Financial Accounting · Accounting Fundamentals

Accounting Standards and Ind AS Framework for CMA Inter

Updated 10 October 2026 · Fact-checked

Accounting Standards (AS) and Ind AS are written rules that tell companies how to recognise, measure, present and disclose transactions. AS are the Indian standards that continue to apply to companies not covered by Ind AS. Ind AS are Indian standards converged with IFRS. Which set a company follows depends on its type, net worth and listing status.

Understand Accounting Standards and Ind AS Framework

Accounts must be comparable and trustworthy. If every business chose its own way to value stock or record revenue, nobody could compare two companies. Accounting standards are the written rules that remove this freedom. They tell you what to recognise, how to measure it, how to present it and what to disclose.

In India, the Accounting Standards Board (ASB) of the Institute of Chartered Accountants of India (ICAI) formulates the standards and submits them to the National Financial Reporting Authority (NFRA). NFRA recommends them to the Central Government (Ministry of Corporate Affairs), which notifies them under Section 133 of the Companies Act, 2013. Once notified, they bind the companies covered. The Companies Rules do not cover non-company entities. They follow the requirements of their own regulator or ICAI's pronouncements for that class of entity.

There are two sets. Accounting Standards (AS) are the Indian standards that continue to apply to companies not covered by Ind AS. They are numbered AS 1, AS 2 and so on, and notified under the Companies (Accounting Standards) Rules, 2021. Indian Accounting Standards (Ind AS) are standards converged with International Financial Reporting Standards (IFRS) issued by the IASB. They are numbered Ind AS 1, Ind AS 2 and so on, and notified under the Companies (Indian Accounting Standards) Rules, 2015. Convergence means aligning with IFRS with limited changes for Indian conditions, not copying it word for word.

Applicability is the part examiners love. Ind AS is mandatory for listed companies (including those in the process of listing, in India or outside India), other than companies listed only on SME exchanges. It is also mandatory for unlisted companies with net worth of ₹250 crore or more. It also applies to the holding, subsidiary, joint venture and associate companies of such companies.

Other companies follow AS. This includes companies listed only on SME exchanges. Small and medium companies (SMCs), as defined in the AS Rules, follow AS with some relaxations. A company not covered by the mandatory test may adopt Ind AS voluntarily. Once it adopts Ind AS, it must continue to follow Ind AS. Check the current Rules for any change to these thresholds.

The conceptual framework sits behind all standards. It states the objective of general purpose financial reporting, the qualitative characteristics of useful information, the elements of financial statements (assets, liabilities, equity, income, expenses) and the concepts of recognition and measurement. It is not a standard itself. It guides standard-setters and helps preparers when no standard covers a transaction.

Key rules to remember

Qualitative characteristics: Fundamental: relevance + faithful representation. Enhancing: comparability, verifiability, timeliness, understandability; Learn the split. Questions ask which characteristic is fundamental.
Elements of financial statements: Assets, Liabilities, Equity (position); Income, Expenses (performance); Five elements. Equity is the residual: Assets − Liabilities.
Issuance chain: ICAI ASB formulates and submits to NFRA → NFRA recommends to the Central Government (MCA) → Central Government notifies under Section 133 of the Companies Act, 2013; Standards bind companies only after Central Government notification. Write the chain in order: ICAI ASB, NFRA, Central Government.
Applicability test: Listed (other than SME exchange only) or unlisted with net worth ≥ ₹250 crore → Ind AS (mandatory); otherwise → AS, unless the company voluntarily adopts Ind AS; Holding, subsidiary, associate and JV companies of an Ind AS company also follow Ind AS. Companies listed only on SME exchanges follow AS. Once a company adopts Ind AS voluntarily, it must continue with Ind AS. Check current Rules for any change.
Accounting equation: Assets = Liabilities + Equity; Underlies the definition of elements in the framework.

How to solve Accounting Standards and Ind AS Framework questions

Use this method for theory questions, applicability cases and framework-based questions.

1Read what is asked: definition, difference, process, applicability or a framework concept.
2Identify the framework involved: AS, Ind AS or the conceptual framework.
3For applicability cases, note whether the company is listed, its net worth and whether it is part of a group with an Ind AS company.
4Apply the test from the Companies Rules and state the conclusion clearly.
5For differences, use two columns of points: basis, AS, Ind AS, covering source, issuer rules, approach and applicability.
6For framework questions, name the concept, define it in one line and give a short example.
7Close with a one-line conclusion that answers the question asked.

Quickest way: Three-question check

When to use it: Use for short applicability or MCQ questions when time is tight.

