The accounting policy of the organization is developed beforehand. It may undergo changes during the company’s further activity. You may learn how it happens from the article below. 

 

The accounting regulation “Accounting policies of an organization” RAS 1/2008 was approved by the Order of the Ministry of Finance of the Russian Federation No 106n, dated October 6, 2008. It has replaced RAS 1/98 and is valid since January 1, 2009. 

On the one hand, RAS 1/2008 has preserved the continuity with RAS 1/98 and has not introduced any changes into the life of Russian organizations with regard to the organization and disclosure of the accounting policy. On the other hand, RAS 1/2008 contains a range of new provisions, which were absent before.

It is worth to mention that the present RAS has expanded the quarters, which have the right of accounting policy making. Now it may be not only a general accountant, but any person, who is liable for the accounting of record-keeping in the organization (paragraph 4 RAS 1/2008).

According to the order established by RAS 1/2008 the company may approve all forms of primary accounting documents in the accounting policy, not only the ones, which have no standard form.

IFS principles may be considered as well for the formation of the accounting policy. The organization may rely upon the International Financial Standard in particular, if there are no regulatory legal acts on the methods of accounting record-keeping on any specific question (paragraph 7 RAS 1/2008).

RAS 1/2008 includes a more detailed procedure of adjustment of book-keeping reports when introducing changes into the accounting policy Provided that the effects of changes are appreciable, the remain is modified on the line  “Unappropriated Balance (pending loss)”.

At present, changes in the accounting policy may be performed not only from the beginning of the report year, if there is a reason of such changes.

It is remarkable that the same Order of the Ministry of Finance of the Russian Federation No 106n, dated October 6, 2008 approved one more provision, RAS 21/2008 “Changes of imputations”. This RAS introduced the notion of «Changes of imputations” (Paragraph 2), which is defined as an adjustment of the asset value (liability) or the amount, reflecting the repayment of the asset value, which is conditioned by the arrival of fresh information, and is performed on the basis of the estimation of the actual position in the organization, expected future profits and obligations, but is not a correction of errors in the financial statements. RAS 21/2008 allows to reconsider such criteria, as a reserve for doubtful debts and the availability period for basic assets (provision 3, RAS 21/2008). However, it is necessary to mention such corrections in the note to the annual accounting report.  

How to Make Accounting Policy

According to paragraph 2 of RAS 1/2008 the accounting policy is a totality of accounting methods accepted by the organization, including primary observation, cost measurement, grouping and summarization of economic events.

 

Your attention should be paid to the fact that “other corresponding methods and procedures” have appeared.

Thus, the main purpose of the accounting policy is to confirm the methods of accounting record-keeping, used by the company, in written form. Indeed, various accounting methods of assets and liabilities are frequently established in the regulatory documents on accounting. The organization has a right to select one out of a number of accounting methods, as provided for in the legislation, and to confirm it in the accounting policy. Whereas the legislation has not adjusted the method of accounting record-keeping on some accounting transactions, the accounting policy making of the company may work out and approve the corresponding method on the individual basis.

Accounting policy making should be considered as one of the most important elements of tax optimization. Competent elaboration of the order on the accounting policy will allow to select an optimum alternative of the accounting for the organization, which is efficient both from the point of view of accounting, and from the viewpoint of tax regime.

On the one hand, accounting policy is a document for the incompany use, and a practical guidance for all employees of the accounts department. At the same time, some part of the accounting policy is provided for the tax authorities. It comprises of notes at the delivery of annual accounting reports.

All the users of the accounting policy may be divided into external and internal ones.

Accounting policy in a general sense is a collection of internal documents of the organization, related to the accounting record-keeping, which is used by:

– the accounting department of the organization for the provision of typical procedures on the accounting, standardization of accounting, provision of reliability of reports on account of production methods development , and as part of control environment;

– control subdivisions of the organization (inspectors, internal auditors)  for the purpose of control over the accounting processes and their subjects, which are the accounting service members, for the confirmation of report characteristics and as a part of the control environment.

