AS-1 : DISCLOSURE OF ACCOUNTING POLICIES
Meaning:
Accounting Policies refer to
- Specific Accounting Principal
- And Method of Applying those Principal
- In Preparation & presentation of Financial Statement.
Ø REASON FOR SUCH POLICIES :
1) Better comparison between different Financial Enterprises.
2) Comparison over the years.
3) Different accounting policies affects enterprises
VARIOUS ACCOUNTING POLICIES
1) valuation of inventories
2) valuation of Investment
3) Treatment of goodwill
4) Retirement Benefits
5) Contingent liabilities
ABOVE LIST ARE EXHAUSTIVE
PRINCIPLES FOR SELECTING ACCOUNTING POLICIES
A) Prudence: Provision for all kinds of loss to be made BUT NOT OF PROFIT.
B) Materiality: Disclosing all materials items i.e. ITEMS THAT MIGHT INFLUENCE THE DECISION OF ANY ONE i.e. Shareholers’, Creditors etc.
C) Substance Over Form: The Accounting treatment & Presentation in financial statement of transaction & events should be governed by their substance & not BY LEGAL FORM
Eg: FINANCIAL LEASE
WHAT ARE ACCOUNTING POLICIES DISCLOSURES?
Ø All Accounting policies adopted in PREPARATION & PRESENTATION of Financial statement should be disclosed.
Ø All significant accounting policies should be DISCLOSED AT ONE PLACE
Ø Accounting policies should be disclosed as first note to financial statement as THIS FORMS BASIS OF PREPARATION FOR SUCH STATEMENT.
CHANGE IN ACCOUNTING POLICIES
When to Adopt
- Required by Law or Statute
- Required by any AS
- Will give better preparation & presentation of accounting statement
REQUIREMENT WHEN ENETRPRISES CHANGES ITS POLICIES
Ø Shall disclose all material facts/effects in current year &
Ø If such change affects the future years then future effects too.
WHEN CHANGES NOT AMOUNTS TO CHANGE IN ACCOUNTING POLICIES
Ø Adoption of accounting policies for events or transaction that differ in substance form previously occurring events or transaction.
Ø Adoption of New accounting policy for events or transactions which doesn’t occur previously or that was not material.
Eg: Change in valuation of Inventory Method is not change in polices, if previously followed method, inventory was insignificant in overall context of enterprises
FUNDAMENTAL ACCOUNTING ASSUMPTION
Their acceptance is underlie thus no disclosure is required if followed but if not than DISCLOSURE IS NECESSARY
| GOING CONCERN | CONSISTENCY | ACCURAL |
| Assumed that Business will Continue for FORSEEABLE FUTURE | Assumed that POLICES ARE SAME IN YEAR TO YEAR | Assumed that REVENUE & COST ARE accounted as when THEY ARE EARNED OR INCCURED not necessary in CASH. |
OTHERS:
CAN DIFFERENT ACCOUNTING POLICES CAN BE APPLY FOR SIMILAR ITEMS ?
YES
After taking into Consideration type & nature of items
Shared BY PAPPU MISHRA
CA FINAL STUDENT
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