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CMA Intermediate · Financial Accounting · Disclosure of Accounting Policies (AS 1)

Kaveri Industries changed its depreciation method, which has a material effect. The effect on the current year's depreciation can be quantified as Rs 3,60,000 additional charge, but the effect on earlier years is not ascertainable. Which disclosure complies with AS 1?

Kaveri should disclose the change, the ascertainable Rs 3,60,000 effect, and state that the remaining effect is not ascertainable. AS 1 requires the amount to be disclosed to the extent ascertainable and the fact to be indicated where it is not ascertainable wholly or in part.

  1. ADisclose the change and the Rs 3,60,000 effect, and indicate the fact that the remaining effect is not ascertainableCorrect
  2. BDisclose nothing, since part of the effect cannot be measured
  3. CDisclose only the fact of change, and omit the Rs 3,60,000 as it is incomplete
  4. DDisclose the Rs 3,60,000 only, without mentioning that the other effect is unascertainable

Explanation

Paragraph 22 requires disclosure of the amount by which an item is affected to the extent ascertainable. Where the amount is not ascertainable wholly or in part, the fact should be indicated. So the Rs 3,60,000 is disclosed and the unascertainable part is flagged. Omitting either piece breaches the standard.

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