Accounting Standards and Convergence
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Questions and Answers

What is the primary reason behind framing policies for capitalisation?

  • To provide adequate guidance for accounting standards
  • To ensure transparency in the standard-setting process
  • To curb overstating profits and assets (correct)
  • To integrate International Accounting Standards with Indian laws

    • What is the role of the Institute of Chartered Accountants of India (ICAI) in the standard-setting process?

  • To provide guidance on International Financial Reporting Standards (IFRSs)
  • To constitute the National Financial Reporting Authority (NFRA)
  • To take a leadership role in constituting the Accounting Standards Board (ASB) (correct)
  • To regulate the application of accounting standards in India

    • What is the primary consideration of the Accounting Standards Board (ASB) while framing Accounting Standards (ASs) in India?

  • To integrate International Accounting Standards with Indian laws (correct)
  • To ensure convergence with global accounting standards
  • To regulate the application of accounting standards in India
  • To provide guidance on revenue expenditure and capitalisation

    • What is the role of the Ministry of Corporate Affairs (MCA) in the standard-setting process?

    <p>To spell out the accounting standards applicable for companies in India</p> Signup and view all the answers

    What is the benefits of convergence of global accounting standards?

    <p>To facilitate comparability of financial statements across countries</p> Signup and view all the answers

    Study Notes

    Importance of Accounting Standards

    • Accounting Standards give a sense of faith and reliability to users
    • They make financial statements of different companies comparable, helping investors in decision-making
    • They prevent misleading accounting treatments and manipulation of data by management

    Need for Convergence of Accounting Standards

    • Indian companies' recent overseas acquisitions require adoption of high-quality standards to convince foreign enterprises about financial standing and governance
    • The Government of India decided to converge with IFRSs instead of adopting them
    • ICAI worked towards convergence of global accounting standards, considering IFRS application in Indian corporate environment

    Ind AS and Global Standards

    • Ind AS are issued by the Central Government of India under ICAI supervision and consultation with NFRA
    • NFRA recommends these standards to the MCA for application in Indian companies
    • Global Standards facilitate cross-border flow of money, global listing, and comparability of financial statements

    Benefits of Convergence

    • Convergence contributes to the free flow of global investment and achieves substantial benefits for all capital market stakeholders
    • It improves investors' ability to compare investments globally, lowering their risk of error
    • It facilitates accounting and reporting for companies with global operations, eliminating costly requirements like reinstatement of financial statements

    Standard-Setting Process

    • ICAI took the leadership role in constituting the Accounting Standards Board (ASB) in 1977
    • ASB considered IASs/IFRSs while framing Accounting Standards in India, integrating them with applicable laws and business environment
    • The standard-setting procedure includes identification of areas, constitution of study groups, and consultation with stakeholders

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    Related Documents

    Introduction to Accounting Standards PDF

    Description

    Learn about the importance of accounting standards and the need for convergence in financial reporting. Understand how standards enhance comparability and prevent misleading data.

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