AS-1 Disclosure of accounting policies

AS-1 deals with the disclosure of various significant accounting policies followed in the financial statements to ensure its true and fair view. Since, various alternate accounting policies are followed by companies; it may not facilitate effective comparison of two companies. Thus, Accounting Standard 1 requires that all the accounting policies followed should be disclosed in the financial statements. Selection of accounting policies from various alternatives available is based on size, nature, requirement of the organization. It varies from organization to organization. According to the AS1, a company cannot estimate it future profits but can recognize only when it is realised. It should make provision for liabilities and expenses and losses. Accounting treatment of the transactions should be governed by the substance and not merely a legal form. It should deal with all material facts. It should ignore all immateriality as it leads to complexity in the presentation of financial statements. The term materiality differs from organization to organization. Any change in accounting policies followed should be disclosed in the financial statements. It can be disclosed in the starting or the end of the statements. However, it is advisable to disclose the same at start point as it forms the base of accounting statements and the base comes first. AS1 is based on three fundamental assumptions1. Going concern- It is assumed that the organization is a going concern, and is under no circumstances willing to get liquidated. However, if the auditor feels the possibility of the same, accounting treatment should be done keeping in mind the same. For example, carried down value of any asset can be taken at NRV instead of WDV. 2. Consistency- An organization should be consistent with the accounting policies that it follows. It should follow the same accounting policies for the consecutive years. However, an accounting policies can be changed only if it is convenient for the better presentation of financial statements, there is any change in the activities of the organization; it is required by any governing policy. 3. Accrual- It is assumed that the organization follows accrual basis of accounting. Transactions are recorded on accrual basis and not on receipt basis.