AS 1 Disclosure of Accounting Policies: CA Inter Advanced Accounting Notes

The notes define accounting policy as the specific principles and methods used in preparing and presenting financial statements. Examples include FIFO or weighted average for inventory, cash or accrual basis of books, cost or revaluation model for PPE, and the direct or indirect method for cash flow statements. They separate the primary objective of a true and fair view from secondary considerations such as substance over legal form, materiality and prudence. The distinction between accounting policy and accounting estimate, such as choosing a depreciation method, is highlighted, along with the rules on disclosing and changing policies.

Read the section on fundamental accounting assumptions and the rules for disclosure of changes in policy together, since these are frequently asked in theory questions. Practise distinguishing between a change in accounting policy and a change in accounting estimate using the debtors provision example given in the notes. Remember the three conditions under which a policy can be changed: legal requirement, an AS requirement, or a better presentation of financial statements. Keep a short list of the prudence rules for profits and provisions for quick recall.

These notes suit CA Inter students preparing Advanced Accounting, particularly those working through AS 1 in the accounting standards part of the syllabus. They are useful for students who want a compact summary of the principles behind financial statement preparation before moving on to other accounting standards that refer to AS 1.

• Meaning of accounting policy
• Primary and secondary considerations for selecting policies
• Prudence and materiality
• Fundamental accounting assumptions
• Going concern accrual basis and consistency
• Disclosure of accounting policies
• Change in accounting policy versus change in estimate