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

The ICAI issues a new Ind AS whose requirement deliberately departs from one aspect of the Conceptual Framework, in order to meet the objective of general purpose financial reporting. Meera & Co, a firm of preparers, asks how such a departure is dealt with. Which statement is correct?

Such a departure is allowed. When the ICAI specifies a requirement departing from aspects of the Conceptual Framework to meet the objective of general purpose financial reporting, it explains the departure in the Appendix to the relevant Ind AS. Preparers simply follow the Ind AS.

  1. AThe departure is invalid unless the Framework is first amended
  2. BThe departure is permitted, and the ICAI will explain it in the Appendix to the relevant Ind ASCorrect
  3. CThe departure is permitted, but preparers must disclose it in each entity's notes to accounts as a non-compliance
  4. DThe departure applies only if the entity's board adopts it by resolution

Explanation

The Framework states that the ICAI may sometimes specify requirements that depart from aspects of the Framework to meet the objective of general purpose financial reporting. If it does, it will explain the departure in the Appendix to the relevant Ind AS. Preparers following that Ind AS are complying, not departing, so no non-compliance disclosure arises, and no board resolution is needed.

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