Financial Statements summarise the end-result business activities of an enterprise during an accounting period in monetary terms. Business activities are varied. It is a strenuous task to present the facts intelligibly, in a summarised form, and yet with minimum loss of information. In order that the methods and principles adopted by various reporting enterprises are coherent, not misleading - and to the extent possible are uniform and comparable - Standards are evolved.
.
Accounting Standards are nothing but common accounting practices which are codified.
.
AS-1: Disclosure of 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.
.
Principle - Providing depreciation on an aset to account for loss in value.
Method of Applying Principle - WDV or SLM or any other appropriate method.
.
The basic touchstone in the selection of accoutning policies is "True and Fair View".
Other major considerations include Prudence , Substance over form, Materiality.
.
Three basic fundamental accounting assumptions are Going concern, Consistency and accrual.
.
Since the methods of applying the principles may vary from one enterprise to another, hence a need arises to disclose the accounting polices followed by the enterprise.
.
As per AS-1 all significant accounting policies adopted in the preparation and presentation of financial statements are to be disclosed normally in one place. Any change in the accounting policy which has a material effect in the current period or is expected to effect in the future is to be disclosed.
CAclubindia
