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CA Intermediate · Advanced Accounting · Introduction to Accounting Standards

Kaveri Foods Ltd. is an unlisted company with turnover of Rs 40 crore. It wishes to know the legal status of Accounting Standards in India. Which statement is correct?

Accounting Standards are notified by the Central Government under the Companies Act, 2013, after the recommendation of the National Financial Reporting Authority, and are mandatory for companies. They are not optional ICAI guidance, nor framed by SEBI or by individual company boards.

  1. AAccounting Standards are notified by the Central Government under the Companies Act and are mandatory for companiesCorrect
  2. BAccounting Standards are only recommendatory guidelines issued by ICAI for companies
  3. CAccounting Standards are issued by SEBI and apply only to listed companies
  4. DAccounting Standards are framed by each company's board and approved by its auditors

Explanation

Under the Companies Act, 2013, Accounting Standards are notified by the Central Government on the recommendation of the National Financial Reporting Authority, and companies must comply with them. The option calling them merely recommendatory is wrong because companies are legally bound.

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