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

Under AS 1, which consideration is described as the primary one when an enterprise selects its accounting policies?

The primary consideration in selecting accounting policies under AS 1 is that the financial statements present a true and fair view of the state of affairs at the balance sheet date and of the profit or loss for the period ended on that date.

  1. AFinancial statements should show a true and fair view of the state of affairs at the balance sheet date and of the profit or loss for the periodCorrect
  2. BPolicies should minimise the tax payable by the enterprise for the period
  3. CPolicies should maximise reported profit for the period
  4. DPolicies should be identical to those used by other enterprises in the same industry

Explanation

AS 1 states that the primary consideration in selecting accounting policies is that the statements give a true and fair view of the state of affairs as at the balance sheet date and of the profit or loss for the period. Tax minimisation, profit maximisation or industry uniformity are not the primary consideration.

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