The Institute of Chartered Accountants of India (ICAI) has clarified that if any part of a non-profit organisation’s (NPO) activities involves commercial, industrial, or business elements, then all Accounting Standards (AS) apply to the entire organisation—including its non-commercial activities.
What This Means for NPOs:
Financial statements must follow the accrual basis of accounting for better transparency.
Compliance with accounting standards enhances credibility and accountability.
The ICAI has released a Technical Guide on Accounting for Not-for-Profit Organisations to help NPOs implement these standards effectively.
This is a significant step towards standardised financial reporting in the non-profit sector. Read more about it bellow:
Attaching the Technical Guide on Accounting for NPOs for read and more clarity. So, if there are commercial activities in an NPO, the AS would apply which even the Technical Guide recommends. The ICAI has also specified which Accounting Standards (AS) need to be followed.
Recommended that AS compliance be made part of the financial reports for consistency and comparability in a gradual manner by NPOs. Compliance with AS should be also captured in the Significant Accounting Policies schedule in the financial statements.