– organization’s methodologists as an apparatus for the observance of accounting policies by the organization;

– a company’s management team in order to provide the compliance of activity to quality standards, standardization of the accounting processes, making of reasonable managerial decisions, i.e. for the purpose of enhancement of the efficiency of the company’s management behavior.

External users apply the order of the accounting policy for the following purposes:

– auditors — for the purpose of confirmation of reports reliability;

– other reports users — for the purpose of understanding reports, evaluation of its separate characteristics (through the disclosure of accounting policy).

Therefore, the accounting policy has an utmost importance for both the organization itself, and external users (represented by tax authorities of the state). Well-defined and competent accounting policy is considered to be a characteristic of high accountant’s qualification.

The accounting policy is annually compiled by the accountant general or other public servant, on which the task of accounting record-keeping in the organization is imposed. It is approved by the head of an organization.

RAS 1/2008, as well as a previous RAS 1/98 is extended to:

organizations, irrelevant to their business legal structures, in the accounting policy  making;

organizations, who publish financial statements (fully or partially) in accordance with Laws of the Russian Federation, instruments of incorporation or on theirs own responsibility concerning the disclosure of the accounting policy.

Methods of accounting record-keeping, which are selected for the accounting policy making, are used since January 1 of the year, following the year of its approval by the head of the organization. They are used by all affiliated organizations, regional offices and other units of business (including the assigned ones to a separate balance sheet) irrespective of their location. A newly established organization should accomplish the accounting policy until the first publication of the financial statements, but not later than 90 days after the acquisition of rights of juridical persons (from the date of entry in the Uniform State Register of Legal Entities). The accounting policy, accepted by the newly established organization, is considered from the date of its registration.

Conditions, which allow to implement the accounting rules and requirements as part of director’s order on the accounting policy, are as follows:

– a working chart of accounts for bookkeeping, which comprises of synthetic and analytical accounts for the accounting record-keeping;

– forms of primary accounting documents for the procession of economic events;

– document forms for the internal accounting reports;

– the procedure for carrying out of inventories of assets and organization’s liabilities.

Conditions, encouraging the application of estimation methods and accounting techniques of property, organization’s liabilities and accounting transactions, are as follows:

– rules of the document flow;

– methods of processing of accounting information;

– control procedure for the business transactions.

The selected estimation methods and accounting techniques for the dynamics of property, the organization’s liabilities and business activities are reflected in the order on the accounting policy, taking into account the various methods and techniques, which are admitted by the  legislation and normative acts on the accounting. Provided that the normative documents specify no method of accounting for the specific question, the organization should work out the corresponding method on the basis of current regulations on the accounting when making the accounting policy.

The order of admission of assets and liabilities of the organization in accounting, the methods of grouping and evaluation of economic events, repayment of asset value, technique of accounting movement of property and liabilities refer to the methods and techniques of accounting.

The set of conditions, allowing to implement the accounting requirements and rules, and also conditions, promoting the application of estimation methods and accounting techniques of property, organization’s liabilities and accounting transactions, makes the organizational and technical aspect of the accounting policy.

The selected estimation methods and accounting techniques for the dynamics of property, the organization’s liabilities and business activities make a methodological aspect of the accounting policy.

Let us consider the subject matter of conditions, which make organizational and technical aspect of the accounting policy of the organization.

The working chart of accounts for bookkeeping, which comprises of synthetic and analytical accounts for the accounting record-keeping is worked out by the organization, depending on the following conditions;

– the complex of synthetic account records, contained in the plan of the accounts of business and financial performance of the organization and instructions on their application, representing the scheme of registration and the grouping of economic events (assets, liabilities, financial and accounting transactions etc.) in accounting records;

– groups of business activities, typical for the organization, depending on the industry characteristics, legal organizational forms, types of activity etc.

