St.

Joseph’s College of Commerce, Bangalore (Autonomous)

Module 1: Conceptual Framework

Introduction to Ind AS, IFRS, Challenges in implementation, Role of an accountant. Concepts –

Assets, Liabilities, Incomes, Expenditure and Equity for Sole proprietor, Partnership firm and
Company. Four Pillars of accounting and Accounting Equation. Applicability of Ind AS –
Voluntary adoption and Mandatory applicability – Phase I, II , III and IV - Ethical values –
Integrity, Objectivity, Professional competence and care, Confidentiality, Professional
behaviour.

Introduction to Indian Accounting Standards and IFRS:

Indian Accounting Standards (Ind AS) are the International Financial Reporting Standards (IFRS)
converged standards issued by the Central Government of India under the supervision and
control of Accounting Standard Board (ASB) of The Institute of Chartered Accountants of India
and in consultation with National Advisory Committee on Accounting Standard (NACAS).
National Advisory Committee on Accounting Standards (NACAS) recommends these standards
to the Ministry of Corporate Affairs (MCA). MCA has to spell out the accounting standards
applicable for companies in India.

Indian Accounting Standards (Ind AS) prescribe the basis for presentation of financial
statements to ensure comparability both with the entity’s financial statements of previous
periods and with the financial statements of other entities. They set out overall requirements
for the presentation of financial statements, guidelines for their structure and minimum
requirements for their content.

They set out the recognition, measurement, presentation and disclosure requirements for
specific transactions and events.

International Financial Reporting Standards (IFRS):

International Financial Reporting Standards (IFRS) are designed as a common global language
for business affairs so that company accounts are understandable and comparable across
international boundaries. They are a consequence of growing international shareholding and
trade and are particularly important for companies that have dealings in several countries. They
are progressively replacing the many different national accounting standards. They are the
rules to be followed by accountants to maintain books of accounts which are comparable,
understandable, reliable and relevant as per the users need, internal or external.

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International Financial Reporting Standards (IFRS) comprise the following: -

1. International Financial Reporting Standards (IFRS) issued by the International

Accounting Standard Board (IASB).
2. International Accounting Standards (IAS) issued by the IASC (International Accounting
Standard Committee).
3. Interpretations issued by the Standards Interpretations Committee (SIC) and
International Financial Interpretations Committee (IFRIC) of the IASB.

The need for convergence with Global Accounting and Financial Reporting Standards is due to
the following reasons:

The IND AS are basically standards that have been harmonised with the IFRS to make reporting
by Indian companies more globally acceptable. Since Indian companies have a far wider global
reach now as compared to earlier, the need to converge reporting standards with international
standards was felt, which has led to the introduction of IND AS.

1. To facilitate enterprises which decide to raise capital from markets other than the
country in which it is located, in translation and re-statement of Financial Statements.
2. To facilitate analysts and investors across the world, in comparing Financial Statements
based on harmonized accounting standards, which will ensure – a) uniformity b)
rationalization c) comparability d) transparency and e) adaptability.
3. To reduce operational challenges for Accounting Firms in translation and re-statement
of Financial Statements, and focus their value of expertise around a unified set of
standards.
4. To create a challenging opportunity for Standard Setters and Stakeholders to improve
the Financial Reporting Model.
5. To enable investors, compare their investments on a global basis, and lower risk of
errors of judgment.

Convergence with IFRSs - Benefits

1. The economy: As the markets expand globally the need for convergence increases. The
convergence benefits the economy by increasing growth of its international business. It
facilitates maintenance of orderly and efficient capital markets and also helps to
increase the capital formation and thereby economic growth. It encourages
international investing and thereby leads to more foreign capital flows to the country.
2. Investors: Investors want the information that is more relevant, reliable, timely and
comparable across the jurisdictions. Financial statements prepared using a common set
of accounting standards help investors better understand investment opportunities as

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opposed to financial statements prepared using a different set of national accounting

standards. For better understanding of financial statements, global investors have to
incur more cost in terms of the time and efforts to convert the financial statements so
that they can confidently compare opportunities. Convergence with IFRS contributes to
investors' understanding and confidence in high quality financial statements.
3. The industry: The industry is able to raise capital from foreign markets at lower cost if it
can create confidence in the minds of foreign investors that their financial statements
comply with globally accepted accounting standards. With the diversity in accounting
standards from country to country, enterprises which operate in different countries face
a multitude of accounting requirements prevailing in the countries. Convergence of
accounting standards simplifies the process of preparing the individual and group
financial statements and thereby reduces the costs of preparing the financial statements
using different sets of accounting standards.
4. The accounting professionals: Convergence with IFRS also benefits the accounting
professionals in a way that they are able to sell their services as experts in different
parts of the world. The thrust of the movement towards convergence has come mainly
from accountants in public practice. It offers them more opportunities in any part of the
world if same accounting practices prevail throughout the world. They are able to quote
IFRS to clients to give them backing for recommending certain ways of reporting.

