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Accounting Standard 1-Disclosure of Accounting Policies


January 27, 2015

Accounting Standard 1, Disclosure of accounting policies

Accounting standard 1 deals with Significant accounting policies which are followed in preparation and
presentation of financial statements
Accounting Policies are Principles and methods of applying these principles which are in presentation of financial
statements
The True and Fairness of the view presented by financial statements largely depends on the Accounting policies
followed by the enterprise . There is no one set of accounting policies followed by enterprises .

The accounting policies followed organizations differ from one to another and some of the policies following areas
Method of valuation of Inventories
Method of depreciation
Treatment of goodwill
Valuation of Investments
Treatment of contingent Liabilities
Valuation of Fixed assets
In Order to make the financial statements useful to its readers , companies follow practice of disclosing the
accounting standards . The Nature and Extent of Disclosure varies between corporate and non corporate players
and between organizations within the same industry
The Purpose of the standard is to promote better understanding of financial statements by laying out disclosure
requirements for accounting policies in financial statements.
1. The Primary consideration in Selection of accounting policies is that , the financial statements prepared on
basis of such accountiing policies should present true and fair view of affairs of enterprise as of balancesheet
date
2. Major considerations in selection of accounting policies should be
1. Prudence In view of uncertainiity attached to the future , Profits are not anticipated , but recognised
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3.
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only when realised. Provision is made for all known Liabilities and Losses even though the amount
cannot be determined with certainity and the amount so determined is only best estimate available.
2. Substance over form The accounting treatment suggested in financial statements for transactions
should be governed by their substance and not merely by their legal form.
3. Materiality Financial statements should disclose all material items . Items are said to be material if
knowledge of them might influence the decision of the user of financial statement.
To ensure proper understanding of financial statements ,it is necessary that all significant accounting
policies adopted in preparation and presentation of financial statements be disclosed
Such disclosure should be part of financial statements
It would be helpful for the reader if the accounting policies are disclosed at one place
Any change in accounting policies which has material effect over financial statements in current period or
which is expected to have material impact in future period has to be disclosed.
In case of any accounting policies which has material affect in current period the amount by which item of
financial statement has been impacted has to be disclosed to the extent ascertainable. where Such amount
cannot be ascertained then the fact should be disclosed.
if fundamental accounting assumptions are followed in preparation of financial statements, then no specific
disclosure is required for the same.If fundamental accounting assumptions are not followed the same needs
to be disclosed. Fundamental accounting assumptions
1. Going concern The enterprise is normally viewed as going concern , i.e the enterprise will continue
its operations for a foreseeable future .it is assumed that the enterprise has neither the necessity nor
the intention to go into liquidation or to curtail the scale of operations
2. Consistency it is generally presumed that the accounting policies followed by enterprise are
consistent from one period to another
3. Accrual Revenue and costs are recognised as and when they are earned or incurred and recorded in
financial year in which they relate to

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