1. Which of the following statements regarding "Ind AS" (Indian Accounting Standards) is CORRECT?
They apply only to manufacturing companies.
They are identical to US GAAP.
They are converged with IFRS (International Financial Reporting Standards) but not identical.
They are rules-based standards unlike IFRS which is principle-based.
Explanation:
Ind AS is "converged" with IFRS, meaning it is largely based on IFRS but contains certain "Carve-outs" (deviations) to suit Indian economic and legal conditions.
2. IFRS stands for:
Indian Fiscal Reporting System
International Fund Regulatory Standards
International Financial Reporting Standards
Indian Financial Rating System
Explanation:
IFRS are issued by the London-based International Accounting Standards Board (IASB) to provide a common global language for business affairs.
3. AS 2 (Valuation of Inventories) states that inventory should be valued at:
Cost Price.
Market Price.
Cost or Net Realizable Value (NRV), whichever is higher.
Cost or Net Realizable Value (NRV), whichever is lower.
Explanation:
This is based on the principle of conservatism (Prudence). You anticipate losses (if NRV < Cost) but do not anticipate gains.
4. Ind AS is mandatory for unlisted companies if their Net Worth is equal to or greater than:
?500 Crore
?50 Crore
?100 Crore
?250 Crore
Explanation:
Under Phase II of Ind AS implementation, unlisted companies with a net worth of ?250 crore or more are required to comply with Ind AS.
5. In India, Accounting Standards are formulated by:
Securities and Exchange Board of India (SEBI)
Institute of Chartered Accountants of India (ICAI)
Reserve Bank of India (RBI)
Ministry of Finance
Explanation:
The Accounting Standards Board (ASB) constituted by ICAI formulates Accounting Standards. Ind AS are notified by the Ministry of Corporate Affairs (MCA) based on ICAI recommendations.
6. AS 1 deals with:
Disclosure of Accounting Policies
Cash Flow Statements
Valuation of Inventories
Depreciation Accounting
Explanation:
AS 1 requires enterprises to disclose the significant accounting policies followed in preparing and presenting financial statements.
7. Ind AS 1 requires a complete set of financial statements to include a "Statement of Changes in Equity". This statement shows:
Changes in Market value of shares.
Changes in Fixed Assets.
Changes in the owner's equity over the period (Share capital, Reserves).
Changes in Cash Flow.
Explanation:
Unlike traditional Indian GAAP, Ind AS requires a separate statement detailing the movement in Equity (Share Capital + Other Equity like Reserves) during the year.
8. Ind AS 16 deals with:
Income Taxes
Employee Benefits
Leases
Property, Plant and Equipment (PPE)
Explanation:
Ind AS 16 prescribes the accounting treatment for Property, Plant and Equipment (Fixed Assets), including recognition, measurement, and depreciation.
9. GAAP stands for:
Government Audit and Accounts Procedures
General Asset Assessment Principles
Generally Accepted Accounting Principles
Global Accounting and Audit Policies
Explanation:
GAAP refers to a common set of accounting principles, standards, and procedures that companies must follow when compiling their financial statements.
10. Ind AS 109 deals with:
Leases
Financial Instruments
Consolidated Statements
Revenue Recognition
Explanation:
Ind AS 109 covers Financial Instruments: Recognition, Measurement, Impairment (ECL model), and Hedge Accounting.
11. Under Ind AS 7, Interest paid by a non-financial enterprise is classified as:
Financing Activity
Extraordinary Activity
Investing Activity
Operating Activity
Explanation:
Interest paid is a cost of obtaining finance. Hence, for non-financial firms, it is a Financing Activity. (For banks, it is Operating).
12. Are NBFCs required to follow Ind AS?
Yes, all NBFCs.
No, they follow IFRS.
No, they follow RBI norms only.
Yes, if their Net Worth is ?500 Cr or more (Phase I) or ?250 Cr or more (Phase II).
Explanation:
MCA mandated Ind AS for NBFCs in phases based on net worth, similar to corporates.
13. Under Ind AS 16, subsequent expenditure on an item of PPE is capitalized only if:
It increases the future economic benefits from the asset beyond its previously assessed standard of performance.
The amount is significant.
It is mandated by law.
It restores the asset to its original condition.
Explanation:
Repairs that only maintain the asset are revenue expenses. Only those that enhance capacity, efficiency, or life are capitalized.