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ACCA Applied Knowledge · Financial Accounting · The regulatory framework

Which statement about the relationship between company law and IFRS Accounting Standards is correct?

IFRS Accounting Standards become legally binding only when a country's law or national regulator requires or adopts them. The IASB has no power to enforce them or fine companies, and they do not automatically override national law. Company law often itself sets requirements for accounts and records.

  1. AIFRS Accounting Standards have legal force in a jurisdiction only if law or a national regulator requires or adopts themCorrect
  2. BIFRS Accounting Standards automatically override national company law in every country
  3. CThe IASB can legally fine companies that do not follow IFRS
  4. DCompany law never specifies any accounting requirements for companies

Explanation

The IASB has no enforcement power. IFRS become mandatory only when a jurisdiction adopts them through law, regulation or listing requirements. Company law often requires accounting records and the preparation and filing of financial statements, so the last option is wrong.

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