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

Kaveri Textiles Ltd. is preparing its financial statements under Ind AS. For a barter-type transaction, no Ind AS specifically applies. The CFO says the Conceptual Framework for Financial Reporting under Ind AS can be used as the basis for developing the accounting policy. A junior accountant argues that because the Conceptual Framework is the foundation of Ind AS, it overrides a specific Ind AS requirement whenever the two conflict. Which statement is correct?

The Conceptual Framework assists preparers in developing consistent accounting policies where no Ind AS applies to a transaction. However, it is not itself an Ind AS, and nothing in it overrides any Ind AS or any requirement in an Ind AS, so a specific standard always prevails.

  1. AThe Conceptual Framework may be used to develop consistent accounting policies where no Ind AS applies, but it is not an Ind AS and does not override any Ind AS requirementCorrect
  2. BThe Conceptual Framework overrides an Ind AS where the Ind AS gives less useful information to investors
  3. CThe Conceptual Framework is itself an Ind AS and prevails over other Ind AS only on measurement matters
  4. DThe Conceptual Framework can be used only by ICAI when formulating Ind AS and never by preparers

Explanation

The Conceptual Framework helps preparers develop consistent accounting policies when no Ind AS applies, or when an Ind AS allows a choice. It is not an Ind AS, and nothing in it overrides any Ind AS or its requirements. The junior's view is therefore wrong.

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