Accounting Standard : 1

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Accounting Standard 1

• Disclosure of Accounting Policies

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Accounting Policy Accounting policy refer to the
specific accounting principles and the method of
applying those principle adopted by the
enterprises in the preparation and presentation
of financial statements.
3
Accounting policy adopted by the enterprises may
vary between enterprises to enterprises. Some
areas are illustrated as follows
Treatment of goodwill, Retirement
benefits, exp. during construction,
Contingent liabilities, Valuation of
inventories, investment, fixed assets,
Method of deprecation, Conversion of
foreign currency item,etc.
4
There are certain fundamental accounting
assumption underline the preparation and
presentation of financial statement (a)
Going Concern The enterprises is normally viewed
as going concern i.e. as continuing in operation
for the foreseeable future. It is assumed that
the enterprises has neither the intention nor the
necessity of liquidation or of curtailing
materially the scale of the operations.
(b) Consistency It is assumed that accounting
policy are consistent from one period to another
period. (c) Accrual Revenue and cost
are accrued i.e. recognized as they are earned or
incurred and recorded in the financial statement
of the period to which they relate.
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In the selection of accounting policies, the
following need to be considered (i)
Prudence Provide for all probable losses but do
not recognize unrealized profit. (ii)
Substance Over Form The accounting treatment and
presentation in the financial statement of
transaction and events should be governed by
their substance and not merely by the legal
form. (iii) Materiality Financial
statement should disclose all material items i.e.
items the knowledge of which might influence the
decision of the user of financial statements.
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Disclosure of Accounting Policies

• The disclosure should form part of the financial
  statement and normally at one place.
• Material effect due to changes in accounting
  policy should be disclosed.
• Disclosure of accounting policies or of changes
  their in cannot remedy a wrong or inappropriate
  treatment.
• If any fundamental accounting assumption does not
  followed, the fact should be disclosed.