The working chart of accounts should contain a complete list of control accounts (primary accounts), sub-accounts (secondary accounts), and analytical accounts. The organization may introduce the additional control accounts into the working chart of accounts for bookkeeping using free accounting codes in order to record the specific operations as agreed upon by the Ministry of Finance of the Russian Federation.The nomenclature of sub-accounts (secondary accounts), mentioned in the plan of the accounts, is made within the account working plan and takes into account the management demands, which includes the economic analysis of business activities, control, and the requirements for book-keeping reports. The organization may specify the matter of sub-accounts, mentioned in the account-plan book keeping, exclude and unite them, as well as introduce additional sub-accounts.

A complex of analytical records accounts within the account working plan is set by the organization itself, taking into account the regulatory acts on bookkeeping and domestic needs of the organization.

The forms of primary accounting documents for the documentation of economic events, which have no standard forms, are developed individually by the organizations according to the requirements of article 9 of the Federal law «On Accounting”. They should have legal effect and contain the following mandatory requisites:

– the name of the document, reflecting financial and economic nature of the economic operation. The document may contain no form code, if it is developed by the organization itself, which is present in the accounting policy. Nevertheless, the presence of code is obligatory, providing that the document is processed using an automated method;

– the date of compilation of the document, which enables to define the specific transaction date, necessary for the purpose of the requirement of completeness, continuity, and priority of content over the legal form in the accounting records. The date of compilation of the document is the day of its signing, and approval; as for the act, it is the day of the event execution;

– the name of the organization, on behalf of which the document is made. This allows to determine the belonging of a primary accounting document to a particular organization;

– the nature of the economic operation, which should strictly correspond to the name of the executed  document;

– indicators of business transactions in physical and monetary terms;

– names of executive officers, responsible for the fulfillment of business transactions and correctness of its documentation, and personal signatures of the indicated individuals. The authority to sign documents on the movement of accounting items is prescribed to specific executive officers according to the orders of the director. The assignment is necessary to take control over the justification of business transactions fulfillment. In this respect the documents should contain the clarifications of signatures of such individuals. When the executive officer, who has a signatory power on primary documents, is absent, the document may be signed by an individual, executing his duties, or a deputy of that executive officer. In this case it is obligatory to state a real post of the signer, and his name.

Absence of requisites in the primary accounting documents, specified by the legislation on accounting, is considered to be an infringement of accounting rules. All forms of primary accounting documents, which are not typical, or unified, are described in the accounting policies of the organization (assignment, preparation and signing procedure) and are attached to it.

The forms of documents for the internal accounting are assigned in the accounting policy, and are intended for the internal users (different types of managers) for the purpose of management decision making, control over business activities of the whole organization or organization departments (industrial, economic and administrative ones). The procedures for preparing documentation and unique forms of reporting are absent in connection with the specific activities of the organizations and different information needs of accounting information users.

The content of internal accounting report forms is determined by particular characteristics of the organization activities: the form of ownership; organization level; organizational structure of management; type of industrial activity; technological characteristics of industrial processes;

 

particular characteristics of procurement and sales activity etc.

Form types of internal accounting reports and their contents are set up individually by the organization on the basis of general requirements to them:

– addresses, which is the orientation of the form content and periodicity of their making-out for the specified users;

– efficiency, i.e. the ability to make up the forms in the short period of time (a shift, a working day, a week, a five-day working week etc.);

– compliance to the balance of the exceeding profit from the use of accounting information over the expenditures, connected with the preparation of reporting.

The order of the director on the accounting policy states the structure and form of internal accounting reports, periodicity and terms of their submission, as well as the executives responsible for their making-out, and the potential users.

The procedure for carrying out inventories assets and liabilities of the organization is established by methodological instructive regulations on taking inventory of property and financial liability, approved by the Order of the Ministry of Finance of the Russian Federation No 49, dated June 13, 1995. Periodic inventory of accounting items provide reliability of accounting population. The main objective of the inventory is to detect a real presence and condition of property and organization liabilities, their matching to the accounting figures. In case of imbalance revelation, the accounting figures should be brought to the real value.

