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

Mehta Ltd changed an accounting policy in the current year and the change has a material effect. The amount by which one item is affected cannot be ascertained at all. What does AS 1 require?

Mehta Ltd should disclose the material change in policy and indicate the fact that the effect on the item is not ascertainable. AS 1 requires the amount to be disclosed to the extent ascertainable, and otherwise the fact must be stated.

  1. ADisclose the change and indicate the fact that the amount is not ascertainableCorrect
  2. BDisclose nothing, as the amount is unknown
  3. CEstimate the amount and disclose it as an exact figure
  4. DDisclose only the new policy without mentioning the change

Explanation

AS 1 requires disclosure of a material change in policy and of the amount affected to the extent ascertainable. Where the amount is not ascertainable, wholly or in part, the fact should be indicated. Silence or an invented exact figure would not comply.

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