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
2] Consistency
3] Accrual
Major considerations governing
the selection of accounting policies:
1] Prudence
2] Substance over form (Logic over Law)
3] Materiality
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.
