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

Sagar Pharma Ltd enters a transaction for which no Ind AS applies. Separately, it faces an Ind AS that permits a choice between two accounting policies. The CFO asks what role the Conceptual Framework plays in these two situations. Which statement matches the stated purposes of the Conceptual Framework?

The Conceptual Framework assists preparers in developing consistent accounting policies when no Ind AS applies to a particular transaction or event, or when an Ind AS allows a choice of policy. It guides judgement rather than overriding standards or requiring regulatory approval.

  1. AIt assists preparers in developing consistent accounting policies when no Ind AS applies to a transaction, or when an Ind AS allows a choice of accounting policyCorrect
  2. BIt replaces the choice in the Ind AS by prescribing a single policy that every preparer must follow
  3. CIt applies only to the standard-setter and has no role for preparers in developing accounting policies
  4. DIt requires the entity to seek ICAI approval before adopting any policy not specified in an Ind AS

Explanation

One stated purpose is to assist preparers in developing consistent accounting policies when no Ind AS applies to a transaction or when an Ind AS allows a choice. It assists but does not override or replace standards. The option saying it prescribes a single policy goes beyond this, since nothing in it overrides an Ind AS.

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