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

Sundaram Engineering Ltd. prepares financial statements for 2025-26. Management is considering the following: (i) a policy for valuing inventory under AS 2, (ii) the company's choice of brand name colour in its annual report, (iii) its method of translating foreign currency items, and (iv) its policy on recognising revenue from long-term contracts. Under AS 1, which of these are areas where disclosure of significant accounting policies is expected, and in which place should the disclosure be made?

Items (i), (iii) and (iv) are accounting policies, and AS 1 requires significant policies to be disclosed together in one place as part of the financial statements. Brand colour is not an accounting policy, and the directors' or auditor's reports are not the place for policy disclosure.

  1. A(i), (iii) and (iv) only, disclosed together in one place as part of the financial statementsCorrect
  2. B(i), (ii), (iii) and (iv), disclosed in the directors' report
  3. C(ii) only, disclosed in the notes
  4. D(i) and (iii) only, disclosed in the auditor's report

Explanation

AS 1 lists areas where different policies are possible, such as inventory valuation, foreign currency translation and revenue recognition on contracts. The choice of brand colour is not an accounting policy. AS 1 requires all significant policies to be disclosed in one place as part of the financial statements, not in the directors' report or the auditor's report.

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