India and IFRS:

India had two options regarding the adoption of IFRS i.e., either to adopt IFRS completely or
converge the existing Indian Accounting Standards to make them compatible with IFRS. It
decided to converge the existing accounting standards to IFRS. In India, the converged
accounting standards are called Ind- AS. The Government of India has issued notification
regarding Ind-AS.

The ICAI has explained convergence as “to design and maintain national accounting standards
in a way that financial statements prepared in accordance with national accounting standards
draw unreserved statement of compliance with IFRS”. It essentially means “adapting” rather
than “adopting” those standards as such.

Challenges in Implementation of Ind AS:

First time adoption of Ind As has its own challenges. One has to undergo the exercise for
making the opening Ind AS Balance Sheet on the date of transition. This is the starting point for
adoption of the Ind ASs. For this purpose, an entity should in its opening Ind AS Balance Sheet:

(a) recognise all assets and liabilities whose recognition is required by Ind ASs;

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(b) not recognise items as assets or liabilities if Ind ASs do not permit such recognition;
(c) reclassify items that it recognised in accordance with previous GAAP as one type of asset,
liability or component of equity, but are a different type of asset, liability or component of
equity in accordance with Ind ASs; and
(d) apply Ind ASs in measuring all recognised assets and liabilities.
(e) For making the opening Ind AS balance sheet, Ind AS grants exemptions in certain areas
where the cost of compliance may exceed the benefits. These options are optional and not
mandatory. Deciding on whether to opt for the options or not is another important
challenge.

Accountant: An accountant is a person who practices the art of accounting. He plays a very
important role in every organization. He is a person who with his education, training, analytical
mind and experience is best qualified to provide multiple need-based services to the ever-
growing society.

Role of an Accountant:

1. Maintenance of books of accounts.

2. Conducting Statutory Audit of Companies and other organizations as required by law.
3. Carrying out Internal Audit in Companies and other entities.
4. Handling taxation matters of a business or a person and representing that business or
person before the tax authorities and settle the tax liability under the prevailing statute.
5. Providing Management Accounting and Consultancy Services.
6. Providing Financial Advice with respect to investments, insurance, business expansion,
investigation, pension schemes, etc.
7. Providing other services like, Secretarial work, Share Registration Work, Company
Formation, Acting as Liquidators, etc.

Emerging Role of an accountant due to convergence with IFRS:

1. Acquisition of knowledge of global and local accounting standards.
2. Instrumental in selection of accounting policies appropriate to business.
3. Ability to exercise professional judgment required in doing business estimation.
4. Possession of knowledge of Information Technology tools.
5. Awareness of best accounting practices of similar companies.
6. Ability to understand the local and international business.
7. Possession of knowledge of new measurement basis and changes in accounting world.

Five Elements of Financial Statements: Asset, Liability, Equity, Income and Expense:
1. Asset • An Asset is a resource
• controlled by the entity

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• as a result of past events

• from which future economic benefits are expected to flow to the
entity.
2. Liability • A Liability is a present obligation (not a future commitment!)
• of the entity
• as a result of past events
• the settlement of which is expected to result in an outflow from the
entity of economic benefits.
3. Equity • Equity is the residual interest in the assets
• after deducting all liabilities.
4. Income • Income is an increase in economic benefits
• during the accounting period
• in the form of inflows or enhancements of assets or decreases in
liabilities
• resulting in increases in equity (other than contributions from equity
participants).
5. Expense • An Expense is a decrease in economic benefits
• during the accounting period
• in the form of outflows or depletions of assets or an increase in
liabilities
• resulting in decreases in equity (other than distributions to equity
participants).
Example 1: benefits earned over more than one period – expense or asset?

