ICAI Non-Corporate Financial Statements Format: Phase II Now Live From FY 2026-27

What's changed: for accounting periods beginning 1 April 2026, Phase II of the ICAI Guidance Note on Financial Statements of Non-Corporate Entities is now in force. The turnover-based exemption that applied under Phase I no longer exists — every non-corporate entity engaged in business or professional activity is now within scope.

What was Phase I vs Phase II?

The ICAI Council approved a phased rollout at its 451st meeting (30-31 March 2026):

• Phase I — accounting periods beginning on or after 1 April 2025, applicable only to entities with turnover exceeding ₹5 crore.
• Phase II — accounting periods beginning on or after 1 April 2026, applicable to all non-corporate entities, irrespective of turnover.

Since FY 2026-27 has now begun, Phase II is live. There is no size-based carve-out left.

Who does this cover?

• Sole proprietorships
• Registered and unregistered partnership firms
• Hindu Undivided Families (HUFs)
• Associations of Persons (AOPs) and Bodies of Individuals (BOIs)
• Trusts and societies carrying on business or professional activity
• Other unincorporated entities engaged in business or professional activity

LLPs are covered by a separate, parallel ICAI Guidance Note on Financial Statements of Limited Liability Partnerships, announced on the same phased timeline.

What does this mean in practice for FY 2026-27 books?

1. Balance Sheet and Statement of Profit and Loss move to the structured, Schedule-III-style presentation instead of a free-format Excel layout.
2. Notes to Accounts become mandatory, not optional — ledger balances must be grouped and explained.
3. Current and non-current classification, where applicable to the entity type, needs to be maintained.
4. Proprietor/partner capital accounts, PPE and depreciation, and comparative (current-year vs previous-year) figures all need to be presented consistently.
5. A client whose books were never grouped this way before will need a one-time conversion exercise before the format can be maintained going forward.

A representation was submitted to ICAI in June 2026 by a regional CA association asking for the ₹5 crore turnover threshold to be raised to ₹10 crore, in line with the tax audit limit. As things stand, this is only a representation — Phase II applicability remains as announced, and firms should plan on that basis unless ICAI issues a formal revision.

Where firms typically get stuck

• Deciding which ledger goes into which note head, especially for mixed-purpose ledgers under "Duties & Taxes" or "Loans & Advances".
• Splitting proprietor/partner capital account movement into contribution, withdrawal and profit-for-the-year, especially for previous-year figures where profit is already merged into the closing balance.
• Building comparative figures for a client whose earlier-year financials were never prepared in this format.
• Doing this client by client, in Excel, for an entire portfolio.

You may also find our earlier article on Schedule III vs ICAI Non-Corporate Format useful to understand why the two frameworks are technically different even though the presentation looks similar.

With Phase II now covering every non-corporate client on your list, converting old-format Excel financials into the ICAI structure one client at a time is no longer practical to do by hand. assureOffice Financial Builder takes existing Excel financials or Tally data and produces a structured Balance Sheet, Profit and Loss and Notes to Accounts for professional review — so the format change doesn't have to mean redoing every client's file from scratch.