Corporate Accounting and Financial Management · Introduction to Corporate Accounting

Accounting Standards and Ind AS Framework for CS Executive

Updated 11 October 2026 · Fact-checked

Accounting standards are written rules on how to recognise, measure and disclose items in financial statements. In India, the Central Government prescribes them under section 133 of the Companies Act, 2013, on ICAI's recommendation. Ind AS are the standards converged with IFRS. Companies follow either AS or Ind AS, depending on their class.

Understand Accounting Standards and Ind AS Framework

Every company reports its profit and financial position. If each company chose its own method, you could not compare one company with another. Accounting standards fix common rules for recognition, measurement, presentation and disclosure. That makes financial statements consistent and reliable.

India has two sets of standards. The first is the Accounting Standards (AS), the older Indian set. The second is the Indian Accounting Standards (Ind AS). Ind AS are based on and converged with the International Financial Reporting Standards (IFRS) issued by the International Accounting Standards Board. Convergence means India adopted IFRS-based standards with some changes to suit Indian law and conditions. It does not mean word-for-word adoption.

The legal backing comes from section 133 of the Companies Act, 2013. The Central Government may prescribe the standards of accounting, or any addendum, as recommended by the Institute of Chartered Accountants of India (ICAI). This is done in consultation with, and after examination of the recommendations of, the National Financial Reporting Authority (NFRA). So ICAI recommends, NFRA's recommendations are examined, and the Central Government prescribes. The standards are notified as rules.

Section 132 deals with the NFRA. The Central Government may constitute it by notification to provide for matters relating to accounting and auditing standards. Its functions include recommending accounting and auditing policies and standards to the Central Government, monitoring and enforcing compliance with them, and overseeing the quality of service of the professions associated with that compliance. It can also investigate professional or other misconduct by chartered accountants and firms, either on its own motion or on a reference from the Central Government. Its head office is at New Delhi.

Which set applies to a company depends on its class, such as listed status and net worth, as set out in the Companies (Indian Accounting Standards) Rules, 2015. For the exact thresholds, learn them from the ICSI study material. Companies that do not fall under Ind AS follow the AS notified under the Companies (Accounting Standards) Rules, 2021.

Key rules to remember

Legal source of standards: Section 133: Central Government prescribes standards, as recommended by ICAI, in consultation with and after examination of NFRA's recommendations; Write this chain of ICAI, NFRA and Central Government in any answer on legal backing.
NFRA constitution: Section 132(1): Central Government may constitute NFRA by notification; The word is 'may'. NFRA is a statutory body for accounting and auditing standards matters.
NFRA functions: Section 132(2): recommend standards; monitor and enforce compliance; oversee quality of service of the professions; Section 132(4) adds the investigation power over chartered accountants and firms.
NFRA penalty on proven misconduct: Individuals: not less than ₹1,00,000, up to 5 times the fees received. Firms: not less than ₹5,00,000, up to 10 times the fees received; Section 132(4)(c)(A). Debarment is for a minimum of six months and up to ten years.
Appeal against NFRA order: Section 132(5): appeal to the Appellate Tribunal against an order under section 132(4)(c); The Appellate Tribunal is NCLAT, as taught in the study material.

How to solve Accounting Standards and Ind AS Framework questions

Use this method for theory questions on accounting standards, Ind AS, IFRS convergence or NFRA.

1Read the question and mark the key word: AS, Ind AS, IFRS, section 133 or NFRA.
2Define the term in one or two lines, in your own words.
3State the legal provision: section 133 for prescribing standards, section 132 for NFRA. Give the exact conditions.
4Add the relevant analysis: the role of ICAI, the meaning of convergence, or the class of company that follows each set.
5If the question says 'differentiate', draw up point-by-point contrasts: basis, source, convergence with IFRS, applicability.
6Close with a one-line conclusion that answers the question asked.

Quickest way: Three-link chain for any legal-backing question

When to use it: Use when time is short and the question asks who makes standards, who enforces them or what the legal basis is.

Write: ICAI recommends, NFRA's recommendations are examined, Central Government prescribes under section 133.
Write: NFRA under section 132 recommends, monitors compliance and investigates CA misconduct.
Write: AS for companies outside Ind AS, Ind AS (IFRS-converged) for companies in the notified classes.
Finish with one line on why standards matter: comparability and reliability.

