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

Varuna Textiles Ltd, an Ind AS reporting company, enters a transaction for which no Ind AS specifically applies. Its CFO proposes to refer to the Conceptual Framework for Financial Reporting under Ind AS when developing an accounting policy. A junior accountant argues that the Conceptual Framework can also be used to override a recognition requirement in Ind AS 2 Inventories if the Framework's concepts suggest a better outcome. Which statement is correct?

The Conceptual Framework helps preparers develop consistent accounting policies when no Ind AS covers a transaction, but it is not itself an Ind AS. Nothing in it overrides any Ind AS or its requirements, so Ind AS 2 must be followed as written.

  1. AThe Conceptual Framework may override Ind AS 2 if the CFO documents that the Framework gives a fairer presentation
  2. BThe Conceptual Framework can be used to develop consistent accounting policies where no Ind AS applies, but it is not an Ind AS and does not override any Ind AS requirementCorrect
  3. CThe Conceptual Framework can be used only by ICAI in standard setting and never by preparers
  4. DThe Conceptual Framework overrides an Ind AS only when the Ind AS was issued before April 1, 2021

Explanation

The Conceptual Framework is not an Ind AS, and nothing in it overrides any Ind AS or requirement in an Ind AS. Its purposes include assisting preparers to develop consistent accounting policies when no Ind AS applies. The option allowing override is wrong because it contradicts this. The option limiting use to ICAI ignores the preparer purpose.

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