The procedure for carrying out of inventories is described in the accounting policies of an organization:

– number of inventories in the accounting year;

– dates for the inventory conduction;

– the list of assets and liabilities, the presence, condition and evaluation of which is verified during every inventory;

– the order of settlement of the detected imbalance etc.

Besides, the accounting policy indicates the procedure of the obligatory inventory in accordance with legislation:

– during the transfer of property for leasing, reacquisition, sale and other cases of this kind;

– before the preparation of annual accounting reports (except for property, the inventory of which was carried out no sooner than October 1 of the report year);

– during change of materially-responsible persons;

– during the revelation of embezzlement, abuse or destruction of property;

– In case of natural disaster, fire or another emergency due to extreme conditions;

– during the readjustment or liquidation of the organization and otherwise.

The results of inventory on the accounting policy on the director‘s order should be represented in accounting records and reports for that month and year, when the inventory was finished.

The rules of document flow are established for the normalization of the work on creation, control and use of primary accounting documents in the accountant’s activity, as well as timeliness of data making of the accounting reports. For this purpose the schedule of documents flow is made as a component of the accounting policies of an organization, which is included into it and approved by the director. It has a form of scheme and includes a list of jobs on making up, checking and processing of documents, performed by each organizational unit and all executors of the corresponding work together with the indication of their interrelation and the execution period.

The schedule of document flow is made according to the requirements contained in the Provision on documents and document flow in accounting records, approved by the order of the Ministry of Finance of the USSR No 105 dated July 29, 1983. It should set the rational document flow, i.e. specify an optimal number of units and executors for the passing of every primary document, determine the minimum period for the keeping of it in the unit, and promote the improvement of all accounting work and reinforcement of the accounting audit function.

The employees of the organization should make and submit documents, related to the sphere of their activity, according to the document flow schedule. Therefore, every executor is given an extract from the schedule. There are documents, related to the sphere of activity of the executor and the terms of their submission as well as the organizational units, which provide the stated documents.

The general accountant of the organization takes a time schedule control over the executors, and the responsibility for the making up of timely and high quality documents. Persons, who created and signed the documents, bear responsibility for the prompt delivery of them for the reflection  in the accounting records and reports, for the reliability of the information written and reliability of the data contained in the documents.

General requirements for the document flow are as follows:

1) making of a primary document at the moment of fulfillment of a business transaction in compliance with the requirements of its documentation;

2) surrender of documents into the accounts department for taking control over the timeliness and completeness of handing-over for the accounting processing;

3) verification of the accepted primary documents by the accounts department:

– according to their form in compliance with the requirements of completeness and correctness of documentation, completion of mandatory requisites;

– according to the content in compliance with the requirements of validity of business transactions, logical matching of certain parameters of the document, and correctness of arithmetic calculations;

4) documents processing in the accounts department:

– rating (pricing);

– grouping of similar documents on the economical content;

– account assignment, which is indicating the correspondence of operations account in the primary accounting document, resulting from the document content;

5) delivery of primary accounting documents to archives after making of accounting records on their ground.

The methods of processing of accounting information as a part of organizational and technological aspect are the aggregate of resources of accounting information procession. Such equipment determines the level and depth of the performed processes by means of automation, a qualitative complex of applied program products, use of accounting forms.

The choice of program products for the application in the accounting process should rest upon their following possibilities

– making up of accounting registers of typical and optional types, and their reproduction in printed and visual form;

– writing up, processing and control over the primary accounting documents of standard forms, and forms approved in the accounting policies of the organization;

– accumulation of results and making calculations (interests, depreciation amounts, foreign exchange differences etc.) for the preparation of necessary accounting information;

– Exploitation of the data received and generalized in the preceding accounting periods etc.

The observed operation conditions of the accounting department make the basis for the organization of the accounting work in the company:  the selection of structure for the accountant’s unit, receiving the area of the accounting work, subordination of specialists etc.