A machine is purchased for Rs. 4,000 in cash. The machine was delivered on the same day as
the payment was made. It is expected to be used over a 4-year period to make widgets that will
be sold profitably. At the end of the 4-year period, the asset will be scrapped.

Required: Discuss how the purchase of the machine should be recognised and measured. (The
definitions and recognition criteria are not required).

Solution to example 1: benefits earned over more than one period – expense or asset?

Definition:

• A machine is a resource since it can be used to make widgets.

• The machine has been delivered (and been paid for) and is thus controlled by the entity.

• An inflow of future economic benefits is expected through the sale of the widgets.

• The past event is the payment of the purchase price/ delivery of the machine. Since all
aspects of the definition of an asset are met, the item (the machine) is an asset to the entity.

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Recognition criteria:

• The cost is reliably measured: Rs. 4,000 already paid in full and final settlement.

• The inflow of future economic benefits is probable since there is no evidence that the widgets
will not be produced and sold.

Conclusion:

Since both recognition criteria are met, the asset should be recognised.

Entry to be passed:

Date Particulars L.F Debit Credit

Machine A/c Dr 4,000
To Cash A/c 4,000

If you were also asked to briefly prove that the initial acquisition did not involve an expense,
then you should provide the following discussion as well:

Since the entity’s assets simultaneously increased (through the addition of a machine) and
decreased (through the outflow of cash), there has been no effect on equity and therefore not
an expense.

Measurement:

The measurement on initial recognition is the invoice price (i.e. historical cost basis), but the
future asset balances in the statement of financial position must reflect the state of the asset.
As the machine’s life is used up in the manufacturing process, so the remaining future
economic benefits will decrease. Since this decrease in the asset’s value occurs with no
simultaneous increase in assets or decrease in liabilities, the equity of the business will be
decreased. The amount by which the asset’s value is reduced is therefore recognised as an
expense.

Entry for year 1,2,3 and 4 for accounting depreciation:

Date Particulars L.F Debit Credit

Depreciation A/c Dr
To Machine A/c

The portion of the asset’s value that is recognised as an expense each year is measured on a
systematic rational basis over the 4-year period:

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• If the widgets are expected to be manufactured and sold evenly over the 4-year period, then
Rs.1,000 should be expensed in each of these 4 years (Rs. 4,000 / 4 years).

• If 50% of the widgets are expected to be manufactured and sold in the first year, 30% in the
second year and 10% in each of the remaining years, then a more rational and systematic basis
of apportioning the expense over the 4 years would be as follows:

- Year 1: Rs. 4,000 x 50% = Rs. 2,000; Year 2: Rs. 4,000 x 30% = Rs. 1,200; Year 3: Rs. 4,000 x
10% = Rs. 400 : Year 4: Rs. 4,000 x 10% = Rs. 400.

Example 2: an inflow – income or liability?

A gym receives a lumpsum payment of Rs. 4,000 from a new member for the purchase of a 4-
year membership.

Required: Briefly discuss whether the lumpsum received should be recognised as income or a
liability. The definitions of both income and liability should be discussed (ignore recognition
criteria).

Solution to example 2: an inflow – income or liability?

Liability:

• The entity has an obligation to provide the member with gym facilities over the next 4 years

• The past event is the entity’s receipt of the Rs. 4,000.

• The obligation will result in an outflow of cash, for items such as salaries for the gym
instructors, electricity and rental of the gym facilities. Since all aspects of the liability definition
are met, the receipt represents a liability.

Income:

• The initial lumpsum represents an increase in cash (an increase in assets)

• There is, however, an increase in liabilities since the club is now expected to provide the
member with gym facilities for the next 4 years which effectively means that the gym has an
equal and opposite obligation (an increase in its liabilities).

• For there to be income, there must be an increase in equity: since the increase in the asset
equals the increase in the liability, there is no increase in equity (equity = assets – liabilities).
Since there is no increase in equity the receipt does not represent income yet.

