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CMA Intermediate · Corporate Accounting and Auditing · Presentation of Financial Statements (Ind AS 1)

Where the relevant regulatory framework prohibits departure from an Ind AS requirement, but management concludes that compliance would be so misleading that it conflicts with the objective of financial statements, what must the entity do under Ind AS 1?

The entity must comply because departure is prohibited, but it should reduce the misleading aspects to the maximum extent possible by disclosing the Ind AS title, the nature of the requirement, management's reason, and the adjustments to each item for each period presented needed for a true and fair view.

  1. AComply, and to the maximum extent possible reduce the perceived misleading aspects by disclosing the Ind AS title, nature of the requirement, reason, and for each period the adjustments needed for a true and fair viewCorrect
  2. BDepart from the requirement and disclose the financial effect of the departure
  3. CComply and make no additional disclosure, since the regulator prohibits departure
  4. DDepart from the requirement only for the current period and ignore comparatives

Explanation

When departure is prohibited, the entity must still comply but reduce the perceived misleading aspects as far as possible. It discloses the title of the Ind AS, the nature of the requirement and why management finds it misleading, plus for each period presented the adjustments to each item that would be necessary for a true and fair view. Departing is not allowed here, so the second option is wrong.

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