This makes it interesting to note that the new Companies Bill, apart from specifically stating that Accounting Standards are mandatory (proposed section 117(1)), also provides for them being incorporated in the Act itself. The relevant provision is proposed section 119, which states,
The Central Government may, after consultation with the Advisory Committee, by notification, lay down accounting standards for adoption by companies or class of companies.
This is a departure from the current scheme where the Standards are only recognised under the Act. Their incorporation into the Act would help to resolve issues of conflicts between the Act and the Standards, and also enable timely alterations to the Act through rules in the case of new Accounting Standards.
Given the International Finance Reporting Standards that will be effective in April 2011, and the current debate over the duties and liability of auditors, this proposal seems one of great interest, and significant implications. Another discussion on the same is available here.