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CA Final · Financial Reporting · Conceptual Framework for Financial Reporting under Indian Accounting Standards (Ind AS)

A listed company's audit committee asks why the Conceptual Framework under Ind AS is said to contribute to economic efficiency. According to the Framework, which explanation is correct?

The Framework contributes to economic efficiency by helping investors identify opportunities and risks across the world, which improves capital allocation. For businesses, using a single trusted accounting language derived from Ind AS lowers the cost of capital and reduces international reporting costs.

  1. AIt helps investors identify opportunities and risks across the world, improving capital allocation, and a single trusted accounting language lowers the cost of capital and international reporting costsCorrect
  2. BIt requires all entities to report identical profits regardless of their business models
  3. CIt eliminates the need for regulators to use financial statements
  4. DIt replaces specific Ind AS with broad principles to reduce preparation effort

Explanation

The Framework states that it contributes to economic efficiency by helping investors identify opportunities and risks worldwide, improving capital allocation. For businesses, a single trusted accounting language lowers the cost of capital and reduces international reporting costs. The other options misstate its role.

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