TaxTMI 
TaxTMI 
ICDS - I : Accounting Policies (w.e.f. AY 2017-18)
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....nting policies are those policies whose impact on financial statements is of significant magnitude. They often influence the judgement of the readers and users of financial statements. • While it recognizes the fundamental accounting assumptions of going concern, consistency and accrual, it does not recognize the concepts of "materiality" and "prudence" in selection of accounting policies. • Treatment and presentation of transactions have to be governed by their substance and not merely by the legal form. • Marked to market loss or an expected loss is not to be recognized unless recognition of such loss is in accordance with the provisions of any other ICDS. 2. Fundamental accounting assumptions:- ....
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.... that revenues and costs accrue as they are earned or incurred and recorded in the previous year to which they relate. Actual receipt or payment is not a relevant. (e.g., Section 40, Section 40A and Section 43B) Income accrues when there "arises a corresponding liability of the other party from whom the income becomes due to pay that amount." [CIT v Excel Industries Limited 2013 (10) TMI 324 - SC ] Note:- ICDS provides that if the fundamental accounting assumptions of Going Concern, Consistency and Accrual are followed, specific disclosure is not required. If a fundamental accounting assumption is not followed, the fact shall be disclosed. Revised Form 3CD of tax audit report provides necessary columns ....
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....its legal form. Representing a legal form that differs from the underlying economic phenomenon would not result in a faithful representation. • Marked to market loss or an expected loss shall not be recognised unless the recognition of such loss is in accordance with the provisions of any other Income Computation and Disclosure Standard. Note:- • The ICDS prohibits change in accounting policies unless there is a reasonable cause for such a change. The expression "reasonable cause" has not been defined and would have to be examined on a case to case basis. • If the change in accounting policy is found to be bona fide, imperative and driven by commercial, contractual or statutory compulsions, such a c....
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....of such change shall be appropriately disclosed in the periods in which the change is adopted. While ICDS provides for disclosure of such change in two years namely, the year in which change is adopted and when it takes effect for the first time. Disclosure Requirements - As per Form 3CD, the following must be disclosed: • Significant accounting policies adopted. • Changes in accounting policies with material impact, including the financial effect if quantifiable. • Changes expected to impact future years, even if they do not materially affect the current year. • Non-compliance with fundamental accounting assumptions, if any. Fundamental Accounting Assumptions, ICDS I ....