Difference in AS issued by ICAI and Income Tax: AS 1 - DISCLOSURE OF ACCOUNTING POLICIES

The CBDT has now notified the Income Disclosure and Tax Accounting Standards vide notification no. 32/2015, F. No. 134/48/2010-TPL, dated March 31, 2015. Comparative study of Accounting Standard issued by ICAI, and notified TAS has been given hereunder:

Accounting Standards issued by ICAI	Income Computation and Disclosure Standards
AS 1 - DISCLOSURE OF ACCOUNTING POLICIES
A. Deals with
"the disclosure of significant accounting policies followed in preparing and presenting financial statements" [Para 2 of (AS) 1]	" Income Computation and Disclosure Standards deals with significant accounting policies" [Para 1]
B. Definition of accounting policies
"The accounting policies refer to the specific accounting principles and the methods of applying those principles adopted by the enterprise in the preparation and presentation of financial statements" [Para 11]	"The accounting policies refer to the specific accounting principles and the methods of applying those principles adopted by the person [Para 3].
C. Selection of accounting policies
The primary consideration in the selection of account policies by an enterprise is that the financial statements prepared and presented on the basis of such accounting policies should represent a true and fair view of the state of affairs of the enterprise as at the balance sheet date and of the Profit or loss for the period ended on that date [Para 17]	Accounting policies adopted by a person shall be such so as to represent a true and fair view of the state of affairs and income of the business, profession or vocation [Para 4]
D. Change in accounting policy
Change in accounting policy should be made only if it is required by statute, accounting standard or if such change will	An accounting policy shall not be changed without any reasonable cause [Para 5] Any  change in an accounting  policy which  has a material effect  shall  be  disclosed.  The  amount  by  which  any  item  is  affected  by  such  change  shall  also  be  disclosed  to  the  extent  ascertainable. Where  such  amount is  not  ascertainable,  wholly  or in  part,  the  fact  shall  be  indicated.  If  a  change  is  made  in  the  accounting  policies  which  has  no  material  effect  for  the  current  previous  year  but which is  reasonably  expected  to  have  a material  effect in later previous years, the fact of such change shall be appropriately disclosed in the previous year in which the change is adopted and also in the previous year in which such  change has material effect for the first time. [Para 7]
E. Substance over form
"The accounting treatment and presentation in financial statements of transactions and events should be governed by their substance and not merely by the legal form." [Para 17]	"The treatment and presentation of transactions and events shall be governed by their substance and not merely by the legal form" [Para 4].
F. Prudence
"In view of the uncertainty attached to future events, profits are not anticipated but recognised only when realized though not necessarily in cash. Provision is made for all known liabilities and losses even though the amount cannot be determined with certainty and represents only a best estimate in the light of available information." [Para 17]	Para 4 provides that "marked to market loss" or an "expected loss" shall not be recognized unless the recognition of such loss is in accordance with the provisions of any other Income Computation and Disclosure Standards
G. Materiality
"Financial statements should disclose all "material" items, i.e. items the knowledge of which might influence the decisions of the user of the financial statements." [Para 17]	Income Computation and Disclosure Standards is silent about the concept of materiality. Since the Act does not recognize the concept of materiality for the purpose of computation of taxable income, the same has not been incorporated in the Income Computation and Disclosure Standards
H. Disclosure of accounting policies
All significant accounting policies adopted in the preparation and presentation of financial statements should be disclosed. Such disclosure should form part of the financial statements It would be helpful to the reader of financial statements if they are all disclosed as such in one place instead of being scattered over several statements, schedules and notes. [Paras 25 & 26]	All significant accounting policies adopted by a person shall be disclosed. Disclosure  of accounting policies or  of changes  therein cannot  remedy a wrong  or  inappropriate treatment of the item [Para 6] 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. [Para 9] Comment: It is not clear where these accounting policies shall be disclosed. Whether in income-tax return or audit report or elsewhere?
I. Transitional Provisions
-	All contract or transaction existing on 01-04-2015 or entered into on or after 01-04-2015 shall be dealt with in accordance with the provisions of this standard after taking into account the income, expense or loss, if any, recognized in respect of the said contract or transaction for the previous year ending on or before 31-03-2015 [Para 10].