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CA Final · Financial Reporting · Ind AS 8 Accounting Policies, Changes in Accounting Estimates and Errors

Sundaram Textiles Ltd's finance team is drafting its accounting policy note. A junior accountant says that 'accounting policies' covers only the measurement bases chosen for assets, and that presentation conventions and practices are outside the term. Under Ind AS 8, how are accounting policies defined?

Under Ind AS 8, accounting policies are the specific principles, bases, conventions, rules and practices an entity applies in preparing and presenting its financial statements. The definition covers both preparation and presentation, so it is not limited to asset measurement. The measurement-uncertainty wording defines accounting estimates instead.

  1. AOnly the measurement bases applied to assets and liabilities in the balance sheet
  2. BThe specific principles, bases, conventions, rules and practices applied by an entity in preparing and presenting financial statementsCorrect
  3. CMonetary amounts in financial statements that are subject to measurement uncertainty
  4. DOnly those principles that are prescribed under Section 133 of the Companies Act, 2013

Explanation

Ind AS 8 defines accounting policies as the specific principles, bases, conventions, rules and practices applied in preparing and presenting financial statements. This covers presentation as well as measurement, so the junior's view is too narrow. The option about monetary amounts with measurement uncertainty is the definition of accounting estimates, not policies.

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