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CA Intermediate · Advanced Accounting · AS 1 Disclosure of Accounting Policies

Anand Pharma Ltd. changes its depreciation method from straight line to written down value. The change is required to comply with a statute but its effect on the current year is not ascertainable. Which statement is correct under AS 1?

AS 1 requires the change in accounting policy to be disclosed. Where the amount of its effect cannot be ascertained wholly or in part, the enterprise must indicate that fact instead. It cannot ignore the change or assume that the effect is nil.

  1. ADisclosure of the change is not required because the effect is unknown
  2. BIf the amount is not ascertainable wholly or in part, that fact should be indicatedCorrect
  3. CThe change must be ignored until the amount can be computed
  4. DThe effect should be assumed to be nil and disclosed as such

Explanation

AS 1 requires disclosure of the change and its effect, if material. Where the effect is not ascertainable wholly or in part, the fact must be indicated. Ignoring or assuming nil effect is not permitted.

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