The control for business transactions is determined by the accounting policy, which includes a substantial examination of business transactions, by means of primary accounting documents, reflected subsequently in the accounting registers, from the perspective of validity, cost-effectiveness, principle correspondence, and accounting requirements and rules. The follow-up control is conducted in accordance with the adjusted accounting policy principles with the assignment of people, responsible for the accounting actions and the assignment of monitor centers, who should process the accounting information on all stages.

Methodological aspect of accounting policies determines the criteria of accounting items, the procedure for their accounting for obtaining of financial results of activity and evaluation of the financial position of the organization. When determining the accounting policies, the organization should reveal the methods of estimation and record keeping, which are rather essential. The essentiality is admitted on the basis of the fact, that a user of accounting reports cannot objectively estimate the results of work of the organization and get an insight into the property and financial condition and the movement of funds. These methods should be uncovered in the notes of an annual accounting report of the organization.

There are the following criteria of property and liabilities of the organization in the accounting records and reports, coming from the variants allowed in the regulative documents.

1. Only actual costs for property developer (investor) should be used at the estimation of unaccomplished investments.

2. The investments, equal to the actual costs for the investor, are accepted in the accounting.

Professional participants of the securities market may consider security papers at market price, at the change of market quotation on them, reassessing their financial investments.

Organizations, which are not the professional participants of the securities market and have quoted equity investments, which quotes are regularly published in the bookkeeping balance sheet at the end of the reporting year, display them at market value, even if it is lower than the value, accepted in the accounting.

3. Fixed-capital assets are accepted to accounting at their actual costs, making their initial cost. Not more frequently than once a year (for the beginning of the reporting period) the organization has the right to reevaluate the items of fixed assets on reproduction costs by means of indexation or direct overcasting on the document supported market prices.

They are reflected by the depreciated cost (original or reproduction cost minus accumulated depreciation for the whole period of object usage) in the accounting balance-sheet. The depreciation of fixed assets can be calculated by the following methods:

– a straight-line method;

– the method of writing off the value in proportion to the volume of production (works, services);

– a diminishing-balance method;

– the method of writing off the value according to the sum of the digits of the years of useful life.

4. Intangible assets are accepted to accounting at their actual costs, making their initial cost. Intangible assets are reflected by the depreciated cost (original cost minus accumulated depreciation for the whole period of object usage) in the accounting balance-sheet. As for intangible assets, when it is impossible to define their useful life, the rate of depreciation is set up to 20 years (but not exceeding the duration of the organization).

There are the following methods of depreciation accrual:

– straight-line method, on the basis of norms, accrued by the organization and based on the term of its beneficial use;

– the method of writing off value in proportion to the volume of production (works, services);

The goodwill must be adjusted within the space of 20 years (but not exceeding the duration of the organization). Depreciation expenses on the positive business reputation are reflected in the accounting records by means of reduction of its initial cost. The negative business reputation is evenly written off for the financial performance as miscellaneous costs.

5. Incomplete production in mass and batch production can be reflected in the accounting balance-sheet according to real factory costs, according to standard (scheduled) factory costs, according to direct items of expenditure, according to the value of raw material, material and semi-manufactured products.

Incomplete production in single piece production is estimated in accounting balance-sheet according to the factual incurred charges.

6. Business inventories are accepted to the accounting at their actual cost. As for sales organizations, and acquired for sale goods, they are estimated at the price of acquisition (in wholesale organizations), and according to sale value with individual accounting of price increase (discounts) (in the retail organizations).

At the release of business inventories in progress or any other disposal, their evaluation is made by one of the following methods:

– at the cost of every unit of value;

– at the average cost;

– at the cost of the first acquisition of business inventories (FIFO method).

The evaluation of business inventories is made, depending upon the accepted method of evaluation of inventories at their disposal (apart from goods, estimated by their sale value) at the end of the accounting period.

7. The expenditures of future periods are written off over a period, to which they are referred, evenly, proportionally to the volume of production, or using other methods.

