Manual - ICDS I : Accounting Policies

The ICDS is not a mere disclosure Standard because it requires income computation to factor in the elements of this Standard viz accrual, going concern and consistency. The accounting policies mentioned in ICDS-I being fundamental in nature shall be applicable for computing income under the heads “Profits and gains of business or profession” or “Income from other sources. The term “accounting policies” in ICDS I should be read as “computation policies”. This would make the provisions of ICDS I relating to substance over form and non-recognition of mark-to-market losses, applicable only for computation of income, and not for accounting purposes.

Such an interpretation would also mean that the “accounting policies” required to be disclosed by this ICDS would mean the policies followed in the computation of income, and not those followed for the purposes of maintenance of books of account.

 

Accounting Policies: treat ICDS I as computation policies affecting taxable income computation, not books of account. ICDS I should be read as prescribing computation policies for taxable income so that accrual, going concern, consistency, substance over form and non recognition of mark to market losses apply to income computation under business or other sources, and the disclosure requirement concerns the policies used in computing income rather than the policies used for maintaining books of account.