Skip to content

CMA Intermediate · Financial Accounting · Introduction to Accounting Standards (GAAP, AS and Convergence to Ind AS)

A firm argues that since the Framework wants comparability and ICAI promotes harmonisation with IFRS, it should never change an accounting policy even when a more relevant and reliable alternative exists. Per the Framework, this view is:

The view is incorrect. The Framework says comparability must not be confused with mere uniformity and must not hinder improved standards. An enterprise should not keep policies unchanged when more relevant and reliable alternatives exist, so continuing blindly is inappropriate.

  1. AIncorrect, because comparability should not be confused with mere uniformity and should not impede improved standardsCorrect
  2. BCorrect, because comparability means identical treatment every year in all cases
  3. CCorrect, because only the IASB can allow policy changes
  4. DIncorrect, but only for Level IV entities

Explanation

Paragraph 41 of the Framework says comparability should not be confused with mere uniformity or become an impediment to improved standards. It is inappropriate to leave policies unchanged when more relevant and reliable alternatives exist. So the firm's view fails for all entities, not only Level IV.

Did you get it right without looking?

One question tells you little. A timed set on Introduction to Accounting Standards (GAAP, AS and Convergence to Ind AS) shows your real accuracy, how long you take and where you lose marks.

Practise Introduction to Accounting Standards (GAAP, AS and Convergence to Ind AS)Free diagnostic mock

More Introduction to Accounting Standards (GAAP, AS and Convergence to Ind AS) questions