Introduction to Accounting Standards – CA Inter Accounts Question Bank is designed strictly as per the latest syllabus and exam pattern.
Introduction to Accounting Standards – CA Inter Accounts Question Bank
Question 1.
What are the issues, with which Accounting Standards deal? (May 2013, 4 marks)
OR
What are Accounting Standards? Explain the issues, with which they deal. (Nov 2017, 5 marks) [IPCC Gr. I]
Answer:
Accounting Standards
Accounting Standards (AS) are written policy documents issued by an Expert Accounting Body or by Government or by other Regulatory Body.
Issues with which Accounting Standards deal are:
- Recognition: Accounting Standards should recognise the transactions and events in the financial statement.
- Measurement: Accounting standards measure these transactions and events.
- Presentation: Presentation of these transactions and events in financial statements, in a meaningful and understandable manner.
- Disclosure: Requires disclosure in financial statements.
Question 2.
Accounting standards are formulated in conformity with the provisions of the applicable laws, customs, usages and business environment of a country.” Comment. (June 2008, 5 marks) [CS Inter -1]
Answer:
Accounting Standards (AS) are written policy documents issued by an Expert Accounting Body or by Government or by other Regulatory Body.
Every effort is made to issue accounting standards which are in conformity with the provisions of the applicable laws, customs, usages and business environment of our nation.
However, if due to subsequent amendments in the law, a particular accounting standard is found to be not in conformity with such law, the provision of the said law will prevail and the financial statements should be prepared in conformity with such law.
The accounting standards by their very nature cannot and do not override the local regulations which govern the preparation and presentation of financial statements in our country.
However, the Institute of Chartered Accountants of India will determine the disclosure requirements to be made in the financial statements and auditor’s reports. Such disclosure may be by way of appropriate notes explaining the treatment of particular items. Such explanatory notes will only be in the nature of clarification and therefore, need not be treated as adverse comments on the related financial statements.
Question 3.
Explain the convergence of Indian Accounting Standards (IAS) with International Financial Reporting Standards (IFRS). (June 2015, 3 marks) [CS Exe – II]
Answer:
Companies which are not required to follow Ind AS shall continue to comply with Accounting Standards (‘AS’) as prescribed in Companies (Accounting Standards) Rules, 2006.
Highlights of the notified Companies (Indian Accounting Standard) Rules, 2015 is provided below:
Applicability of Ind AS:
The Companies and their Auditors shall comply with the Ind AS specified in the Annexure to the Rules in preparation of their Financial Statements (FS) and Audit respectively, in the following manner;
1. Voluntary adoption (for FY 2015-16):
Any company may comply with the Ind AS for Financial Statements for accounting periods beginning on or after 1st April 2015, with the comparatives for the periods ending on 31st March 2015, or thereafter. This option is also available to companies whose securities are listed or are in the process of being listed on Small and Medium Enterprises (‘SME’) exchange.
2. Mandatory adoption:
(i) From FY 2016-17: Companies satisfying following criteria are required to comply with the Ind AS for or the accounting periods beginning on or after 1st April 2016, with the comparatives for the periods ending on 31st March 2016, or thereafter.
(a) Companies whose Equity or Debt Securities are listed or are in the process of being listed on any stock exchange in India or outside India and having Net Worth (NW) of ₹ 500 crore or more.
(b) Unlisted Companies (i.e. other than those mentioned in (a) above) having NW of ₹ 500 crore or more.
(c) Holding, Subsidiary, Joint Venture/Associate Companies of Companies covered in (a) and (b) above.
(ii) From FY 2017-18: Companies satisfying following criteria are required to comply with the Ind AS for the accounting periods beginning on or after 1st April 2017, with the comparatives for the periods ending on 31st March 2017, or thereafter:
(a) Companies whose Equity or Debt Securities are listed or are in the process of being listed on any stock exchange in India or outside India and having NW of less than ₹ 500 crore.
(b) Unlisted Companies having NW of ₹ 250 crore or more but less than ₹ 500 crore.
(c) Holding, Subsidiary, Joint Venture/Associate Companies of Companies covered in (a) and (b) above.
Ind AS once required to be complied within accordance with these rules, shall apply to both standalone financial statements (SFS) and consolidated financial statements (CFS).
Question 4.
Write short note on the Objectives of international accounting standards. (Dec 2008, 3 marks) [CS Exe -1]
Answer:
Objectives of International Accounting Standards
1. To formulate and publish International Accounting Standards
The IAS issues financial accounting standards on specific problems concerning elementary as well as sophisticated accounting issues.
2. To promote their worldwide acceptance and observation
The IASC has no inherent authority to do this and instead relies on its members organisations, who have pledged to use their best efforts to have the standard adopted by their national authoritative standards setting bodies.
Question 5.
Write short note on the Non-acceptability of International Accounting Standards. (June 2010, 3 marks) [CS Exe -1]
Answer:
Non acceptability of International Accounting Standard :
Accounting practices in different countries are different due to there different legislative requirement, social and economic condition, long standing practices, tax structure and organized professional accounting. Whenever multinational company have different way of working than national company, and of due to this. Worldwide contradiction of views have been noticed in the national standard setting bodies and international bodies. There is a glaring diversity in accounting practices in different countries which require harmonization for evolving uniform accounting standard for world wide application.
The above discussed factors are the basic reason for non-acceptability of International Accounting Standard throughout the world.
Question 6.
State the objectives of the Accounting Standards Board. (Dec 2013, 3 marks) [CS Exe – I]
Answer:
Objectives of the Accounting Standards Board
- To conceive and suggest areas in which Accounting Standards need to be developed.
- To formulate Accounting Standards with a view to assisting the council of the ICAI in evolving and establishing Accounting Standards in India.
- To examine how far the relevant International Accounting Standards/ International Financial Reporting Standard can be adapted while formulating the AS and to adapt the same.
- To review, at regular intervals the Accounting Standards from the point of view of acceptance or changed conditions and if necessary revise the same.
- To provide from time to time interpretations and guidance on Accounting Standards.
- To carry out such other functions relating to Accounting Standards.