fundamental accounting assumptions

Definition:

Assumptions that the International Accounting Standards Committee recognise as underlying the preparation of financial statements and which it is not necessary to disclose although there must be disclosure and an explanation if financial statements are not based on the assumptions. The fundamental accounting assumptions as stated in IAS 1 are: (a) Going concern. The enterprise is normally viewed as a going concern, that is, as continuing in operation for the foreseeable future. It is assumed that the enterprise has neither the intention nor the necessity of liquidation or of curtailing materially the scale of its operations. (b) Consistency. It is assumed that accounting policies are consistent from one period to another. (c) Accrual. Revenues and costs are accrued, that is, recognised as they are earned or incurred (and not as money is received or paid) and recorded in the financial statements of the periods to which they relate. See also the entry for ‘accounting principles’.



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