American Journal of Economics, Finance and Management
Articles Information
American Journal of Economics, Finance and Management, Vol.1, No.3, Jun. 2015, Pub. Date: May 14, 2015
Choice of Accounting Policy: Effects on Analysis and Interpretation of Financial Statements
Pages: 190-194 Views: 2530 Downloads: 8245
Authors
[01] Sunday Adebayo Alayemi, Faculty of Business and Social Sciences, Department of Accounting, Adeleke University, Ede, Osun State, Nigeria.
Abstract
This paper examined the effect of accounting policy adopted by the reporting entity on the analysis and interpretation of financial statements. It is mandatory according to the Statement of Accounting Standards (SAS NO.1) and International Accounting Standards (IAS 1) for every reporting entity to disclose the accounting policy adopted in the preparation and presentation of financial statement. Accounting policies are very important for the proper understanding of the information provided in the financial statements. An entity should clearly state the accounting policies it has used while preparing and presenting the financial statements. Disclosure of accounting policies is important because many accounting standards allow alternative treatments for a same transaction or item. Users of financial statements will not be able to compare the financial information with other entities if the accounting policies are not cleared outlined. Therefore, by stating the policy adopted, this will make it possible for the readers and users of financial statements to make informed decision. The users will as well be able to see the impact of accounting policies on the income statement and financial position of the reporting entity within the industry.
Keywords
Accounting Policy, Financial Statement, Reporting Entity, SAS, IAS
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