Download Presentation on AS 1

Accounting Standard : 1
Disclosure of Accounting Policies
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.
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.
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.
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.
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.