Ind AS Framework and Conceptual Framework for CA Final IBS

Ind AS are the Indian Accounting Standards notified under the Companies (Indian Accounting Standards) Rules, 2015. They are largely converged with IFRS issued by the IASB, with some changes for Indian law and conditions (called carve-outs). Whether a company must follow Ind AS depends on the applicability criteria in those Rules, such as listing status and net worth thresholds. Check the criteria given in the question.

The Conceptual Framework is not a standard. It does not override any Ind AS. It helps preparers develop consistent policies when no standard covers a transaction, and helps users understand the statements. In exams, you use it to justify why a treatment is right.

The objective of general purpose financial reporting is to give information useful to existing and potential investors, lenders and other creditors in making decisions about providing resources to the entity. To be useful, information must have two fundamental qualitative characteristics: relevance and faithful representation. Relevant information has predictive value, confirmatory value or both. Materiality is an entity-specific aspect of relevance, not a separate kind of relevance. Faithful representation means information that is complete, neutral and free from error. Enhancing characteristics are comparability, verifiability, timeliness and understandability. Cost is a pervasive constraint.

The elements are: assets, liabilities and equity (financial position), and income and expenses (performance). An asset is a present economic resource controlled by the entity as a result of past events. An economic resource is a right that has the potential to produce economic benefits. A liability is a present obligation of the entity to transfer an economic resource as a result of past events. Equity is the residual interest in assets after deducting liabilities.

An item is recognised if it meets the definition of an element and recognition gives useful information: relevant and faithfully represented. The 2018 Conceptual Framework has no separate probability criterion for recognition. Recognition may not give useful information, for example because of cost constraint, uncertainty about existence or measurement, or a low probability of an inflow or outflow of economic benefits. These points affect relevance. They are not a separate probability threshold in the Framework.

Specific standards can still set their own criteria, and the specific standard prevails over the Framework. For example, Ind AS 37 still requires an outflow to be probable (more likely than not) before a provision is recognised. Derecognition removes an item from the statement of financial position. For an asset, it occurs when the entity loses control of all or part of it. For a liability, it occurs when the entity no longer has a present obligation for all or part of it.

Measurement bases are historical cost and current value. Current value measurement bases are fair value, value in use (for assets) and fulfilment value (for liabilities), and current cost. The framework also covers the reporting entity, presentation and disclosure, and concepts of capital and capital maintenance.

Difference from old AS: Ind AS are IFRS-based, use fair value more widely, and add comprehensive, mandatory standards in areas such as financial instruments (Ind AS 32, 107 and 109). Ind AS 115 replaces AS 9 and AS 7 with a five-step revenue model. Some Ind AS have no direct AS equivalent, such as Ind AS 102 (share-based payment), Ind AS 113 (fair value measurement) and Ind AS 103 (business combinations). In IBS, you will see these ideas inside a case study, so read the facts and map them to the concept.

Use this method for any question on the framework or on Ind AS applicability and concepts.