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ICDS I : Accounting Policies

Income Tax - Income computation and disclosure standards - 02 - ICDS - 01 - I - Accounting policies (w.e.f. AY 2017-18) Accounting Standards U/s 145(2) 1. Scope:- The scope of the ICDS is limited to significant accounting policies applied while computing income under the head Profits and gains of business or profession or Income from other sources . ICDS I does not deal with maintenance of books of account. It is concerned with application of accounting policies and assumptions while computing i .....

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events shall be governed by their substance and not merely by their legal form, and that mark-to-market loss or an expected loss shall not be recognised unless the recognition of such loss is in accordance with any other ICDS - relate to computation of income, and not disclosure. 2. Fundamental accounting assumptions:- Certain fundamental accounting assumptions form the basis of preparation and presentation of financial statements. They are usually not specifically stated, because their accepta .....

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to continue business or profession. When computing the total income, an evaluation of the assessee s ability to continue as a going concern has to be made. Note: The ICDS however does not provide specific guidance as to the manner of computation in the event that the assumption of going concern is not met. In the absence of specific mandate in this ICDS, an assessee may rely upon this treatment prescribed by the Framework of Financial Statements issued by ICAI. (b) Consistency:- It is assumed th .....

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her party from whom the income becomes due to pay that amount." [CIT v Excel Industries Limited] 2013 (10) TMI 324 - SUPREME COURT Note:- ICDS provides that if the fundamental accounting assumptions of Going Concern, Consistency and Accrual are followed, specific disclosure is not required. If a fundamental accounting assumption is not followed, the fact shall be disclosed. Revised Form 3CD of tax audit report provides necessary columns for such disclosures. 3. Accounting Policies:- Account .....

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those principles in the specific circumstances of each enterprise calls for considerable judgement by the management of the enterprise. In the context of this ICDS, accounting policies would mean the principles and methods of computation of total income. 4. Selection and Change of Accounting Policies:- ICDS states that the accounting policies adopted by a person shall be such so as to represent a true and fair view of the state of affairs and income of the business, profession or vocation. To ac .....

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menon would not result in a faithful representation. Marked to market loss or an expected loss shall not be recognised unless the recognition of such loss is in accordance with the provisions of any other Income Computation and Disclosure Standard. Note:- The ICDS prohibits change in accounting policies unless there is a reasonable cause for such a change. The expression reasonable cause has not been defined and would have to be examined on a case to case basis. If the change in accounting polic .....

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