Podcast
Questions and Answers
Which body initially formulates accounting standards in India, before they are examined and potentially modified by the NFRA?
Which body initially formulates accounting standards in India, before they are examined and potentially modified by the NFRA?
- Ministry of Corporate Affairs (MCA)
- Securities and Exchange Board of India (SEBI)
- Reserve Bank of India (RBI)
- Institute of Chartered Accountants of India (ICAI) (correct)
What is the primary role of the National Financial Reporting Authority (NFRA) concerning accounting standards in India?
What is the primary role of the National Financial Reporting Authority (NFRA) concerning accounting standards in India?
- To examine, potentially modify, and then notify the accounting standards formulated by ICAI (correct)
- To conduct audits of companies to ensure compliance with tax laws
- To directly issue and implement accounting standards without any prior recommendation
- To only provide suggestions for improvement of accounting practices to companies
Which of the following is NOT a stated objective of implementing accounting standards?
Which of the following is NOT a stated objective of implementing accounting standards?
- To ensure reliability of financial statements
- To enhance comparability of financial statements across different entities
- To eliminate variations in accounting practices
- To minimize the cost of preparing financial statements (correct)
Which Ind AS deals specifically with the guidelines for the structure and minimum content requirements for the presentation of financial statements?
Which Ind AS deals specifically with the guidelines for the structure and minimum content requirements for the presentation of financial statements?
A company is determining the cost of its inventory for the financial year. Which Indian Accounting Standard (Ind AS) provides guidance on the accounting treatment for inventories?
A company is determining the cost of its inventory for the financial year. Which Indian Accounting Standard (Ind AS) provides guidance on the accounting treatment for inventories?
Which Ind AS requires companies to classify cash flows into operating, investing, and financing activities within the statement of cash flows?
Which Ind AS requires companies to classify cash flows into operating, investing, and financing activities within the statement of cash flows?
A company discovers a significant error in its prior period financial statements. According to accounting standards, which Ind AS provides guidance on the accounting treatment and disclosure of such errors?
A company discovers a significant error in its prior period financial statements. According to accounting standards, which Ind AS provides guidance on the accounting treatment and disclosure of such errors?
An entity needs to determine whether to adjust its financial statements for events that occurred after the reporting period. Which Ind AS provides guidance on this?
An entity needs to determine whether to adjust its financial statements for events that occurred after the reporting period. Which Ind AS provides guidance on this?
Which Indian Accounting Standard (Ind AS) specifically addresses the accounting treatment for borrowing costs?
Which Indian Accounting Standard (Ind AS) specifically addresses the accounting treatment for borrowing costs?
Which of the following scenarios would necessitate disclosures under Ind AS 24, Related Party Disclosures?
Which of the following scenarios would necessitate disclosures under Ind AS 24, Related Party Disclosures?
Under which Ind AS would a company find guidance on how to account for investments in entities over which it has significant influence, but not control?
Under which Ind AS would a company find guidance on how to account for investments in entities over which it has significant influence, but not control?
A company operates in a country experiencing hyperinflation. Which Ind AS provides guidance on how to restate its financial statements?
A company operates in a country experiencing hyperinflation. Which Ind AS provides guidance on how to restate its financial statements?
When should an entity apply Ind AS 36, Impairment of Assets?
When should an entity apply Ind AS 36, Impairment of Assets?
Which Ind AS provides guidance on the appropriate accounting and disclosure for provisions, contingent liabilities, and contingent assets?
Which Ind AS provides guidance on the appropriate accounting and disclosure for provisions, contingent liabilities, and contingent assets?
A company that previously used IFRS decides to adopt Ind AS for the first time. Which standard provides guidance on the procedures this company must follow?
A company that previously used IFRS decides to adopt Ind AS for the first time. Which standard provides guidance on the procedures this company must follow?
A company grants its employees share options as part of their compensation package. Which Indian Accounting Standard (Ind AS) addresses the accounting for these transactions?
A company grants its employees share options as part of their compensation package. Which Indian Accounting Standard (Ind AS) addresses the accounting for these transactions?
Company A acquires Company B. Which Ind AS provides guidance on how to account for this business combination?
Company A acquires Company B. Which Ind AS provides guidance on how to account for this business combination?
In which scenario would Ind AS 105, Non-current Assets Held for Sale and Discontinued Operations be most applicable?