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Conclusion: At the time of the receipt, the lumpsum is recognised as a liability and journalised
as follows:

Date Particulars L.F Debit Credit

Cash A/c Dr 4,000
To Income Received in Advance A/c 4,000

Had you not been asked to only discuss the initial lumpsum received, you could then have given
the following discussion as well:

As time progresses, the gym will discharge its obligation thus reducing the liability. The amount
by which the liability reduces is then released to income since it meets the definition of income:

For example, after each year of providing gym facilities there is an inflow of economic benefits
through the decrease in the liability: the obligation to provide 4 years of gym facilities, drops to
3 years, then 2 years, 1 more year and finally the obligation is reduced to zero. In this way, the
receipt is recognised as income on a systematic basis over the 4 years during which the entity
will incur the cost of providing these services (i.e. the income is effectively matched with the
expenses incurred over 4-years). In each of the 4 years during which the gym provides facilities
to the member, the following journal will be processed (after processing 4 of these journals,
there will be no balance on the liability account and the entire Rs. 4,000 received will have been
recognised as income).

Date Particulars L.F Debit Credit

Income Received in Advance A/c Dr 4,000
To Membership Fees A/c 4,000

Example 3: staff costs – an asset?

Companies often maintain that their staff members constitute their biggest asset. However, the
line-item ‘people’ is never seen under ‘assets’ in the statement of financial position.

Required: Explain why staff members are not recognised as assets in the statement of financial
position?

Solution to example 3: staff costs – an asset?

In order for ‘staff’ to appear in the statement of financial position as an asset, both the
following need to be satisfied: • the definition of an asset; and • the recognition criteria.

First consider whether a ‘staff member’ meets the definition of an ‘asset’.

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• Is the staff member a resource? A staff member is a resource – a company would not pay a
staff member a salary unless he/ she were regarded as a resource. In fact, employees are
generally referred to as ‘human resources’.

• Is he controlled by the entity? Whether or not the staff member is controlled by the entity is
highly questionable: it is considered that, despite the existence of an employment contract,
there would always be insufficient control due to the very nature of humans.

• Is the staff member a result of a past event? The signing of the employment contract could be
argued to be the past event.

• Are future economic benefits expected to flow to the entity as a result of the staff member? It
can be assumed that the entity would only employ persons who are expected to produce future
economic benefits for the company. In respect of the asset, the recognition criteria require that

• the flow of future economic benefits to the entity must be probable; AND

• the asset has a cost/value that can be reliably measured.

It is probable that future economic benefits will flow to the entity otherwise the entity would
not employ the staff.

The problem arises when one tries to reliably measure the cost/value of each staff member.
How would one value one staff member over another? Perhaps one could calculate the present
value of their future salaries, but there are two reasons why this is unacceptable. Consider the
following:

• Can you reliably measure the cost of a staff member? If one were to use future expected
salaries and other related costs, consider the number of variables that would need to be
estimated: the period that the staff member will remain in the employment of the entity, the
inflation rate over the expected employment period, the fluctuation of the currency, the future
performance of the staff member and related promotions and bonuses. You will surely then
agree that a reliable measure of their cost is really not possible.

• Since it is evident that we cannot reliably measure the cost of a staff member, can one
reliably measure their value in another way? The value of a staff member to an entity refers to
the value that he or she will bring to the entity in the future. It goes without saying that there
would be absolutely no way of assessing this value reliably!

Staff members may therefore not be recognised as assets in the statement of financial position
for two main reasons:

• there is insufficient control over humans; and

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• it is not possible to reliably measure their cost or value.

The four pillars of Accounting of IFRS:

The four pillars of Accounting of IFRS are the recognition, measurement, presentation and
disclosure of the elements of Financial Statements.

1. Recognition:
Recognition is the process of incorporating in the balance sheet or statement of profit and
loss an item that meets the definition of an element and satisfies the criteria for recognition
of that element.
An item that meets the definition of an element should be recognised if:
(a) it is probable that any future economic benefit associated with the item will flow to or
from the entity; and
(b) the item has a cost or value that can be measured with reliability.

Recognition ▪ The inflow of economic benefits to entity is probable.

criteria for an
Asset ▪ The cost/value can be measured reliably.
Recognition ▪ The outflow of resources embodying economic benefits (such as
criteria for a cash) from the entity is probable.
Liability
▪ The cost / value of the obligation can be measured reliably.
Recognition ▪ when an increase in future economic benefits related to an increase
criteria for in an asset or a decrease of a liability has arisen
Income
▪ the increase in an asset or the decrease in a liability can be
measured reliably.
(other than contributions from equity participants).
Recognition ▪ when a decrease in future economic benefits related to a decrease
criteria for in an asset or an increase of a liability has arisen
Expenses
▪ the decrease in an asset or the increase of a liability can be
measured reliably.
(other than distributions to equity participants).

