Question

Accounting standard-setters use the following process in establishing accounting standards:

1. Research, exposure draft, discussion paper, standard.
2. Discussion paper, research, exposure draft, standard.
3. Research, preliminary views, discussion paper, standard.
4. Research, discussion paper, exposure draft, standard.

Short answer

According to the accounting standard-setting process, the options (b), (c), and (d) are incorrect answers.

Thus, the correct option is (a).

Step-by-step solution

Explanation of Standard-Setting

The process of introducing a new standard to the standard board is known as the standard-setting. The setters need to do a thorough study of the consequences of the standard before starting it.

Accounting Standard Setting Process:

The accounting Standard-setting process is as follows:

• Research: The research is done regarding identifying broad areas by the accounting standard board for the formulation of accounting standards.
• ExposureDraft: After identifying the areas for the formulation of standards, preparation of the draft of the proposed accounting standard is done. It mostly contains the objectives, scope, definition, recognition, etc.
• DiscussionPaper: After the draft is prepared, it is further circulated among ICAI, MCA, SEBI, CBDT, C&AG, public, etc., for obtaining their views on the proposed accounting standard.
• Standard: After receiving the views from different bodies, modifications, if any, are made to the preliminary draft or else sent for approval, and a standard, is issued.