IGC-L32 — Accounting Policies & IAS Influence
Understanding how accounting policies are selected and how international standards influence financial reporting.
Learning Objectives
- define accounting policies
- explain the importance of accounting policies
- understand the role of International Accounting Standards (IAS}
- explain why consistency and disclosure are important
- answer examination-style questions
Concept Framework
Accounting Policies
Accounting policies are the specific methods and procedures used by a business to prepare its financial statements.
These policies guide how transactions are:
• recorded
• measured
• presented
Examples of Accounting Policies
• method of depreciation (straight-line or reducing balance)
• inventory valuation method (FIFO or average)
• treatment of doubtful debts
Importance of Accounting Policies
Accounting policies ensure:
• consistency in financial reporting
• comparability between periods
• reliability of financial information
Disclosure of Accounting Policies
Businesses must disclose the accounting policies used in preparing financial statements.
This allows users to:
• understand how figures are calculated
• compare results between businesses
• make informed decisions
International Accounting Standards (IAS)
What are IAS?
International Accounting Standards (IAS) are guidelines developed to standardise accounting practices globally.
They ensure that financial statements are:
• consistent
• comparable
• transparent
Purpose of IAS
IAS help to:
• reduce differences in accounting practices
• improve reliability of financial information
• enable comparison between international businesses
Example
Inventory is valued using:
This rule is influenced by international accounting standards.
Relationship Between Policies and IAS
IAS → Provide guidelines
Accounting Policies → Apply those guidelines in practice
Worked Examples
A business uses:
• straight-line method for depreciation
• FIFO for inventory valuation
These are its accounting policies.
They must be:
• applied consistently
• disclosed in financial statements
📌 Additional theory-based questions are available in the
🎯 Question Papers + YouTube Explanation section.
Students should practise explanation questions regularly.
Structured Practice
Level 1 – Concept Check
Define accounting policies.
What is IAS?
Level 2 – Application Practice
Explain why accounting policies must be disclosed.
Level 3 – Examination Style Question
Explain the importance of International Accounting Standards.
(4 marks)
📌 Additional structured adjustment questions are available in the 🎯 Question Papers + YouTube Explanation section.
∗ Additional structured questions are available in the Question Papers and YouTube Explanation section. Students should practise journal corrections and Suspense Account preparation regularly and review video explanations for procedural clarity.
Enrolled students may submit questions from recognised textbooks, past examination papers or other genuine academic material for expert clarification through the Student Doubt Support facility.
Proficiency Check
Students who believe they understand this topic should attempt:
- Explain the role of accounting policies.
- Explain why IAS are important for global businesses.
- Explain how accounting policies affect financial statements.
If unsure, review the lesson.
Detailed Activity Solutions
Solution
Accounting policies must be disclosed so that users understand how financial statements are prepared.
This allows comparison and improves transparency.
How This Topic Appears in the Examination
This topic commonly appears through:
• definition questions
• explanation questions (2–4 marks)
• application to scenarios
Examiners frequently assess:
• understanding of policies
• role of IAS
• importance of disclosure
Students should practise regularly and review video explanations.
Enrolled students may submit questions from recognised textbooks, past examination papers or other genuine academic material for expert clarification through the Student Doubt Support facility.
Self-Assessment Checklist
- I understand historic cost
- I understand money measurement
- I can apply both principles
- I can answer theory questions clearly
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