2. Measurement:
Measurement is the process of determining the monetary amounts at which the elements
of the financial statements are to be recognized and carried in the balance sheet and

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statement of profit and loss. This involves the selection of the particular basis of
measurement.

A number of different measurement bases are employed to different degrees and in varying
combinations in financial statements. They include the following:

(a) Historical cost: Assets are recorded at the amount of cash or cash equivalents paid or
the fair value of the consideration given to acquire them at the time of their acquisition.
Liabilities are recorded at the amount of proceeds received in exchange for the
obligation, or in some circumstances (for example, income taxes), at the amounts of
cash or cash equivalents expected to be paid to satisfy the liability in the normal course
of business.

(b) Current cost: Assets are carried at the amount of cash or cash equivalents that would
have to be paid if the same or an equivalent asset was acquired currently. Liabilities are
carried at the undiscounted amount of cash or cash equivalents that would be required
to settle the obligation currently.

(c) Realisable (settlement) value: Assets are carried at the amount of cash or cash
equivalents that could currently be obtained by selling the asset in an orderly disposal.
Liabilities are carried at their settlement values; that is, the undiscounted amounts of
cash or cash equivalents expected to be paid to satisfy the liabilities in the normal
course of business.

(d) Present value: Assets are carried at the present discounted value of the future net cash
inflows that the item is expected to generate in the normal course of business.
Liabilities are carried at the present discounted value of the future net cash outflows
that are expected to be required to settle the liabilities in the normal course of
business.

(e) Fair value: Assets are carried at the amount at which they could be exchanged, or a
liability settled, between knowledgeable, willing parties in an arm’s length transaction. In
other words, Fair Value is the price that would be received to sell an asset or paid to
transfer a liability in an orderly transaction between market participants at the
measurement date.

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3. Presentation:

This prescribes the basis for presentation of general purpose financial statements to ensure
comparability both with the entity’s financial statements of previous years as well as the
financial statements of other entities.

4. Disclosure:

Disclosure requires certain information to be disclosed in the financial statements to enable the
users to understand the financial statements better, to evaluate the risks involved in the
business, etc.

Owner’s Equity:
Owner's equity represents the owner's investment in the business minus the
owner's withdrawals from the business plus the net income (or minus the net loss) since the
business began. Mathematically, the amount of owner's equity is the amount of assets minus
the amount of liabilities.

Owner’s equity, often called net assets, is the owners’ claim to company assets after all of the
liabilities have been paid off. In other words, if the business assets were liquidated to pay off
creditors, the excess money left over would be considered owner’s equity. That is why it is
often referred to as net assets. According to the accounting equation, owner’s equity equals
total company assets minus total company liabilities.

The Equity for a Sole Proprietor:

A sole proprietorship is a business owned by only one person. The equity section of a sole
proprietorship is rather simple. It consists of only one account called Capital.

The Equity for a Partnership Firm:

A partnership is a common form of business organization that consists of two or more people
who join together to operate a business and share in the profits and losses of the business in
agreed proportion.

A partnership type of business involves more than one owner. For instance, a partnership
business could consist of two, three, four, or ten owners. For each partner a capital account
and a current account (in case of fixed capital system) or only a capital account (in case of
fluctuating capital system) may be maintained by the firm depending upon the system of
maintaining accounts of partners. The summation of these accounts of all the partners and the
retained earnings if any is the Equity for a Partnership Firm.

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In other words, the total contributions of all the partners plus retained earnings are reflected
on a partnership’s Balance Sheet as Equity. Each partner has a separate capital account that
represents that partner's equity in the partnership.

The Equity for Company:

The Equity for a Company is the summation of Share Capital and the Retained Earnings. In
other words, it is the difference between total assets and liabilities.

Accounting Equation:

Every transaction has two-fold aspects – debit and credit. The system of recording both the
aspects in the books of accounts is called Double Entry System of Book-keeping.
The equation that is the foundation of double entry system of book-keeping is called
Accounting Equation. The accounting equation displays that all assets are either financed by
borrowing money or paying with the money of the owners. Thus, the accounting equation is:
Assets = Liabilities + Equity.

