DISCLOSURE OF ACCOUNTING POLICY
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.
- 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.
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.
Fundamental Accounting Assumption: (GCA) :
1] Going Concern
Major considerations governing the selection of accounting policies:
2] Substance over form (Logic over Law)
The following are examples of the areas in which different accounting policies may be adopted by different enterprises:
- Methods of depreciation
- Methods of translation of foreign currency
- Valuation of inventories
- Valuation of investments
- Treatment of retirement benefits
- Treatment of contingent liabilities etc.