A set of principles, rules, bases, guidelines, conventions, and practices that an entity applies in the process of preparing and presenting its financial statements. Accounting policies constitute a framework according to which assets, liabilities, income and expenses are recognized, measured and presented in an entity’s financial statements, in order to enhance the level of comparability of financial information from an entity to another.
Accounting policies have to be implemented consistently within an accounting period and from one financial year to the next. However, there could be situations where an entity needs or is required to change a specific accounting policy (or a set of policies), as in the situation where a new accounting standard or regulatory directive has been issued and become effective, requiring a different accounting treatment.
As a matter of practical necessity, accounting policies have to be regularly revisited/ reviewed in order to update/ reconsider specific accounting and disclosure requirements, time to time.
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