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

Sunrise Textiles Ltd, an Indian company, has a transaction for which no Ind AS specifically applies. Its finance head says the Conceptual Framework can be used to develop a consistent accounting policy. Another executive argues that, where an Ind AS does apply, the Conceptual Framework can be used to override that Ind AS if it gives a fairer picture. Which statement is correct as per the Conceptual Framework for Financial Reporting under Ind AS?

The Conceptual Framework assists preparers in developing consistent accounting policies where no Ind AS applies, or where an Ind AS permits a choice. It is not an Ind AS, and nothing in it overrides any Ind AS or its requirements, so the override argument fails.

  1. AThe Conceptual Framework overrides an Ind AS whenever the preparer believes the result is fairer
  2. BThe Conceptual Framework is itself an Ind AS and so must be applied in priority to other Ind AS
  3. CThe Conceptual Framework helps preparers develop consistent accounting policies when no Ind AS applies, but nothing in it overrides any Ind AS or its requirementsCorrect
  4. DThe Conceptual Framework is meant only to assist ICAI in formulating Ind AS and has no use for preparers

Explanation

The purposes of the Conceptual Framework include assisting preparers to develop consistent accounting policies when no Ind AS applies to a transaction or when an Ind AS allows a choice. It is not an Ind AS, and nothing in it overrides any Ind AS or any requirement in an Ind AS. The override argument is therefore wrong, and limiting the purpose to ICAI alone ignores the preparer purpose.

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