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A change in Accounting Policy is justified to :
- a)Comply with accounting standard
- b)Comply with Law
- c)Ensure more appropriate presentation of Financial Statements
- d)All of the above
Correct answer is option 'D'. Can you explain this answer?
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A change in Accounting Policy is justified to :a)Comply with accountin...
Understanding Changes in Accounting Policy
A change in accounting policy is significant for various reasons, ensuring that financial statements are reliable and relevant. The justification for such changes can be summarized as follows:
Compliance with Accounting Standards
- Accounting standards, such as IFRS or GAAP, provide a framework for preparing financial statements.
- Adopting or changing policies to align with these standards ensures that the financial statements are consistent and comparable.
Compliance with Law
- Certain laws and regulations dictate how financial information should be reported.
- Changing accounting policies may be necessary to comply with these legal requirements, preventing potential legal issues or penalties.
More Appropriate Presentation of Financial Statements
- Accounting policies impact how transactions are recognized, measured, and presented.
- A change may lead to more accurate and relevant representations of a company’s financial position and performance, enhancing the decision-making process for users of financial statements.
Conclusion
- In summary, a change in accounting policy can be justified for multiple reasons, including compliance with accounting standards and laws, as well as improving the presentation and relevance of financial statements.
- Hence, option 'D'—"All of the above"—is correct, as it encapsulates the multifaceted rationale behind such changes.
A change in accounting policy is significant for various reasons, ensuring that financial statements are reliable and relevant. The justification for such changes can be summarized as follows:
Compliance with Accounting Standards
- Accounting standards, such as IFRS or GAAP, provide a framework for preparing financial statements.
- Adopting or changing policies to align with these standards ensures that the financial statements are consistent and comparable.
Compliance with Law
- Certain laws and regulations dictate how financial information should be reported.
- Changing accounting policies may be necessary to comply with these legal requirements, preventing potential legal issues or penalties.
More Appropriate Presentation of Financial Statements
- Accounting policies impact how transactions are recognized, measured, and presented.
- A change may lead to more accurate and relevant representations of a company’s financial position and performance, enhancing the decision-making process for users of financial statements.
Conclusion
- In summary, a change in accounting policy can be justified for multiple reasons, including compliance with accounting standards and laws, as well as improving the presentation and relevance of financial statements.
- Hence, option 'D'—"All of the above"—is correct, as it encapsulates the multifaceted rationale behind such changes.
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A change in Accounting Policy is justified to :a)Comply with accounting standardb)Comply with Lawc)Ensure more appropriate presentation of Financial Statementsd)All of the aboveCorrect answer is option 'D'. Can you explain this answer?
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