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

According to the Framework for the Preparation and Presentation of Financial Statements, if an Accounting Standard and the Framework conflict in a limited number of cases, which requirement prevails?

The Accounting Standard prevails. The Framework itself says that in the limited cases where it conflicts with a Standard, the Standard's requirements override the Framework. The Framework only guides the Accounting Standards Board in developing and reviewing Standards, so conflicts should reduce over time.

  1. AThe Framework, because it sets out the underlying concepts
  2. BThe Accounting Standard, because its requirements prevail over those of the FrameworkCorrect
  3. CWhichever the auditor considers more relevant to the enterprise
  4. DWhichever the enterprise's management chooses and discloses

Explanation

The Framework states that where there is a conflict, the requirements of the Accounting Standard prevail over those of the Framework. The Framework is used to guide the development of future Standards, so such conflicts are expected to diminish over time. Choosing the Framework reverses this hierarchy.

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