting and reporting processes comply with the guidance note requirements from FY 2025-26, while other entities will need to prepare for implementation from FY 2026-27.
Early preparation will help avoid last-minute compliance challenges and ensure smooth adoption of the new reporting framework.
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