Accounting Policies - Ind AS - Indian Accounting Standards - Companies Law

Accounting Policies Selection and application of accounting policies When an Ind AS specifically applies to a transaction, other event or condition, the accounting policy or policies applied to that item shall be determined by applying the Ind AS. Accounting policies adopted by the entity mut comply with Ind ASs specific guidance. Financial statements which are prepared by the accounting policies set by Ind AS gives relevant and reliable information about the transactions, other events and conditions to which they apply. Those policies need not be applied when the effect of applying them is immaterial. However, it is inappropriate to make, or leave uncorrected, immaterial departures from Ind ASs to achieve a particular presentation of an entity s financial position, financial performance or cash flows. Ind ASs are accompanied by guidance that is integral part of Ind AS to assist entities in applying their requirements. Such guidance is mandatory. In absence of Accounting Policies to specific transaction In rare occasions, it may happen that, one cannot find an accounting policy suitable to the transaction or event affecting the entity, In this case, the management of the entity needs to develop its own accounting policies. In the absence of an Ind AS that specifically applies to a transaction, other event or condition, management shall use its judgement in developing and applying an accounting policy that results in information that is: relevant to the economic decision-making needs of users; and reliable, in that the financial statements: represent faithfully the financial position, financial performance and cash flows of the entity; reflect the economic substance of transactions, other events and conditions, and not merely the legal form; are neutral, ie free from bias; are prudent; and are complete in all material respects. Refer Conceptual Framework - While making the judgement, management shall refer to, and consider the applicability of, the following sources in descending order: the requirements in Ind ASs dealing with similar and related issues; and the definitions, recognition criteria and measurement concepts for assets, liabilities, income and expenses in the Conceptual Framework for Financial Reporting under Indian Accounting Standards issued by the Institute of Chartered Accountants of India. Refer Pronouncement - In making the judgement described above, management may also first consider the most recent pronouncements of International Accounting Standards Board and in absence thereof those of the other standard-setting bodies that use a similar conceptual framework to develop accounting standards, other accounting literature and accepted industry practices, to the extent that these do not conflict with the sources in paragraph 11. Consistency of accounting policies An entity shall select and apply its accounting policies consistently for similar transactions, other events and conditions, unless an Ind AS specifically requires or permits categorisation of items for which different policies may be appropriate. If an Ind AS requires or permits such categorisation, an appropriate accounting policy shall be selected and applied consistently to each category.