Upload File

as 1 - disclosure of accounting policies · as 1 - disclosure of accounting policies . introduction...

  • Home
  • Documents
  • AS 1 - Disclosure of Accounting Policies · AS 1 - Disclosure of Accounting Policies . Introduction . It deals with disclosure of significant accounting policies followed in preparing
37
AS 1 - Disclosure of Accounting Policies CA Final Course Paper 1 Financial Reporting Chapter1 Unit1 CA. B. Ganesh

Upload: lamthu

Post on 27-Apr-2018

225 views

Category:

Documents


4 download

Report

TRANSCRIPT

Page 1: AS 1 - Disclosure of Accounting Policies · AS 1 - Disclosure of Accounting Policies . Introduction . It deals with disclosure of significant accounting policies followed in preparing

AS 1 - Disclosure of Accounting Policies

CA Final Course Paper 1 Financial Reporting Chapter1 Unit1

CA. B. Ganesh

Page 2: AS 1 - Disclosure of Accounting Policies · AS 1 - Disclosure of Accounting Policies . Introduction . It deals with disclosure of significant accounting policies followed in preparing

Contents

Introduction

Fundamental Accounting Assumptions

Nature of Accounting Policies

Areas of different Accounting Policies

Considerations in selection of Accounting Policies

Disclosure of Accounting Policies

Main Principles - Synopsis

Page 3: AS 1 - Disclosure of Accounting Policies · AS 1 - Disclosure of Accounting Policies . Introduction . It deals with disclosure of significant accounting policies followed in preparing

Introduction AS 1 - Disclosure of Accounting Policies

Page 4: AS 1 - Disclosure of Accounting Policies · AS 1 - Disclosure of Accounting Policies . Introduction . It deals with disclosure of significant accounting policies followed in preparing

Introduction

It deals with disclosure of significant accounting policies followed in preparing and presenting financial statements.

The view presented in the financial statements of an enterprise of its state of affairs and of the profit or loss can be significantly affected by the accounting policies followed in the preparation and presentation of the financial statements.

The accounting policies followed vary from enterprise to enterprise.

Page 5: AS 1 - Disclosure of Accounting Policies · AS 1 - Disclosure of Accounting Policies . Introduction . It deals with disclosure of significant accounting policies followed in preparing

Introduction -2

Disclosure of significant accounting policies followed is necessary if the view presented is to be properly appreciated.

The disclosure of some of the accounting policies followed in the preparation and presentation of the financial statements is required by law in some cases.

ICAI recommends disclosure of certain accounting policies., eg: translation policies in respect of foreign currency items

Page 6: AS 1 - Disclosure of Accounting Policies · AS 1 - Disclosure of Accounting Policies . Introduction . It deals with disclosure of significant accounting policies followed in preparing

Introduction - 3

As a practice, the Companies disclose accounting policies followed in preparing and presenting the financial statements.

Many enterprises include in the Notes on the Accounts, descriptions of some of the significant accounting policies.

The nature and degree of disclosure vary considerably between the corporate and the non-corporate sectors and between units in the same sector.

Page 7: AS 1 - Disclosure of Accounting Policies · AS 1 - Disclosure of Accounting Policies . Introduction . It deals with disclosure of significant accounting policies followed in preparing

Introduction - 4

The purpose of this Standard is to promote better understanding of financial statements by establishing through an accounting standard the disclosure of significant accounting policies and the manner in which accounting policies are disclosed in the financial statements.

Such disclosure would also facilitate a more meaningful comparison between financial statements of different enterprises

Page 8: AS 1 - Disclosure of Accounting Policies · AS 1 - Disclosure of Accounting Policies . Introduction . It deals with disclosure of significant accounting policies followed in preparing

Fundamental Accounting Assumptions

Page 9: AS 1 - Disclosure of Accounting Policies · AS 1 - Disclosure of Accounting Policies . Introduction . It deals with disclosure of significant accounting policies followed in preparing

Going Concern

The enterprise is normally viewed as a going concern, that is, as continuing in operation for the foreseeable future.

It is assumed that the enterprise has neither the intention nor the necessity of liquidation or of curtailing materially the scale of the operations.

