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

Veda Engineering Ltd. changes an accounting policy this year, with no material effect now, but the change is reasonably expected to have a material effect in later periods. Which treatment follows AS 1?

The change should be disclosed in the period it is made. AS 1 requires appropriate disclosure of the change when it has no material effect now but is reasonably expected to materially affect later periods, so deferring the disclosure is not allowed.

  1. ANo disclosure now, because the current effect is immaterial
  2. BDisclose the change in the current period, and disclose the fact that later periods are expected to be materially affectedCorrect
  3. CApply the change retrospectively and restate comparatives
  4. DDisclose only when the later period arrives

Explanation

AS 1 requires that if a change has no material effect now but is reasonably expected to have a material effect in later periods, the fact of the change must be appropriately disclosed in the period of the change. Waiting until the later period is incorrect, so option D fails.

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