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ICDS-I provides that an accounting policy shall not be changed without ’reasonable cause’. The term ’reasonable cause’ is not defined. What shall constitute ’reasonable cause’.

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Dated: 8-9-2017

Manual - ICDS I : Accounting Policies

Under the Act, ’reasonable cause is an existing concept and has evolved well over a period of time conferring desired flexibility to the tax payer in deserving cases. The expression “reasonable cause” has not been defined and would have to be examined on a case to case basis.

Any change in accounting policy should be adjudged as ‘reasonable’ if it satisfies the criterion of AS 5. As per AS 5, a change in an accounting policy should be made only if the adoption of a different accounting policy is required by statute or for compliance with an accounting standard or if it is considered that the change would result in a more appropriate presentation of the financial statements of the enterprise.


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