8. The authorized (reserve) capital is reflected in the accounting balance-sheet in accordance with the constitutional documents.

9. Reserves are made by the organization in accordance with legislation of the Russian Federation (loss reserve fund of joint-stock company and limited liability company, redemption of bonds and repurchase of own stock), provisions of regulatory documents based on the results of inventories of accounts receivable (provision for doubtful debts), in order to make a regular inclusion of costs incurred for manufacturing costs or for spending during the accounting period (reserves for payment of vacation allowances, payment of annual long-service awards, payment of remunerations according to the results at the year-end etc.). They are reflected in the accounting balance-sheet in the form of remaining balance, passing on to for the subsequent year.

10. Settlements with debtors and creditors are reflected in the amounts, indicated in the accounting records and acknowledged as correct. Loan and credit indebtedness is shown, taking into account the due and payable interests at the end of the accounting period.

When making the accounting policy, it is supposed, that:

assets and obligations of the organization exist separately from the assets and liabilities of the organization’s property owners, and assets and liabilities of other organizations (the economic entity assumption);

the organization will continue its activity in the foreseeable future, and it has no  intention and necessity of winding up or a substantial reduction of its activity and, therefore, their obligations will be covered in accordance with the established procedure (going concern assumption);

accounting policy accepted by the organization is applied consistently from one reporting year to another (assumption of the consistent application of accounting policies);

economic events of the organization refer to the accounting period, in which they took place, irrespective of actual time of receipt or outflow of cash, connected with these events (assumption of the accrual basis of accounting).

Basic principles of discount policy are completeness, timeliness, consistency, rationality, consecution, comparability, deliberateness, and substance over form, property disintegration of the organization.

The requirement of timeliness is called to provide the timely reflection of economic events in the accounting records and reports. The procedure of execution of the present requirement is reflected in RAS 7/98 “Events occurring after the reporting date” (approved by the order of the Ministry of Finance of the Russian Federation No 56n, dated November 25, 2008) and RAS 8/01 “Contingency of economical activity” (approved by the order of the Ministry of Finance of the Russian Federation No 96n, dated November 28, 2001).

Deliberateness supposes a greater willingness to acknowledging of expenses and liabilities, rather than potential gains and assets, and non-admission of hidden reserves creation.

The principle of substance over form means that the economic events should be reflected, coming not only from the legal form, but from their economic content and business environment. To put it differently, it is important to state not only the name of a certain agreement for the accounting purposes, but the economic content of these operations, which are carried out according to the agreement.

According to the principle of accounting policy consistency the analytical records data should be identical to turnovers and balances on the accounts of synthetic records for the last calendar day of every month.

The requirement of rationality of the accounting policy supposes rational and economical accounting record-keeping coming from the conditions of economic activity and the size of commercial organization. For example, the rationality of non-inclusion of associated companies’ indices into the summary reporting of the holding company should be approved by the independent auditor.

As a general rule, only those questions are reflected in the accounting policy, which have several possible decision options in legislation. A legal practitioner has a right to choose one of such variants in the case of such questions. In case any question is resolved clearly in legislation, it requires no reflection in the accounting policy. For example, the norms of Federal law «On Accounting» are obligatory for all organizations at the carrying out of business accounting; therefore there is no necessity to indicate that is has been performed according to the requirements of the present Federal law. It is clear without any additional explanations.

RAS 1/2008 allows organizations to rely upon the International Financial Standards, if there are no regulatory legal acts on the methods of accounting record-keeping on any specific question.

IAS 1 «Financial Reporting” and IAS 8 “Accounting Policies, Changes in Accounting Estimates and Errors” are dedicated to questions on the application of the accounting policy.

