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

Sharma Traders prepares its financial statements on a going concern basis, follows consistent policies and uses the accrual basis. What does AS 1 require regarding disclosure of these assumptions?

No specific disclosure is required. AS 1 states that when the fundamental assumptions of going concern, consistency and accrual are followed, their acceptance is assumed and they need not be stated. Disclosure becomes necessary only if any of them is not followed.

  1. AEach assumption must be disclosed separately in every year's financial statements
  2. BNo specific disclosure is required, because they are followedCorrect
  3. COnly the going concern assumption must be disclosed
  4. DDisclosure is required only in the auditor's report

Explanation

AS 1 says that if Going Concern, Consistency and Accrual are followed, specific disclosure is not required. Their acceptance is assumed. Disclosure arises only when one of them is not followed.

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