Page 10: AS 1 - Disclosure of Accounting Policies · AS 1 - Disclosure of Accounting Policies . Introduction . It deals with disclosure of significant accounting policies followed in preparing

Consistency

It is assumed that accounting policies are consistent from one period to another

Page 11: AS 1 - Disclosure of Accounting Policies · AS 1 - Disclosure of Accounting Policies . Introduction . It deals with disclosure of significant accounting policies followed in preparing

Accrual

Revenues and costs are accrued, that is, recognised as they are earned or incurred (and not as money is

received or paid) and recorded in the financial statements of the periods to which they relate.

Page 12: AS 1 - Disclosure of Accounting Policies · AS 1 - Disclosure of Accounting Policies . Introduction . It deals with disclosure of significant accounting policies followed in preparing

Nature of Accounting Policies

An Intro.

Page 13: AS 1 - Disclosure of Accounting Policies · AS 1 - Disclosure of Accounting Policies . Introduction . It deals with disclosure of significant accounting policies followed in preparing

Nature of Accounting Policies

The accounting policies refer to the specific accounting principles and the methods of applying those principles adopted by the enterprise in the preparation and presentation of financial statements.

There is no single list of accounting policies which are applicable to all circumstances.

Page 14: AS 1 - Disclosure of Accounting Policies · AS 1 - Disclosure of Accounting Policies . Introduction . It deals with disclosure of significant accounting policies followed in preparing

Nature of Accounting Policies- 2

The differing circumstances in which enterprises operate in a situation of diverse and complex economic activity make alternative accounting principles and methods of applying those principles acceptable.

The choice of the appropriate accounting principles and the methods of applying those principles in the specific circumstances of each enterprise calls for considerable judgment by the management of the enterprise

Page 15: AS 1 - Disclosure of Accounting Policies · AS 1 - Disclosure of Accounting Policies . Introduction . It deals with disclosure of significant accounting policies followed in preparing

Nature of Accounting Policies -3

The various Standards of the ICAI combined with the efforts of government and other regulatory agencies and progressive managements have reduced in recent years the number of acceptable alternatives particularly in the case of corporate enterprises.

While continuing efforts in this regard in future are likely to reduce the number still further, the availability of alternative accounting principles and methods of applying those principles is not likely to be eliminated altogether in view of the differing circumstances faced by the enterprises.

Page 16: AS 1 - Disclosure of Accounting Policies · AS 1 - Disclosure of Accounting Policies . Introduction . It deals with disclosure of significant accounting policies followed in preparing

Areas of & Consideration in Selection of Accounting Policies

An Intro.

Page 17: AS 1 - Disclosure of Accounting Policies · AS 1 - Disclosure of Accounting Policies . Introduction . It deals with disclosure of significant accounting policies followed in preparing

Areas of Different Accounting Policies – Examples

Methods of depreciation, depletion and amortisation

Treatment of expenditure during construction

Conversion or translation of foreign currency items

Valuation of inventories

Treatment of goodwill

Valuation of investments

Treatment of retirement benefits

Recognition of profit on long-term contracts

Valuation of fixed assets

Treatment of contingent liabilities.

Page 18: AS 1 - Disclosure of Accounting Policies · AS 1 - Disclosure of Accounting Policies . Introduction . It deals with disclosure of significant accounting policies followed in preparing

Consideration in Selection of Accounting Policies

The primary consideration in the selection of accounting policies by an enterprise is that the financial statements prepared and presented on the basis of such accounting policies should represent a true and fair view of the state of affairs of the enterprise as at the balance sheet date and of the profit

Page 19: AS 1 - Disclosure of Accounting Policies · AS 1 - Disclosure of Accounting Policies . Introduction . It deals with disclosure of significant accounting policies followed in preparing

Selection of Accounting Policies - Major Considerations

Prudence

In view of the uncertainty attached to future events, profits are not anticipated but recognised

only when realised though not necessarily in cash.

Provision is made for all known liabilities and losses even though the amount cannot be

determined with certainty and represents only a best estimate in the light of available information.

Page 20: AS 1 - Disclosure of Accounting Policies · AS 1 - Disclosure of Accounting Policies . Introduction . It deals with disclosure of significant accounting policies followed in preparing

Substance over Form

The accounting treatment and presentation in financial statements of transactions and events should be governed

by their substance and not merely by the legal form.

Page 21: AS 1 - Disclosure of Accounting Policies · AS 1 - Disclosure of Accounting Policies . Introduction . It deals with disclosure of significant accounting policies followed in preparing

Materiality

Financial statements should disclose all “material” items, i.e. items the knowledge of which might influence

the decisions of the user of the financial statements.

