Question

The professional associations are issuing many accounting standards related to disclosures, but many corporations disclose more information than required, explain? What are the types of disclosures according to accounting practice?

Answer 1

Dislosure Of Accounting Policies Has Per AS-1

Disclosure Required by Law

Some times law required a bussines entity to disclose certain accouting policies follwed by it in order prepare and present financial

Disclosure Required by ICAI

Instituteof ICAI of india has been issuing notifications over a peroid of time recommending Disclosure of certain accouting polices

Following are the types of disclosure as per accouting pratice

1) Fundamental Accounting Assumptions

Certain fundamental accounting policies are follwowed in the prepartion and presentation of financial statments they are usually not specifically stated they are assumed to be followed hence disclouser is not neccesary if  they are not followed then disclouser is neccesary

Following are the fundamental accouting assumptions

1) Going Concern

2) Consistency

3) Accrual

2) Nature of accounting policies

Accouting policies refer to accouting principles and the methods of applying these principles adopted by the organisation in the prepartion and presentation of financial statments

There is no single list of accounting policies which are applicable in all circumstances the choice of appropriate accounting principles shall choosed by management of the organisation as per the nature of bussines

To ensure proper understanding of financial statements it is neccessarythat all the significant accouting policies adopted in the prepartion and presentation of financial statments must be disclosed

Few examples where areas in which dfferent accouting polices can be followed

1) Treatment of Goodwill

2) Valuation of invesments

3) Valuation offixed assets Etc

3) Considerations in the Selection of Accounting Policies

primary consideration in the selection of accounting policies is that financial staments should represent true and fair view of the statment of affairs of the entity as at the balance sheet date and of the profit and loss account

Major Considertaions governing the selection and application of Accounting Policies are

1) Prudence

2) Substance over form

3) Materiality

Disclosure of accounting Policies

1) To ensure proper understanding of FS it is neccessary that all significant accounting policies adopted in the preparation and presentation shouldbe disclosed

2) such disclosure should form part of the FS

3) disclosure of accouting policies or of changes therein cannot remedy a wrong or inappropriate treament of the item in the accounts