In which scenario would Ind AS 105, Non-current Assets Held for Sale and Discontinued Operations be most applicable?
Which standard contains principles for reporting useful information to financial statement users about the nature, amount, timing, and uncertainty of revenue from a contract with a customer?
Which standard contains principles for reporting useful information to financial statement users about the nature, amount, timing, and uncertainty of revenue from a contract with a customer?
Which of the following is a benefit of adhering to accounting standards?
Which of the following is a benefit of adhering to accounting standards?
Flashcards
Accounting Standards
Accounting Standards
Rules and guidelines for preparing and presenting financial statements, ensuring transparency, consistency, and comparability.
ICAI's Role
ICAI's Role
An entity that recommends Accounting Standards to the NFRA.
NFRA's Role
NFRA's Role
An entity that examines and modifies accounting standards before notifying them under the Companies Act, 2013.
Objectives of Accounting Standards
Objectives of Accounting Standards
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Ind AS 1
Ind AS 1
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Ind AS 2
Ind AS 2
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Ind AS 7
Ind AS 7
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Ind AS 8
Ind AS 8
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Ind AS 10
Ind AS 10
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Ind AS 12
Ind AS 12
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Enforcement of Accounting Standards
Enforcement of Accounting Standards
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Benefits of Adhering to Accounting Standards
Benefits of Adhering to Accounting Standards
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Ind AS 101
Ind AS 101
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Ind AS 109
Ind AS 109
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Ind AS 116
Ind AS 116
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Study Notes
- Accounting standards in India are a set of rules and guidelines that govern the preparation and presentation of financial statements to ensure transparency, consistency, and comparability
- These standards are issued by the Institute of Chartered Accountants of India (ICAI)
- The ICAI formulates Accounting Standards which are then recommended to the National Financial Reporting Authority (NFRA)
- The NFRA examines and may modify these accounting standards before notifying them under the Companies Act, 2013
Objectives of Accounting Standards
- Standardizing accounting practices
- Eliminate variations in accounting practices
- Ensuring reliability of financial statements
- Provide a credible and reliable view of the financial state of an entity
- Enhancing comparability
- Enable comparison of financial statements across different entities
- Promoting understandability
- Easier to understand for the users
Key Accounting Standards in India
- Indian Accounting Standard (Ind AS) 1: Presentation of Financial Statements
- Lays down overall requirements for the presentation of financial statements, guidelines for their structure and minimum requirements for their content
- Ind AS 2: Inventories
- Prescribes the accounting treatment for inventories, including the determination of cost and its subsequent recognition as an expense
- Ind AS 7: Statement of Cash Flows
- Requires the presentation of a statement of cash flows that classifies cash flows during the period by operating, investing and financing activities
- Ind AS 8: Accounting Policies, Changes in Accounting Estimates and Errors
- Establishes criteria for selecting and changing accounting policies, together with the accounting treatment and disclosure of changes in accounting policies, changes in accounting estimates and corrections of errors
- Ind AS 10: Events After the Reporting Period
- Prescribes when an entity should adjust its financial statements for events after the reporting period
- Ind AS 12: Income Taxes
- Prescribes the accounting treatment for income taxes
- Ind AS 16: Property, Plant and Equipment
- Prescribes the accounting treatment for property, plant and equipment
- Ind AS 19: Employee Benefits
- Prescribes the accounting for employee benefits, including short-term benefits, post-employment benefits, other long-term benefits and termination benefits
- Ind AS 20: Accounting for Government Grants and Disclosure of Government Assistance
- Prescribes the accounting for, and disclosure of, government grants and disclosure of other forms of government assistance
- Ind AS 21: The Effects of Changes in Foreign Exchange Rates
- Prescribes how to include foreign currency transactions and foreign operations in the financial statements of an entity and how to translate financial statements into a presentation currency
- Ind AS 23: Borrowing Costs
- Prescribes the accounting treatment for borrowing costs
- Ind AS 24: Related Party Disclosures
- Ensures that an entity’s financial statements contain the disclosures necessary to draw attention to the possibility that its financial position and profit or loss may have been affected by the existence of related parties and by transactions and outstanding balances with such parties
- Ind AS 27: Separate Financial Statements