Page 22: AS 1 - Disclosure of Accounting Policies · AS 1 - Disclosure of Accounting Policies . Introduction . It deals with disclosure of significant accounting policies followed in preparing

Disclosure of Accounting Policies

Page 23: AS 1 - Disclosure of Accounting Policies · AS 1 - Disclosure of Accounting Policies . Introduction . It deals with disclosure of significant accounting policies followed in preparing

Disclosure of Accounting Policies

To ensure proper understanding of financial statements, it is necessary that all significant accounting policies adopted in the preparation and presentation of financial statements should be disclosed.

Such disclosure should form part of the financial statements.

It would be helpful to the reader of financial statements if they are all disclosed as such in one place instead of being scattered over several statements, schedules and notes

Any change in an accounting policy which has a material effect should be disclosed. The amount by which any item in the financial statements is affected by such change should also be disclosed to the extent ascertainable.

Page 24: AS 1 - Disclosure of Accounting Policies · AS 1 - Disclosure of Accounting Policies . Introduction . It deals with disclosure of significant accounting policies followed in preparing

Disclosure of Accounting Policies (contd.)

Where such amount is not ascertainable, wholly or in part, the fact should be indicated.

If a change is made in the accounting policies which has no material effect on the financial statements for the current period but which is reasonably expected to have a material effect in later periods, the fact of such change should be appropriately disclosed in the period in which the change is adopted.

Disclosure of accounting policies or of changes therein cannot remedy a wrong or inappropriate treatment of the item in the accounts.

Page 25: AS 1 - Disclosure of Accounting Policies · AS 1 - Disclosure of Accounting Policies . Introduction . It deals with disclosure of significant accounting policies followed in preparing

Main Principles - Synopsis

Page 26: AS 1 - Disclosure of Accounting Policies · AS 1 - Disclosure of Accounting Policies . Introduction . It deals with disclosure of significant accounting policies followed in preparing

Main Principles - Synopsis

All significant accounting policies adopted in the preparation and presentation of financial statements should be disclosed.

The disclosure of the significant accounting policies as such should form part of the financial statements and the significant accounting policies should normally be disclosed in one place.

Any change in the accounting policies which has a material effect in the current period or which is reasonably expected to have a 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, wholly or in part, the fact should be indicated.

Page 27: AS 1 - Disclosure of Accounting Policies · AS 1 - Disclosure of Accounting Policies . Introduction . It deals with disclosure of significant accounting policies followed in preparing

Main Principles - Synopsis

If the fundamental accounting assumptions, viz. Going Concern, Consistency and Accrual are followed in financial statements, specific disclosure is not required. If a fundamental accounting

assumption is not followed, the fact should be disclosed.

Page 28: AS 1 - Disclosure of Accounting Policies · AS 1 - Disclosure of Accounting Policies . Introduction . It deals with disclosure of significant accounting policies followed in preparing

Case Studies

Page 29: AS 1 - Disclosure of Accounting Policies · AS 1 - Disclosure of Accounting Policies . Introduction . It deals with disclosure of significant accounting policies followed in preparing

Case Study - 1

No

As per para 25 of the Accounting standard, “The disclosure of the significant accounting policies as such should form part of the financial statements and the significant accounting policies should normally be disclosed in one place.”

Hence the Finance Officer is not correct. The Company shall disclose the entire set of accounting policies at one place.

AB Limited, has disclosed the significant accounting policies adopted by it in preparation of the financial statements, in the respective notes. Example, the accounting policy of revenue was disclosed in the Note relating to Income from Operations.

The Finance Officer is of the opinion that, such a practice would give a clear picture to the user of the financial statement. Is the Finance Officer right ?

Page 30: AS 1 - Disclosure of Accounting Policies · AS 1 - Disclosure of Accounting Policies . Introduction . It deals with disclosure of significant accounting policies followed in preparing

Case Study - 2

FD Limited, has fixed deposits worth ` 10 Lakhs with a Scheduled Bank. As on the year end the Company had not received the interest for the month of March 2013, as the amount was due to be received on 2nd of every month.

Mr. Int, the Accounts Officer of the Company states that as they have not yet received the interest for the year end, they will account for it in the next year, when the amount will be actually received.

