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

Gomti Pharma Ltd. adopted a new method of valuing its stock of finished goods. The ICAI-prescribed disclosure of accounting policies is in place. The accountant lists the following as items for the policy note: (i) method of depreciation on plant, (ii) basis of valuing inventories, (iii) the specific amount of the fine paid to a regulator in the year, (iv) treatment of foreign currency translation differences, (v) the name of the company's statutory auditor. Which items are accounting policies that AS 1 expects to be disclosed where significant?

Depreciation method, inventory valuation basis and foreign currency translation treatment are accounting policies that AS 1 expects to be disclosed when significant. The amount of a fine and the auditor's name are not accounting policies, so only items (i), (ii) and (iv) qualify.

  1. A(i), (ii) and (iv) onlyCorrect
  2. B(i), (ii), (iii) and (iv)
  3. C(ii), (iii) and (v) only
  4. D(i), (iv) and (v) only

Explanation

AS 1 lists areas where different policies are possible, such as depreciation methods, valuation of inventories and treatment of foreign currency items. A fine paid is a transaction amount, not a policy, and the auditor's name is not an accounting policy. So only (i), (ii) and (iv) qualify. Option B wrongly treats the fine as a policy.

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