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CA Final · Financial Reporting · Ind AS 8 Accounting Policies, Changes in Accounting Estimates and Errors

Narmada Infra Ltd, in the absence of an Ind AS that specifically applies to a transaction, is deciding what sources management may first consider when developing an accounting policy. The CFO notes that Ind AS 8, as modified from IAS 8, contains a specific wording on this point. Which statement matches the Ind AS 8 text?

Where no Ind AS applies, Ind AS 8 paragraph 12 says management may first consider the most recent pronouncements of the International Accounting Standards Board. The wording is permissive, not mandatory. Options limiting management to ICAI alone or to competitors' practice have no basis in the text.

  1. AManagement may first consider the most recent pronouncements of the International Accounting Standards BoardCorrect
  2. BManagement must first consider the most recent pronouncements of the Institute of Chartered Accountants of India only
  3. CManagement must apply the policy of the largest competitor in the industry
  4. DManagement may not look to any pronouncement outside Ind AS

Explanation

The comparison with IAS 8 states that in paragraph 12 of Ind AS 8, in the absence of an Ind AS, management may first consider the most recent pronouncements of the International Accounting Standards Board. The wording is permissive, 'may'. The other options impose requirements or restrictions that the text does not contain.

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