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CS Professional · Environmental, Social and Governance (ESG) - Principles and Practice · Legislative Framework of Corporate Governance in India

Vihaan Textiles Ltd wants its financial statements to follow a particular accounting standard. A director asks who has the power to prescribe accounting standards for companies under the Companies Act, 2013 (Section 133). Which statement is correct?

Under Section 133 of the Companies Act, 2013, the Central Government prescribes accounting standards. It acts on the ICAI's recommendations, in consultation with and after examining the recommendations of the National Financial Reporting Authority. Companies' boards, SEBI and Registrars do not hold this power under the section.

  1. AThe Central Government prescribes them, as recommended by the ICAI, after consulting and examining the recommendations of the National Financial Reporting AuthorityCorrect
  2. BEach company's board prescribes its own accounting standards by resolution
  3. CSEBI prescribes accounting standards for all companies, listed or unlisted
  4. DThe Registrar of Companies prescribes them for companies in his jurisdiction

Explanation

Section 133 empowers the Central Government to prescribe accounting standards as recommended by the ICAI, in consultation with and after examination of the recommendations of the NFRA. The board, SEBI and the Registrar have no such power under this section, so the other options are wrong.

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