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

Sundaram Textiles Ltd. follows the accrual basis, going concern and consistency as fundamental accounting assumptions. In preparing its financial statements for 2025-26, the company did not state in them that these three assumptions were followed. Under AS 1, what is the correct position?

Under AS 1, going concern, consistency and accrual are fundamental accounting assumptions. When they are followed in the financial statements, no specific disclosure is needed. Disclosure becomes necessary only when any one of them is not followed, so Sundaram Textiles need not state them.

  1. ADisclosure of these assumptions is mandatory in every case, even when they are followed
  2. BIf the fundamental accounting assumptions are followed in the financial statements, specific disclosure of them is not requiredCorrect
  3. COnly the going concern assumption needs to be disclosed when followed
  4. DOnly the accrual assumption needs to be disclosed when followed

Explanation

AS 1 states that if the fundamental accounting assumptions of going concern, consistency and accrual are followed, specific disclosure is not required. Disclosure is required only if any of them is not followed. Hence the company's omission is acceptable, and the options requiring disclosure in all cases are wrong.

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