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CMA Intermediate · Financial Accounting · Introduction to Accounting Standards (GAAP, AS and Convergence to Ind AS)

Under the ICAI Framework, where an Accounting Standard conflicts with the Framework in a limited number of cases, which of the following follows?

The Accounting Standard prevails. The Framework itself says that where a limited number of cases of conflict arise between it and a Standard, the Standard's requirements override the Framework, because the Framework only guides the Board and fills gaps where no Standard exists.

  1. AThe Framework prevails over the Accounting Standard
  2. BThe requirements of the Accounting Standard prevail over the FrameworkCorrect
  3. CThe entity may choose whichever it prefers
  4. DThe auditor decides which one applies

Explanation

The Framework states that in a limited number of cases of conflict between it and an Accounting Standard, the requirements of the Standard prevail. The Framework only guides preparers and the Accounting Standards Board where no Standard exists. Option A reverses the hierarchy.

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