Changes In Accounting Policies

November 14th, 2006 Comments off
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In the earlier articles, we have discussed Changes in accounting estimates and fundamental errors.

This article explained what is this Changes In accounting Policies

Changes In Accounting Policies

  • As we know Accounting policies are the specific principles, bases, methods, conventions, rule and practices that an enterprise adopts in the preparation and presentation of its financial statements.

  • Based on consistency concept, accounting policies, enterprises do not change their accounting policies from period to period otherwise the comparability objective of financial reporting is not achieved.

  • Based on a few exceptions, accounting policies which are not appropriate need to be changed otherwise this will result in fundamental errors.

Two circumstances warrant a change in accounting policy:

  • Made only if required by new law/statute or new accounting standard and

  • If the change will result in a more appropriate presentation of events or transactions in the financial statements of the enterprise.

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