Accounting standards

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03 December 2017 What is the relevance of "ASs are intended to apply only to items which are material"??

Vivek Hebbar

Vivek Hebbar (Expert)
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05 December 2017 While applying Accounting Standards in the preparation and presentation of financial statements, there would be items which are immaterial. The decision regarding whether an item of expense or income or asset or liability is material or not is subjective and differs in every situation. e.g. A company whose turnover is about Rs. 100 crores and profit is about Rs. 25 crores, a prior period expense of Rs.1,00,000 may be immaterial. Hence, disclosure under AS-5 may be ignored. However, for a company with turnover of Rs.1 crore and profit of about Rs.2.5 lakhs, a prior period expense of Rs.1,00,000 is material. Hence, disclosure as per AS-5 would be required.

Guest

Guest (Querist)

06 December 2017 Suppose the closing stock of an enterprise as on 31.03.2017 is immaterial, then whether the entity has to comply with AS 2 in terms of valuation principle and disclosure requirements??

Vivek Hebbar

Vivek Hebbar (Expert)
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09 January 2018 The management can take a call on the same. The auditor also has to agree with the management's call. Or else the auditor will qualify the report. As I said, the topic is entirely subjective. So, the management has to first convince itself and also the auditor to not follow As-2

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