Accounting Standard 1 – Disclosure of Accounting Policies [PPT]

A PPT on Accounting Standard 1, Disclosure of Accounting Policies with summary Below. You can download the PPT at the end of the article. Accounting Standard 1 - Disclosure of Accounting Policies ppt

Summary of the PPT

The Standard deals with disclosure of significant accounting policies followed in preparing financial statements. As the financial statements are influenced by accounting policies and as the latter vary from enterprise to enterprise, disclosure of such policies is necessary for proper appreciation of financial statements. Such disclosure would also facilitate a more meaningful comparison between financial statements of different enterprises.

Accounting Policies

Accounting policies are the specific accounting principles and the methods of applying those principles adopted by an enterprise in the preparation and presentation of financial statements.

Significant Accounting Policies

  • Accounting Conventions followed
  • Valuation of Fixed Assets including revaluation
  • Policies relating to depreciation and Inventory
  • Valuation of Investments
  • Translation of foreign currency Items
  • Treatment of Government Grants
  • Costs incurred on research and Development – How disposed of
  • Basis of Accounting – Historical or Current Cost
  • Preliminary Expenses and Capital issue Expenses – Treatment
  • Treatment of Lease rental paid and Lease rental Income
  • Treatment of Expenditure during Construction
  • Treatment of Contingent Liabilities
  • Treatment of Goodwill
  • Recognition of Profit on Long Term Contracts

The List is only Illustrative and Not Exhaustive.

Fundamental Accounting Assumptions

The Financial Statements are expected to be prepared by following the accounting principles of

  • Going Concern
  • Consistency
  • Accrual

So long as these assumptions are followed in preparation of financial statements, no disclosure of such adherence is necessary. Any departure from any of these assumptions should however be disclosed.

Selection of Accounting Policies

An Enterprise in the selection of accounting policies must be primarily guided with a view to present a true and fair view of the profit and loss account for the period and a true and fair view of the balance sheet at the end of the year. For this purpose the major considerations governing the selection and application of accounting policies are:

Prudence: Profits are not recognised on the basis of anticipation. They are recognized only when realised in cash. However all losses are anticipated and provided for.

Substance over Form: Transactions and events are governed by the substance and not merely by the legal form.

Materiality: Financial Statements should disclose all material items, i.e., knowledge of which might influence the decision of the user of financial statements

Changes in the Accounting Policies

Any change in accounting policies which has a material effect in the current period or which is reasonably expected to have material effect in later periods should be disclosed.

In the case of a change in accounting policies, which has a material effect in the current period, the amount by which any item in the financial statements is affected by such change should also be disclosed to the extent ascertainable. Where such amount is not ascertainable, the fact should be indicated.

Disclosure of Accounting Policies

  • All significant accounting policies should be disclosed.
  • Such disclosure form part of financial statements.
  • All disclosures should be made at one place.
  • Specific disclosure for the adoption of fundamental accounting assumptions is not required.
  • Disclosure of accounting policies cannot remedy a wrong or inappropriate treatment of the item in the accounts.

Disclosure of deviations from fundamental accounting assumptions

If the fundamental accounting assumptions, viz. Going concern, Consistency and Accrual are followed in financial statements, specific disclosure is not required. If a fundamental accounting assumption is not followed, the fact should be disclosed.

The principle of consistency refers to the practice of using same accounting policies for similar transactions in all accounting periods. The deviation from the principle of consistency therefore means a change in accounting policy.

Download Accounting Standard 1 PPT


'Accounting Standard 1 – Disclosure of Accounting Policies [PPT]' have 2 comments

  1. January 19, 2013 @ 8:06 am ronak

    the website is mentained very good, only thing is that more information is to added

    Reply

  2. February 10, 2014 @ 10:59 am radhe

    nice site

    Reply


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