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

Ganga Steel Ltd. has decided to adopt a new accounting policy for a transaction type that was never earlier undertaken, as the company recently began exporting. Is disclosure of a change in accounting policy required under AS 1?

No change in accounting policy arises. AS 1 states that adopting a policy for transactions that did not occur earlier, or that differ in substance from earlier ones, is not a change in policy, so the change-disclosure requirements do not apply, although the new policy itself is disclosed.

  1. AYes, because any new policy is a change in accounting policy
  2. BYes, but only if the amount is above ₹1 crore
  3. CNo, adoption of a policy for events or transactions that did not occur previously is not a change in accounting policyCorrect
  4. DNo, because exports are not covered by AS 1

Explanation

AS 1 treats the adoption of an accounting policy for events or transactions that differ in substance from previous ones, or that did not occur previously, as not a change in accounting policy. Hence the change disclosure requirements do not apply, though the new policy is still disclosed as a significant policy. No ₹1 crore threshold exists in AS 1.

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