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

Sundaram Textiles Ltd. follows the accrual basis of accounting and the going concern assumption, and has not stated these in its notes to accounts. Under AS 1, what is the correct position regarding disclosure of these fundamental accounting assumptions?

Under AS 1, going concern, consistency and accrual are presumed to be followed in financial statements, so no specific disclosure is needed when they are followed. Disclosure is required only when a fundamental accounting assumption is not followed in preparing the statements.

  1. AThey must be disclosed in every case, otherwise the financial statements are non-compliant
  2. BDisclosure is needed only if the company is listed on a stock exchange
  3. CSpecific disclosure is required only if a fundamental assumption is not followed; otherwise their use is presumedCorrect
  4. DDisclosure is required only for the going concern assumption, not for accrual

Explanation

AS 1 treats going concern, consistency and accrual as fundamental accounting assumptions. If they are followed, specific disclosure is not required as their use is presumed. Disclosure is required only when any of them is not followed. Option A reverses this rule.

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