Page 31: AS 1 - Disclosure of Accounting Policies · AS 1 - Disclosure of Accounting Policies . Introduction . It deals with disclosure of significant accounting policies followed in preparing

Case Study - 2

Mr. Int is not correct. • As per Para 10 (C) of the Accounting Standard,

“Revenues and costs are accrued, that is, recognised as they are earned or incurred (and not as money is received or paid) and recorded in the financial statements of the periods to which they relate.”

• Hence the interest shall be accounted for on accrual basis and not receipt basis.

Page 32: AS 1 - Disclosure of Accounting Policies · AS 1 - Disclosure of Accounting Policies . Introduction . It deals with disclosure of significant accounting policies followed in preparing

Case Study - 3

Multiplex Software Limited had a policy of depreciating computer hardware equipment over a period of three years. But during the year 2012-13, it was decided by the management of the Company that the same shall be depreciated over two years.

On enquiry by management, Mr.G, the Finance Head, stated that the depreciation impact on account of the same was amounting to ` 20 Lakhs. Further he states, as the amount is material, the impact of the same shall be disclosed in the financial statements. Is his contention right ?

Page 33: AS 1 - Disclosure of Accounting Policies · AS 1 - Disclosure of Accounting Policies . Introduction . It deals with disclosure of significant accounting policies followed in preparing

Case Study - 3

Yes. Mr.G’s contention is right.

As per para 26 of the Accounting standard, “Any change in the accounting policies which has a material effect in the current period or which is reasonably expected to have a 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, wholly or in part, the fact should be indicated.”

Hence the same shall be disclosed.

Page 34: AS 1 - Disclosure of Accounting Policies · AS 1 - Disclosure of Accounting Policies . Introduction . It deals with disclosure of significant accounting policies followed in preparing

Case Study - 4

Ideal Limited, is a company which is running into losses. For the financial year ending March 31, 2013, the Finance officer had not made a provision for the employee who had resigned and his settlement was not made. He opined that as the employee had not yet claimed his settlement amount, there was no requirement to make a provision towards the same.

Page 35: AS 1 - Disclosure of Accounting Policies · AS 1 - Disclosure of Accounting Policies . Introduction . It deals with disclosure of significant accounting policies followed in preparing

Case Study - 4

The Finance Officer is not correct in his statement.

As per para 17 (a), “in view of the uncertainty attached to future events, profits are not anticipated but recognised only when realised though not necessarily in cash. Provision is made for all known liabilities and losses even though the amount cannot be determined with certainty and represents only a best estimate in the light of available information.”

Though the employee had not yet asked for settlement, it is a known liability for the year ended March 31, 2013 and provision shall be made towards the same.

Page 36: AS 1 - Disclosure of Accounting Policies · AS 1 - Disclosure of Accounting Policies . Introduction . It deals with disclosure of significant accounting policies followed in preparing

Lesson Summary

Page 37: AS 1 - Disclosure of Accounting Policies · AS 1 - Disclosure of Accounting Policies . Introduction . It deals with disclosure of significant accounting policies followed in preparing

THANK YOU


CRAFTING DISCLOSURE POLICIES - NFMA · CRAFTING DISCLOSURE POLICIES 1 CRAFTING DISCLOSURE POLICIES The purpose of this paper is to provide NABL members with tools to advise issuers1

IPSAS 3—ACCOUNTING POLICIES, CHANGES IN ACCOUNTING ... · 2. Disclosure requirements for accounting policies, except those for changes in accounting policies, are set out in IPSAS

AS 1: Disclosure of Accounting policies · Disclosure of significant accounting policies followed is necessary if the view presented is to be properly appreciated. 4. Introduction

ASSIGNMENT CLASSIFICATION TABLE (BY TOPIC) · CE5-1 (a) Current assets is ... disclosure of accounting policies provided that the entity identifies and describes its significant accounting

Accounting and disclosure of football player registrations ...721716/FULLTEXT01.pdf · Accounting and disclosure of football player registrations: ... Accounting and disclosure of

Draft Accounting Policies

GENERALLY RECOGNISED ACCOUNTING PRACTICE (GRAP). GRAP/03... · 2012-07-20 · Note: inappropriate accounting treatments are not rectified either by disclosure of the accounting policies

Accounting Policies, Changes in Accounting … and disclosure of changes in accounting policies, changes in accounting estimates and corrections of errors. The Standard is intended