IAS 1 emphasizes the importance of information for the users on the assessment principles used for the preparation of accounts statements. If more than one assessment principles are used within this procedure, for example, when certain asset classes are accounted using both original and revalued price, it is necessary to indicate the category of assets, to which each of the mentioned principles is applied. IAS 1 supposes the necessity of detailed analysis in arriving at the detailed data degree, concerning the basic provisions of accounting policy. In particular, the decision of disclosure on the present information should not be based only upon the size of amount involved. The standard points out that the data on the accounting treatment of some operations may be of utmost importance due to the type of business of the company, even if the sums for the transactions on the current and previous periods have been very small.

The standard also requires to reveal the provisions of accounting policy in relation to all material transactions, on which there are no specific requirements in IAS and which are developed by the company on the individual basis in accordance with IAS 8. A specified standard of the financial accounting supposes the hierarchy of principles, which should be followed at the choice of the accounting policy in this case. The basic requirement of the standard consists in the necessity of application of professional judgment at the choice and application of accounting policy, which would secure the provision of relevant and reliable information for the users at the acceptance of economic decisions. Eventually, the reporting procedure should meet several fundamental criteria. They are as follows:

– it provides a valid position of the company, the results of its financial and economic activities and the flow of funds;

– it reflects the economic contents of operations, other events and conditions, but not only its legal form;

– it is a neutral procedure, which is not aimed at a specific result;

– it is prepared  on the principle of deliberateness;

– it is full in all existing aspects.

Useful source. The company’s management team should consider the following sources of information when applying this judgment:

– the requirements and guidance standards and interpretations, which consider the analogue and similar questions;

– corresponding notions, recognition criteria and assessment principles of assets, liabilities, incomes and expenditures, provided in the conception.

When applying the judgment, the company’s management team may also study the provisions of document, issued lately by other organs, which use a similar conception for the development of Financial Reporting Standards, other literature on the bookkeeping and the branch practice, if all this does not contradict the provisions (a) and (b), introduced above.

The norms of IAS 1 recommend the representatives of profit organizations to take the following requirements at the decision making on the revealing of any provisions of accounting policy into account: if such information will assist users in understanding of how the economic events are reflected in the reports in present results on the financial and economic activities and the company position. Disclosure of provisions in the accounting policy is very useful in the situations, when the standards and interpretation provide the choice option. For example, the participant of joint venture may acknowledge his share in the jointly controlled entity using the method of proportional consolidation or the equity method.

The information on the accounting treatment of some operations may be of utmost importance due to the type of business of the company, even if the sums for the transactions are very small.

Difficult disposition. Every company should consider the character of its activity and the accounting policy, which, as the users of financial accounting may expect, should be disclosed for such companies. For example,

– if the company has a fundamental foreign subdivision or foreign currency transactions, then it should disclose the accounting policy in relation to recognition of income and expenses from the exchange rate change;

– at the acquisition of companies it is necessary to disclose the provisions of accounting policy regarding appraisals of goodwill and minority interests.

The process of accounting policy adoption requires the application of various judgments. Therewith, these judgments may influence the amounts, accepted in the financial accounting; and IAS 1 requires uncovering of basic provisions of the accounting policy or other sections of appendix. For example, it is necessary to apply a judgment:

– at the clarification if the financial assets are investments, which are hold to maturity;

– at the detection of the moment, when practically all fundamental risks and fees, connected with the possession of financial assets and rented assets, are transferred to another company;

– at the detection of the fact, if certain operations on the sale of goods are financing arrangements according to their contents, due to which they do not lead to the  receipt of income;

– in the case when it is necessary to establish if the company is a special purpose entity.

International standard also requires a disclosure of information on changes in accounting policy in the financial statements. IAS 8 differentiates changes, made in compliance with the first use of standard or interpretation, and changes in the accounting policy, done on the own initiative, and also define various requirements for the information disclosure in every separate case. If the standard or the interpretation has been issued but not taken effect or being applied, it is necessary to point out the possibility of their probable impact on the outcome.

Notwithstanding that the main issues of accounting policy are considered in two standards, the company should take into account all international financial reporting standards at its composition and application. At the same time it is necessary to remember, that there will always exist judgments at the use of accounting policy, which should be revealed in the notes to the financial statements on IAS.