AS-1 of the ICAI : Disclosure of Accounting Policies
AS 1 issued by the ICAI is mandatory in nature and deals with the disclosure of significant accounting policies followed in preparing and presenting the financial statements.
Disclosure of accounting policies means disclosure of the specific accounting principles and the methods of applying those principles adopted by the enterprise in the preparation and presentation of financial statements. In other words disclosing the accounting policies, principles, application methods means disclosing the significant rules followed in preparation and presentation thereof as these rules are capable of delivering different results and / or the state of affairs given the application of different set of rules. Basically we need to set out and disclose the rules of the game of preparation and presentation of financial statements for better understanding of the concerned users.
Explanations are included in the AS-1 on the following relevant topics:
To facilitate better understanding of the financial statements, all significant accounting policies followed in preparation and presentation of financial statements should be disclosed, by way of note(s), preferably at one place, forming part of the financial statements. Examples of cases where different accounting polices may be encountered or adopted are already mentioned above.
Any change in accounting policy(ies) which has a material effect should be quantified and disclosed with impact thereof on the state of affairs and / or on profits or losses of the current or future periods. Where the impact of change is not ascertainable, the fact needs be adequately disclosed.