Skip to content

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

Vindhya Steels Ltd follows the policy of valuing inventory at lower of cost and net realisable value, and the company discloses this in its notes. Which of the following is correct about where AS 1 expects accounting policies to be disclosed?

Significant accounting policies must be disclosed as part of the financial statements, normally together in one place such as a single note. Showing them only in the directors' report or auditor's report is not enough, and unchanged policies still require disclosure.

  1. AIn a single place, as part of the financial statements, preferably as one note at the beginningCorrect
  2. BScattered across the directors' report only
  3. COnly in the auditor's report
  4. DThey need not be disclosed if they are the same as the previous year

Explanation

AS 1 requires disclosure of all significant accounting policies adopted in preparing and presenting the financial statements, and they should form part of the financial statements, normally shown in one place. Disclosure in the directors' report or auditor's report does not make them part of the financial statements. Being unchanged does not remove the duty.

Did you get it right without looking?

One question tells you little. A timed set on AS 1 Disclosure of Accounting Policies shows your real accuracy, how long you take and where you lose marks.

Practise AS 1 Disclosure of Accounting PoliciesFree diagnostic mock

More AS 1 Disclosure of Accounting Policies questions