The accounting policies are a vital document for any enterprise that plans or is already transitioning to International Financial Reporting Standards (IFRS). This document defines the basic principles and methods a company uses to prepare and present its financial statements per the requirements of IFRS.
Developing accounting policies is also essential in ensuring compliance with international standards and achieving clarity of financial information for reporting users.
the main principles and methods to recognise and reflect business transactions in financial statements.
how assets, liabilities, and changes in equity are reflected in financial statements and what methods of valuation and measurement of assets and liabilities are used, for example, fair value measurements, provisions for expected credit losses, amortisation cost, and others.
requirements for disclosure and presentation of information in financial statements, including information about critical estimates, assumptions and other sources of estimation uncertainty that require the most difficult, subjective or complex judgments of management and are used by them in the preparation.
rules for displaying events that occurred after the reporting period but before the approval date of financial statements, etc.
Importance of development of accounting policies:
accounting policies help comply with the requirements of IFRS, consistently apply them in practice, and reduce the tax risks of fiscal interpretations.
this document makes financial statements more understandable and focuses on key aspects of accounting practices.
accounting policies become the basis for the beginning of the audit process and help auditors understand an entity’s methods and approaches used in accounting.
