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

Ganga Pharma Ltd. prepares its financial statements on the assumption that it will continue in operation for the foreseeable future. Which of the following is correct as per AS 1 regarding the fundamental accounting assumptions of going concern, consistency and accrual?

Under AS 1, no specific disclosure is needed when going concern, consistency and accrual are followed, but if any of them is not followed, that fact must be disclosed. Their use is presumed, so disclosure is required only for departures.

  1. AIf a fundamental accounting assumption is followed, specific disclosure of it is required in every case
  2. BIf a fundamental accounting assumption is not followed, the fact must be disclosed; if followed, no specific disclosure is requiredCorrect
  3. CFundamental assumptions must be disclosed only when the company is listed
  4. DAccrual may be disregarded if the company follows a different accounting policy for cash items without disclosure

Explanation

AS 1 states that if the fundamental accounting assumptions, going concern, consistency and accrual, are followed in financial statements, specific disclosure is not required. If any of them is not followed, the fact should be disclosed. Option A states the opposite and option D contradicts the standard.

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