Smu Assanment (41 q2)

Q.
2 (A) When is the change in accounting policy recommended and

what are the disclosure requirement regarding the change in
accounting policy?
(B) Explain IFRS.
Ans. (A) Accounting Policy

Accounting policies are the specific principles, bases, conventions,
rules and practices applied by an entity in preparing and presenting financial
statements.
If refers to specific accounting principles and methods of accounting
adopted by the enterprise while preparing and presenting the financial
statement. The management of each enterprise has to select appropriate
accounting policies based on the nature and circumstances of the business
they are in. some of the areas in which different accounting policies may be
adopted are:-
➢ Treatment of expenditure during construction,
➢ Methods of depreciation, amortization,
➢ Conversion or translation of foreign currency items,
➢ Valuation of inventories,
➢ Valuation of investments,
➢ Treatment of goodwill,
➢ Valuation of fixed assets,
➢ Recognition of profit on long-term contract and
➢ Treatment of contingent liabilities.
A change in accounting estimate is an adjustment of the carrying amount
of an asset or liability, or related expense, resulting from reassessing the
expected future benefits and obligations associated with that asset or
liability.
Change in Accounting Policies:-
The change in accounting policy is recommended only in the
following circumstances—
➢ If is required by statute for compliance with an accounting standard
➢ If is considered that the change would result in a more appropriates
presentation of the financial statements of an enterprise.
Disclosure in case of change in Accounting Policy:-

➢ If change has a material effect in current period and the effect of
change is ascertainable the amount of change should be disclosed.
➢ If change has no material effect in current period but which is
reasonably accepted to have a material effect in later periods, the fact
of such change should be appropriately disclosed.
➢ If the change has a material effect in current period and the effect
of change is not ascertainable wholly or in part, the fact should be
disclosed.
(B) IFRS (International Financial Reporting

System)
International Accounting Standards Board
(IASB) that companies and organizations can follow when compiling financial
statements. The creation of international standards allows investors,
organizations and governments to compare the IFRS-
supported financial statements with greater ease. Over
100 countries currently require or permit companies to comply with IFRS
standards. The International Financial Reporting Standards were previously
called the International Accounting Standards (IAS). Organizations in
the United States are required to use the Generally Accepted Accounting
Principles (GAAP).
Objective:-
The main objective of IFRS are-----
1) To develop in public interest, a single set of high quality,

understandable and enforceable global accounting standards that
require high quality, transparent and comparable information in
financial statement.
2) To promote the use and rigorous application of those standards.
3) In fulfilling the objectives associated above to take account of, as
appropriate, the special needs of small & medium-sized entities &
emerging economies.
4) It should also provide the current financial status of the entity to all
the users of financial information.
Benefits:-
The main benefits of IFRS are—
1) Encourage international investing & there by increase in foreign capital

inflow.
2) Benefit the economy by increased international business.
3) More relevant, reliable, timely & comparable information to investors.
4) Better understanding of financial statements would benefit investors
who wish to invest outside the country.
5) Capital at lesser cost from foreign market.
6) Professional opportunity to serve international clients.
7) Increased mobility to work in different parts of the world either in
industry or practice.

Smu Assanment (41 q2)

Uploaded by

Copyright:

Available Formats

Smu Assanment (41 q2)

Uploaded by

Document Information

Original Title

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Smu Assanment (41 q2)

Uploaded by

Copyright:

Available Formats

Q.

2 (A) When is the change in accounting policy recommended and

(B) Explain IFRS.

Ans. (A) Accounting Policy

Disclosure in case of change in Accounting Policy:-

(B) IFRS (International Financial Reporting

1) To develop in public interest, a single set of high quality,

1) Encourage international investing & there by increase in foreign capital

You might also like