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

Anand Pharma Ltd. changes its depreciation method in the current year, with a material effect. The effect on the current year cannot be quantified reliably. Which statement is correct under AS 1?

The change in depreciation method must still be disclosed. Where the effect on financial statements cannot be ascertained wholly or partly, AS 1 requires the enterprise to indicate that fact, so inability to quantify does not excuse silence.

  1. AThe change need not be disclosed if the amount cannot be quantified
  2. BThe change must be disclosed, and if the effect is not ascertainable, that fact should be indicatedCorrect
  3. CThe change must be disclosed only if the effect is expected in future periods
  4. DThe old policy must continue until the effect can be quantified

Explanation

AS 1 says the change must be disclosed. Where the amount is not ascertainable wholly or in part, the fact should be indicated. Not quantifying does not remove the duty to disclose, so option A is wrong.

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