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.