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

Sundaram Textiles Ltd's finance team is drafting an accounting policy for a new type of customer-loyalty arrangement. No Ind AS applies specifically to it. The CFO asks what role the Conceptual Framework for Financial Reporting under Ind AS plays here. Which statement is correct as per the Conceptual Framework's stated purpose?

The Conceptual Framework helps preparers develop consistent accounting policies when no Ind AS covers a transaction, or when an Ind AS permits a choice of policy. It is not an Ind AS and does not override any Ind AS requirement, so it guides rather than overrides.

  1. AIt overrides any Ind AS requirement if the CFO believes the Framework gives a fairer presentation
  2. BIt assists preparers in developing consistent accounting policies when no Ind AS applies to a transactionCorrect
  3. CIt is itself an Ind AS and must be applied in preference to the policies of the company
  4. DIt applies only to the ICAI when formulating standards and has no relevance for preparers

Explanation

One stated purpose of the Conceptual Framework is to assist preparers to develop consistent accounting policies when no Ind AS applies to a particular transaction or event, or when an Ind AS allows a choice. It is not an Ind AS, and nothing in it overrides any Ind AS requirement. So the option claiming it overrides Ind AS is wrong, and the option saying it is only for the ICAI ignores the preparer purpose.

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