APPLICABILITY OF IND AS

The Ministry of Corporate Affairs (MCA), in 2015, had notified the Companies (Indian
Accounting Standards (IND AS)) Rules 2015, which stipulated the adoption and applicability of
IND AS in a phased manner beginning from the Accounting period 2016-17. The IND AS are
basically standards that have been harmonised with the IFRS to make reporting by Indian
companies more globally acceptable. Since Indian companies have a far wider global reach
now as compared to earlier, the need to converge reporting standards with international
standards was felt, which has led to the introduction of IND AS.

Dated 2 January 2015

The following is the summary of the roadmap.

Voluntary adoption

Companies can voluntarily adopt Ind AS for accounting periods beginning on or after 1 April
2015 with comparatives for period ending 31 March 2015 or thereafter. However, once they
have chosen this path, they cannot switch back.

Mandatory applicability

Phase I

Ind AS will be mandatorily applicable to the following companies for periods beginning on or
after 1 April 2016, with comparatives for the period ending 31 March 2016 or thereafter:

• Companies whose equity and/or debt securities are listed or are in the process of listing on any
stock exchange in India or outside India and having net worth of 500 crore INR or more.

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• Companies having net worth of 500 crore INR or more other than those covered above.
• Holding, subsidiary, joint venture or associate companies of companies covered above.

Phase II

Ind AS will be mandatorily applicable to the following companies for periods beginning on or
after 1 April 2017, with comparatives for the period ending 31 March 2017 or thereafter:

1. Companies whose equity and/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 of less than rupees 500 Crore.
2. Unlisted companies other than those covered in Phase I and Phase II whose net worth are more
than 250 crore INR but less than 500 crore INR.
3. Holding, subsidiary, joint venture or associate companies of above companies.

Phase III

Mandatory applicability of IND AS to all Banks, Non-banking Financial Companies (NBFCs), and
Insurance companies from 1st April 2018, whose:

• Net worth is more than or equal to INR 500 crore with effect from 1st April 2018.

IRDA (Insurance Regulatory and Development Authority) of India shall notify the separate set of
IND AS for Banks & Insurance Companies with effect from 1st April 2018. NBFCs include core
investment companies, stock brokers, venture capitalists, etc. Net Worth shall be checked for
the past 3 financial years (2015-16, 2016-17, and 2017-18)

Phase IV

All NBFCs whose Net worth is more than or equal to INR 250 crore but less than INR 500 crore
shall have IND AS mandatorily applicable to them with effect from 1st April 2019.

ETHICAL VALUES - Values which serve to distinguish between good and bad, right and wrong,
and moral and immoral are called Ethical Values. At a societal level, these values frequently
form a basis for what is permitted and what is prohibited.

In order to achieve the objectives of the Accountancy profession, professional accountants

have to observe a number of prerequisites or fundamental principles. The fundamental
principles are: -

Integrity: A professional accountant should be straightforward and honest in performing

professional services.

Objectivity: A professional accountant should be fair and should not allow prejudice or bias,
conflict of interest or influence of others to override objectivity.

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Professional Competence and Due Care: A professional accountant should perform

professional services with due care, competence and diligence and has a continuing duty to
maintain professional knowledge and skill at a level required to ensure that a client receives the
advantage of competent professional service based on up-to-date developments in practice,
legislation and techniques.

Confidentiality: A professional accountant should respect the confidentiality of information

acquired during the course of performing professional services and should not use or disclose
any such information without proper and specific authority or unless there is a legal or
professional right or duty to disclose.

Professional Behaviour: A professional accountant should act in a manner consistent with the
good reputation of the profession and refrain from any conduct which might bring discredit to
the profession. The obligation to refrain from any conduct which might bring discredit to the
profession requires IFAC member bodies to consider, when developing ethical requirements,
the responsibilities of a professional accountant to clients, third parties, other members of the
accountancy profession, staff, employers and the general public.

Technical Standards: A professional accountant should carry out professional services in

accordance with the relevant technical and professional standards. Professional accountants
have a duty to carry out with care and skill, the instructions of the client or employer in-so-far
as they are compatible with the requirements of integrity, objectivity and in the case of
professional accountants in public practice, independence. In addition they should confirm with
the technical and professional standards promulgated by :- - IFAC (e.g. International Standards
on Auditing); - International Accounting Standards Board; - The Member’s professional body or
other regulatory body; and - Relevant legislation.

Independence: When in public practice, an accountant should both be, and appear to be, free
of any interest which might be regarded, whatever its actual effect, as being incompatible with
integrity and objectivity.

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