Common mistakes in Accounting Standards and Ind AS Framework

Saying Ind AS are the same as IFRS.
The phrase 'IFRS-converged' sounds like 'identical'.
Fix: Write that Ind AS are converged with IFRS with carve-outs and changes to suit Indian conditions and law.
Writing that ICAI itself makes the standards legally binding.
ICAI issues the standards, so students assume it has the final power.
Fix: ICAI recommends. The Central Government prescribes under section 133. That is what gives them legal force for companies.
Leaving NFRA out of the section 133 chain.
Students remember only ICAI and the Central Government.
Fix: Include that the Central Government acts in consultation with and after examination of NFRA's recommendations.
Mixing up section 132 and section 133.
The numbers are consecutive and both relate to standards.
Fix: Remember: 132 is the body (NFRA), 133 is the power to prescribe standards.
Stating that every company must follow Ind AS.
Students over-generalise from listed companies.
Fix: Say that applicability depends on the class of company as notified in the Ind AS Rules. Others follow AS.
Stating the NFRA penalty for firms as the individual figure.
The two limits sit in the same clause.
Fix: Individuals: minimum ₹1 lakh, up to 5 times fees. Firms: minimum ₹5 lakh, up to 10 times fees.

Worked examples

Example 1

Explain the legal backing for accounting standards in India under the Companies Act, 2013. (Short answer)

Show the solution

Provision: section 133 empowers the Central Government to prescribe the standards of accounting, or any addendum, as recommended by the Institute of Chartered Accountants of India.
Condition: this is done in consultation with, and after examination of the recommendations made by, the National Financial Reporting Authority.
Analysis: ICAI drafts and recommends the standards. NFRA's recommendations are examined. The Central Government then notifies them, which gives them legal force for companies.
Link: section 132 provides for the constitution of NFRA, which recommends accounting and auditing standards and monitors compliance.
Conclusion: accounting standards bind companies because they are prescribed by the Central Government under section 133.

Answer: Accounting standards are legally backed by section 133 of the Companies Act, 2013. The Central Government prescribes them on ICAI's recommendation, in consultation with and after examination of NFRA's recommendations.

Example 2

Differentiate between Accounting Standards (AS) and Indian Accounting Standards (Ind AS). (Short answer)

Show the solution

Meaning: AS are the Indian standards issued by ICAI and prescribed under section 133. Ind AS are standards converged with IFRS and also prescribed under section 133.
Basis: AS were developed mainly on the basis of Indian practice. Ind AS are based on IFRS issued by the International Accounting Standards Board, with changes for Indian conditions.
Applicability: companies in the classes notified under the Ind AS Rules follow Ind AS. Other companies follow AS.
Legal source: both are notified by the Central Government, as recommended by ICAI and after examination of NFRA's recommendations.
Conclusion: the two sets run in parallel, and the class of company decides which one applies.

Answer: AS are the older Indian standards. Ind AS are IFRS-converged standards. A company follows one or the other depending on the class to which it belongs under the notified Rules.

Exam tips

Always quote section 133 for the power to prescribe standards and section 132 for NFRA. Marks go to the provision first.
For 'differentiate' questions, give at least four points: basis, IFRS link, applicability and scope of disclosure.
Write 'converged with IFRS', not 'same as IFRS'. Examiners look for this.
Do not memorise Ind AS thresholds from a guide that is not current. Check the notified Rules in your ICSI study material before the exam.
Keep answers short. A 5-mark answer needs four to five crisp points and a conclusion.

Practice questions from Introduction to Corporate Accounting

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 older Indian accounting standards. Ind AS are standards converged with IFRS. Both are prescribed under section 133, but a company follows Ind AS only if it falls in a notified class. Other companies follow AS.

Which section of the Companies Act, 2013 deals with accounting standards?

Section 133. It allows the Central Government to prescribe the standards of accounting, or any addendum, as recommended by ICAI. It acts in consultation with and after examination of NFRA's recommendations.

What is the role of NFRA?

NFRA is constituted under section 132. It recommends accounting and auditing policies and standards, monitors and enforces compliance, and oversees the quality of service of the professions. It can also investigate misconduct by chartered accountants and firms.

What does IFRS convergence mean for India?

It means India bases Ind AS on IFRS but makes changes to suit Indian laws and conditions. It is not a direct, word-for-word adoption of IFRS.

Can a person appeal against an NFRA order?

Yes. Under section 132(5), a person aggrieved by an order made under section 132(4)(c) can appeal to the Appellate Tribunal. The appeal must follow the prescribed manner and fee.