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ACCOUNTING STANDARD .

1 DISCLOSURE OF ACCOUNTING POLICIES


BY : -HARSH SHAH -HIRAL TILALA -MANOJ PADHIYAR -KAMINI PATEL -ISHITA SHAH

INRTODUCTION TO ACCOUNTING STANDARDS (ASs)


ACCOUNTING STANDARDS (ASs) ARE WRITTEN POLICY DOCUMENTS ISSUED BY EXPERT BODY OR BY GOVERNMENT OR OTHER REGULATORY BODY COVERING THE ASPECTS OF -------RECOGNITION -MEASUREMENT -PRESENTATION -DISCLOSURE OF THE ACCOUNTING TRANSACTIONS IN THE FINANCIAL STATEMENTS.

THEY REDUCE THE ALTERNATIVES IN PREPRATION OF FINANCIAL STATEMENTS IN BOUNDS OF RATIONALITY THEREBY ENSURING COMPARABILITY.

BENEFITS AND LIMITATIONS OF (ASs)


BENIFITS

LIMITATIONS

STANDARDS ELIMINATE CONFUSING VARIATIONS IN ACCOUNTING TREATMENTS. STANDARDS MAY CALL FOR DISLOSURE OF INFORMATION BEHOND THAT ARE REQUIRED BY LAW. FACILITATE THE COMPARISION OF FINANCIAL STATEMENTS OF COMPANIES IN COUNTRY OR IN THE WORLD.

THERE ARE RECOMMENDATIONS FOR USING ALTERNATIVE TRETMENTS SO TO CHOICE BETWEEN ALTERNATIVES MAY BECOME DIFFICULT. TREND CAN MOVE TOWARDS RIGIDITY AND AWAY FROM FLEXIBILITY IN APPLYING ASs. THEY ARE REQUIRED TO BE FRAMED WITHIN THE RANGE OF STATUTES.

AS .1: DISCLOSURE OF ACCOUNTING POLICIES

This standard deals with the disclosure of significant accounting policies followed in preparation and presentation of financial statements.
Financial statements portray the effect of past events and transaction. Accounting policies and methods adopted by an enterprise, in turn, influence the effect of past events and transactions.

The disclosure by an entity of its accounting policies, enable users to- understand the past - extrapolate to the future. Accounting policies refer to: a) Specific accounting principles, and

NEED OF DISCLOSURE

Accounting principles and methods can differ between one enterprise and another, in the areas of recognition, treatment or valuation of assets, or recognition of transactions or events. An illustrative list of examples is given below:

FUNDAMENTAL ACCOUNTING CONCEPTS


Going Concern Concept - Continuing in operation in the foreseeable future, and without any intention or necessity to either liquidate or limit materially.

Accrual Concept - Transactions are recognized as soon as they occur, whether cash is actually paid or received.

Consistency Concept - Practice of using same accounting policies for sililar transactions in all accounting periods.

SELECTION OF APPROPRIATE ACCOUNTING POLICIES


There is an obligation to provide a TRUE AND FAIR VIEW to users of financial statements. E.g. Consider another case of usage of a machinery wear and tear of which is higher in initial years, relative to later years. Selection of written down value method of depreciation would be appropriate in this case, as opposed to a straight-line method. Such a selection is guided by THREE major considerations. PRUDENCE , SUBSTANCE OVER FORM , MATERIALITY. Other qualitative characteristics of accounting information, such as (i) relevance, (ii) neutrality, (iii) completeness, and (iv) reliability are equally critical to users in order that financial statements are meaningful.

SELECTION OF APPROPRIATE ACCOUNTING POLICIES


- PRUDENCE Do not recognise profits on the basis of ANTICIPATION. Recognise only when REALIZED.
- SUBSTANCE OVER FORM INFORMATION presented in accordance with their substance and economic reality and not merely their 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.

AREAS OF DISCLOSURE

All significant policies adopted in the preparation and presentation of financial statements should be disclosed at one place and should form part of the financial statements.

CHANGES IN ACCOUNTING POLICIES

An enterprise is free to change its accounting policies, unless it violates any statutory provisions, or codes laid down in a mandatory Accounting Standard, and provided of course such a change leads to better and more meaningful presentation of accounting information.
Where a change in the accounting policies carries with it a material impact on the performance and operations in the current period, the amount by which any item in the financial statement is affected by such change should also be disclosed to the extent ascertainable. E.g. Changing the depreciation policy from STRAIGHT-LINE to WRITTEN DOWN VALUE for better representation.

COMPARISION OF AS.1 WITH IAS AND US GAAP


Defines accounting policies, as specific accounting principles and methods of applying these principles. Defines overall considerations for financial statements, besides prescribing minimum structure and content of financial statements.
Defines accounting policies as specific accounting principles that are judged by the management of the enterprise to be the most appropriate in the circumstance. Unusual or innovative applications of GAAP are additionally to be disclosed.

Choice of appropriate accounting policies

Require specific disclosure for departure from IFRS (INTERNATIONAL FINANCIAL REPORTING STANDARDS) True and fair view, going No item should be concern, consistency, disclosed as extraordinary accrual, prudence, item. materiality and substance over form are highlighted.