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CA Intermediate · Advanced Accounting · Introduction to Accounting Standards

Sahyadri Textiles Ltd, a company whose securities are listed on a recognised stock exchange in India, is preparing its financial statements under the Companies (Accounting Standards) Rules, 2021. The finance head asks which authority issues the Accounting Standards that the company must follow under the Companies Act, 2013. Who prescribes these standards for companies?

The Central Government prescribes Accounting Standards for companies, in consultation with the National Financial Reporting Authority. ICAI only formulates and recommends them, so they become binding on companies only when notified by the Government under the Companies Act, 2013.

  1. AThe Central Government, in consultation with the National Financial Reporting AuthorityCorrect
  2. BThe Institute of Chartered Accountants of India, on its own authority
  3. CThe Securities and Exchange Board of India, through listing regulations only
  4. DThe Reserve Bank of India, for all companies

Explanation

Under the Companies Act, 2013, the Central Government prescribes accounting standards in consultation with and on the recommendation of the NFRA. ICAI formulates and recommends standards but does not itself make them binding on companies. SEBI and RBI do not prescribe the general accounting standards for all companies.

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