Ask: is it a company? If not, the Companies Rules do not apply. Follow the requirements of its own regulator or ICAI for that entity.
Ask: is it listed (not only on an SME exchange), or unlisted with net worth of ₹250 crore or more, or linked to such a company as holding, subsidiary, JV or associate? If yes, Ind AS.
If none apply, the company follows AS, unless it has voluntarily adopted Ind AS. Then pick the option matching that conclusion.

Common mistakes in Accounting Standards and Ind AS Framework

Saying ICAI notifies the standards.
ICAI formulates them, so students assume it also enforces them.
Fix: Write the chain in order: ICAI ASB, NFRA, Central Government. ICAI ASB formulates and submits the standards to NFRA. NFRA recommends them to the Central Government (MCA), which notifies them under Section 133 of the Companies Act, 2013.
Treating Ind AS as identical to IFRS.
Ind AS is called converged, which sounds like copied.
Fix: Say Ind AS is substantially aligned with IFRS but carries some carve-outs for Indian conditions.
Applying Ind AS to a company only because it is large in turnover.
Students confuse turnover with net worth.
Fix: Test listing status and net worth, then group links. Turnover is not the test.
Forgetting group companies.
Students check only the company in the question.
Fix: Always ask whether its holding, subsidiary, associate or JV is under Ind AS.
Calling the conceptual framework a standard that overrides others.
It sounds authoritative.
Fix: State that a specific standard prevails over the framework when they conflict.
Mixing fundamental and enhancing characteristics.
Both are lists of similar words.
Fix: Remember fundamental = relevance and faithful representation. The rest enhance.

Worked examples

Example 1

Distinguish between Accounting Standards (AS) and Indian Accounting Standards (Ind AS). (Answer in four points.)

Show the solution

Basis of origin: AS are developed by ICAI on Indian practice; Ind AS are converged with IFRS issued by the IASB.
Notifying Rules: AS are notified under the Companies (Accounting Standards) Rules, 2021; Ind AS under the Companies (Indian Accounting Standards) Rules, 2015.
Applicability: Ind AS applies to listed companies (other than those listed only on SME exchanges), unlisted companies with net worth of ₹250 crore or more, and their holding, subsidiary, JV and associate companies; other companies follow AS.
Purpose: Ind AS aims at global comparability and consistency with IFRS, while AS continues to apply to companies not covered by Ind AS.

Answer: AS are the Indian standards that continue to apply to companies not covered by Ind AS, while Ind AS are IFRS-converged standards notified under separate Rules and applicable to listed and larger companies and their group entities.

Example 2

Aarav Textiles Ltd is an unlisted company whose net worth is below the Ind AS threshold. It is a subsidiary of Bharat Steels Ltd, a listed company. Which framework must Aarav Textiles follow?

Show the solution

Aarav Textiles is a company, so the Companies Rules apply.
On its own it is unlisted and below the net worth threshold, so alone it would follow AS.
But Ind AS also applies to the holding, subsidiary, joint venture and associate companies of a company covered by Ind AS.
Bharat Steels is listed, so it follows Ind AS. Its subsidiary Aarav Textiles is therefore also covered.

Answer: Aarav Textiles Ltd must follow Ind AS because its holding company is listed and under Ind AS.

Exam tips

Write the issuance chain in order: ICAI ASB, NFRA, Central Government.
For AS versus Ind AS, use a two-column layout with four or five points instead of a paragraph.
In MCQs on applicability, look for net worth and listing status. Ignore distractors such as turnover.
Under the Rules, the net worth test for unlisted companies is ₹250 crore or more. Check the current Rules for any change, and use the figure given in the question if it differs.
For conceptual framework questions, define the term in one line and add a one-line example.

Practice questions from Accounting Fundamentals

Accounting Standards and Ind AS Framework in other exams

The same ground in other exams, if you are preparing for more than one or want another angle on it.

Accounting Standards and Ind AS Framework: frequently asked questions

What is the difference between AS and Ind AS?

AS are the Indian standards developed by ICAI that continue to apply to companies not covered by Ind AS. Ind AS are standards converged with IFRS. They are notified under different Rules and apply to different classes of companies.

Who issues Accounting Standards in India?

ICAI's Accounting Standards Board formulates them and submits them to NFRA. NFRA recommends them to the Central Government (MCA), which notifies them under Section 133 of the Companies Act, 2013. Write the chain in that order: ICAI ASB, NFRA, Central Government.

Is the conceptual framework an accounting standard?

No. It sets out the objective of reporting, qualitative characteristics, elements, recognition and measurement concepts. It guides standard-setters and preparers, and a specific standard prevails if there is a conflict.

Do I need to memorise the list of Ind AS with titles?

Learn the standards named in your syllabus and know a few common ones, such as Ind AS 1 for presentation of financial statements and Ind AS 116 for leases. Focus on how they are applied, not only on the titles.