Friday, July 14, 2017

ICDS 1 vs. AS 1

The corresponding AS to ICDS - 1 is AS - 1 'Disclosure of Accounting Policies'.

Point of Difference

1. Considerations in the Selection and Change of Accounting Policies:
· ICDS-1 prohibits recognition of expected losses or mark-to-market losses unless permitted by any other ICDS. However, there is no express prohibition on recognizing mark-to-market gains. The prohibition on recognizing expected or mark-to-market losses appears to be inconsistent with the accrual concept. This is opposed to the treatment of mark-to-market losses as per AS-1 according to which such losses are to be provided for in view of prudence concept.

· ICDS-1 do not contain Prudence and Materiality as considerations governing the selection and application of accounting policies as opposed to AS-1.

· ICDS-1 provide that there should be reasonable cause for change in accounting policy. 'Reasonable cause' has not been defined. AS-5 'Net Profit or loss for the period, prior period Items and changes in accounting policy' on the other hand provides for change in accounting policy in order to meet the applicable statue, requirement of accounting standard, and for better presentation of financial statements.

2. Disclosure of Accounting Policies

· As per ICDS-1, change in the accounting policies which have no material effect for the current year but which is reasonably expected to have a material effect in later years should be disclosed in the year in which the change is adopted and also in the year in which such change has material effect for the first time. However, as per AS-1 if a change in the accounting policy has no material effect on the financial statements for the current period, but is expected to have a material effect in the later periods, the same should be disclosed.