CLUB4CA.COM€¦ · Accounting Standards AS 1 Disclosure of Accounting Policies AS 2 Valuation of Inventories AS 3 Cash Flow Statements AS 4 Contingencies and Events Occuring after

1 SIGNIFICANT ACCOUNTING POLICIES Revenue recognition · 1 significant accounting policies The principal accounting policies adopted in the preparation of these financial statements

Current Accounting and Disclosure Issues

EASi Accounting Disclosure Guide

dissertation sustainability accounting disclosure

Accounting Update: What you need to know for 2014 South/Presentations... · Accounting Update: What you need to know for 2014 ... SSAP No. 1 – Disclosure of Accounting Policies,

Programme Master of Commerce with Code: MCCA …Indian Accounting Standards: An Overview - Disclosure of Accounting Policies (AS1) – Valuation of Inventories (AS2) – Cash Flow

DRAFT INCOME COMPUTATION AND DISCLOSURE ... Releases...2015/01/08  · Income Computation and Disclosure Standard [ICDS] Accounting Policies Preamble This Income Computation and Disclosure

Accounting Policies & Procedures Manualmytraining.sdbor.edu/.../AccountingPoliciesAugust2012.pdf · 2012-09-24 · Accounting Policies & Procedures Manual Financial Accounting & Reporting

This Accounting Policies Register details the Accounting

1. Basis of preparation and significant accounting policies · 1. Basis of preparation and significant accounting policies (continued) (b) Significant accounting policies (continued)

Accounting Policies and Accounting Estimates€¦ · (a) clarifying how accounting policies and accounting estimates relate to each other, by explaining that accounting estimates

Disclosure of Accounting Policies Contentssaprlaw.com/taxblog/icai_as.pdf · accounting policies are disclosed in the financial statements. Such disclosure would also facilitate a

PART III - Amazon S3s3-ap-southeast-1.amazonaws.com/static.cakart.in/... · AS 1 : Disclosure of Accounting Policies ∗ [This Accounting Standard includes paragraphs set in bold

Accounting Policies, Changes in Accounting Estimates and ......Australian Accounting Standard AASB 108 Accounting Policies, Changes in Accounting Estimates and Errors (as amended)

Chapter 80 - Accounting Policies...State Administrative & Accounting Manual Issued by: Office of Financial Management 1 Chapter 80 - Accounting Policies 80.10 About Accounting Policies,

AS – 1 DISCLOSURE OF ACOUNTING POLICY · AS – 1 DISCLOSURE OF ACOUNTING POLICY . Accounting policies are the specific accounting principles and the methods of applying those principles

Financial Accounting Disclosure Makalah Imam

CITY OF PHILADELPHIA DISCLOSURE POLICIES AND PROCEDURES · CITY OF PHILADELPHIA DISCLOSURE POLICIES AND PROCEDURES ... “Disclosure Documents ... identified as Contributors shall

Accounting Policies and Accounting Estimates · including direct, indirect, incidental or consequential loss, ... clarifying how accounting policies and accounting estimates relate

DRAFT INCOME COMPUTATION AND DISCLOSURE …2).pdfIncome Computation and Disclosure Standard [ICDS] Accounting Policies Preamble This Income Computation and Disclosure Standard is applicable

Environmental Accounting Disclosure and Firm Value of ......environmental accounting disclosure on company firm value. Environmental accounting disclosure for some period of time in

IPSAS 3—ACCOUNTING POLICIES, CHANGES IN … · Comparison with IAS 8 . ACCOUNTING POLICIES, CHANGES IN ACCOUNTING ESTIMATES AND ERRORS IPSAS 3 108 IPSAS 3, “Accounting Policies,

PAPER1 - ACCOUNTING Inter Vs. IPCC (New Syllabus … · Overview of Accounting Standards AS 1: Disclosure of Accounting Policies IPCC AS 2: Valuation of Inventories IPCC AS 3: Cash

Singapore Accounting Standards - IAS Plus — Disclosure and Accounting Standards Committee ... apply consistently one of those policies, unless the SAS/INT specially requires or

Group Accounting Policies

Accounting Disclosure Rules And Practices - 10K …images.10kwizard.com/adr_p0300.pdfFRC - Codification of Financial Reporting Policies ... SAB - Staff Accounting Bulletins (by topic)