It's clear after studying guidance note on revised schedule VI that if there is conflict between AS and Revised Schedule VI , the AS will override the latter .
But if there is conflict between AS and any legal law , which will override ?
25 May 2013
Generally Law overrides the Standards notified under it. In Revised Sch. VI, AS is specifically granted overriding effect. But same permission is not granted to other laws so it is clear that AS will not override other laws.
21 July 2024
In the context of financial reporting in India, the hierarchy of authority for accounting standards (AS), including the conflict resolution between AS and legal laws, is generally understood as follows:
1. **Companies Act, 2013 (or any relevant legislation):** The Companies Act, 2013, and other relevant laws take precedence over Accounting Standards (AS) issued by the Institute of Chartered Accountants of India (ICAI). This means that if there is a conflict between an AS and a specific provision of the Companies Act or any other law, the provision of the law will override the AS.
2. **Accounting Standards (AS):** AS issued by the ICAI provide guidelines for the preparation and presentation of financial statements. They are generally based on principles and are meant to ensure consistency and comparability across financial statements. However, if there is no specific provision in the Companies Act or other applicable laws governing a particular accounting treatment, AS are followed.
**Example:**
Let's consider an example involving the recognition of revenue:
- **AS-9 (Revenue Recognition):** AS-9 provides guidelines on when revenue should be recognized, generally based on the principle of accrual. It lays down criteria such as when goods are delivered or services rendered, and when there is reasonable certainty of recovery of the consideration.
- **Companies Act Requirement:** Suppose the Companies Act, 2013, specifies that revenue from a particular type of transaction must be recognized only upon receipt of cash, regardless of whether goods have been delivered or services rendered.
In this scenario: - If AS-9 allows recognition of revenue based on delivery or service completion but the Companies Act requires cash receipt, the provision of the Companies Act will override AS-9. - The company would need to follow the specific revenue recognition requirement of the Companies Act, even though it may conflict with AS-9.
**Conclusion:**
To summarize, while Accounting Standards provide general guidelines for financial reporting, specific provisions in the Companies Act or other applicable laws take precedence over AS in case of conflict. Therefore, companies must adhere to legal requirements first and foremost, ensuring compliance with statutory provisions before applying AS guidelines. This hierarchy ensures that financial reporting is not only consistent but also legally compliant with the prevailing regulatory framework.
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