- Prescribes the accounting and disclosure requirements for investments in subsidiaries, joint ventures and associates when an entity prepares separate financial statements
- Ind AS 28: Investments in Associates and Joint Ventures
- Prescribes the accounting for investments in associates and joint ventures
- Ind AS 29: Financial Reporting in Hyperinflationary Economies
- Prescribes restatement procedures for entities reporting in the currency of a hyperinflationary economy
- Ind AS 32: Financial Instruments: Presentation
- Establishes principles for presenting financial instruments as liabilities or equity and for offsetting financial assets and financial liabilities
- Ind AS 33: Earnings Per Share
- Prescribes principles for determining and presenting earnings per share (EPS) information
- Ind AS 34: Interim Financial Reporting
- Prescribes the minimum content of an interim financial report and prescribes the principles for recognition and measurement in complete or condensed financial statements for an interim period
- Ind AS 36: Impairment of Assets
- Prescribes the procedures that an entity applies to ensure that its assets are carried at no more than their recoverable amount
- Ind AS 37: Provisions, Contingent Liabilities and Contingent Assets
- Prescribes the accounting for and disclosure of provisions, contingent liabilities and contingent assets
- Ind AS 38: Intangible Assets
- Prescribes the accounting treatment for intangible assets
- Ind AS 40: Investment Property
- Prescribes the accounting treatment for investment property and related disclosure requirements
- Ind AS 41: Agriculture
- Prescribes the accounting treatment, financial statement presentation, and disclosures related to agriculture
- Ind AS 101: First-time Adoption of Indian Accounting Standards
- Specifies the procedures that an entity must follow when it adopts Ind ASs for the first time as the basis for preparing its general purpose financial statements
- Ind AS 102: Share-based Payment
- Prescribes the accounting for share-based payment transactions
- Ind AS 103: Business Combinations
- Prescribes the accounting for business combinations
- Ind AS 104: Insurance Contracts
- Specifies the financial reporting for insurance contracts
- Ind AS 105: Non-current Assets Held for Sale and Discontinued Operations
- Specifies the accounting for non-current assets held for sale and the presentation and disclosure of discontinued operations
- Ind AS 106: Exploration for and Evaluation of Mineral Resources
- Specifies the financial reporting for the exploration for and evaluation of mineral resources
- Ind AS 107: Financial Instruments: Disclosures
- Requires entities to provide disclosures in their financial statements that enable users to evaluate the significance of financial instruments
- Ind AS 108: Operating Segments
- Requires an entity to disclose information to enable users of its financial statements to evaluate the nature and financial effects of the operating segments
- Ind AS 109: Financial Instruments
- Establishes principles for the financial reporting of financial assets and financial liabilities
- Ind AS 110: Consolidated Financial Statements
- Establishes principles for the presentation and preparation of consolidated financial statements when an entity controls one or more other entities
- Ind AS 111: Joint Arrangements
- Establishes principles for financial reporting by entities that have an interest in arrangements that are controlled jointly
- Ind AS 112: Disclosure of Interests in Other Entities
- Requires an entity to disclose information that enables users of financial statements to evaluate the nature of, and risks associated with, its interests in other entities
- Ind AS 113: Fair Value Measurement
- Defines fair value, sets out in a single Ind AS a framework for measuring fair value and requires disclosures about fair value measurements
- Ind AS 114: Regulatory Deferral Accounts
- Specifies the financial reporting requirements for regulatory deferral account balances that arise when an entity provides goods or services to customers at a price or rate that is subject to rate regulation
- Ind AS 115: Revenue from Contracts with Customers
- Establishes the principles that an entity shall apply to report useful information to users of financial statements about the nature, amount, timing, and uncertainty of revenue from a contract with a customer
- Ind AS 116: Leases
- Sets out the principles for the recognition, measurement, presentation and disclosure of leases
- Ind AS 117: Insurance Contracts
- Specifies the financial reporting for insurance contracts
Applicability of Accounting Standards
- Accounting standards are applicable to various types of entities, including companies, partnerships, and other organizations
- The applicability depends on the size, nature, and complexity of the entity
- Certain exemptions and relaxations are available for small and medium-sized enterprises (SMEs)
Enforcement
- The NFRA oversees the enforcement of accounting standards
- It has the power to investigate non-compliance and take necessary actions
- ICAI also plays a role in monitoring and promoting compliance with accounting standards
Benefits of Adhering to Accounting Standards
- Enhances the credibility of financial statements
- Facilitates comparability of financial performance
- Improves investor confidence
- Ensures better corporate governance
- Promotes transparency and accountability
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