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CA Intermediate · Advanced Accounting · Introduction to Accounting Standards

Bharat Agro Ltd. has an accounting policy of valuing inventory at lower of cost and net realisable value. Management states that the company follows the fundamental accounting assumptions of going concern, consistency and accrual. In its financial statements, it did not disclose the fact that it follows these assumptions. Under AS 1, what is the position?

Under AS 1, specific disclosure of the fundamental accounting assumptions is needed only when one of them is not followed. Since Bharat Agro follows going concern, consistency and accrual, its not disclosing them is acceptable, and listing status makes no difference.

  1. ADisclosure is required for every fundamental assumption in all cases
  2. BDisclosure is required only if a fundamental assumption is not followedCorrect
  3. CDisclosure is required only for going concern and accrual, not consistency
  4. DDisclosure is required only if the company is listed

Explanation

AS 1 states that if the fundamental accounting assumptions of going concern, consistency and accrual are followed, specific disclosure is not required. Disclosure is required only if any of them is not followed. Hence non-disclosure is acceptable here.

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