EITHER In view of the increasing inflow of foreign capital and the resultant complexities in financial instruments and transactions, critically…

Either The increasing inflow of foreign capital and the resulting complexities in financial transactions necessitated the introduction of Indian Accounting Standards (Ind AS) to replace the earlier Accounting Standards (AS) due to the following reasons: 1. Complex Financial Instruments: AS lacks explicit guidance on accounting for complex capital-raising instruments such as optionally or compulsorily convertible shares and debentures, leading to inconsistent treatment across entities. 2. Derivative Instruments and Embedded Features: The proliferation of derivative instruments embedded in foreign currency bonds, equity instruments and commodity derivatives require comprehensive accounting principles which are inadequately addressed under AS. 3. Group Restructuring and Business Combinations: Activities such as mergers, acquisitions, demergers and slump sales are increasingly common but lack a uniform accounting framework, creating discrepancies in recognition and measurement. 4. Emerging Business Models and Revenue Arrangements: The rise of innovative digital economy business models introduce complex revenue recognition issues that are not explicitly covered in AS, leading to divergent practices. 5. Stock-based Compensation: Diverse and innovative remuneration models, especially for senior management and executives, demand detailed standards which AS do not comprehensively provide. 6. Complex Tax Provisions: The determination of current and deferred tax was complicated by changing tax laws and business structures, requiring enhanced guidance beyond the limited scope of AS. 7. Shareholder Returns and Investments in Kind: Varied modes of providing returns to shareholders and investments during group reorganizations lacked clear accounting principles under AS. 8. Need for Enhanced Disclosures: The limited disclosure requirements under AS in areas such as revenue, related party transactions, segment reporting and business combinations were insufficient for providing investors with a complete understanding of business risks and performance. 9. Alignment with Global Standards: To attract foreign investment and ensure comparability with international financial reporting, adoption of Ind AS aligned with IFRS became essential. Ind AS was introduced to address the above complexities and to provide a comprehensive, consistent and transparent accounting framework that improves the quality of financial reporting and enables investors to make informed decisions. Or Following are the some of the key relevant provisions of the Companies Act 2013, which gives reference to Ind AS: 1. Section 2 (2) states that accounting standards means the standards of accounting or any addendum thereto for companies or class of companies referred to in Section 133. 2. Section 133 states the Central Government may prescribe the standards of accounting or any addendum thereto, as recommended by the Institute of Chartered Accountants of India, in consultation with and after examination of the recommendations made by the National Financial Reporting Authority. Under the power given to the Central Government under section 133, it notified the Companies (Indian Accounting Standards) Rules, 2015. 3. Section 129 suggests the financial statements shall give a true and fair view of the state of affairs of the company or companies, comply with the accounting standards notified under section 133 and shall be in the form or forms as may be provided for different class or classes of companies in Schedule III. 4. Section 134 (5) (a), a statement that the applicable accounting standards had been followed with proper explanation relating to material departures shall be given in the Director Responsibility Statement to be issued under section 134 (3) (c) in the Director's report to be published in Annual General Meeting. 5. Section 143, auditor has to opine whether the financial statements comply with the accounting standards.