Accounting policies

Meaning

Accounting policies (السياسات المحاسبية) are the choices a business makes within the standards: how it values stock (FIFO or weighted average), how it depreciates assets (straight line or reducing balance, over how many years), when it recognises revenue, and which assets, if any, it carries at fair value. Under IAS 8, part of the IFRS framework endorsed by SOCPA, they are disclosed in the notes to the financial statements and applied consistently, so this year's figures can be compared with last year's.

Prudence, often called the conservatism principle (مبدأ الحيطة والحذر), guides judgement where figures are uncertain: assets and income are not overstated, and liabilities and expenses are not understated. A policy changes only when a standard requires it or the new one gives more reliable information, and the change is explained and applied to the comparative figures too.

Also called: accounting policy · conservatism principle · prudence · السياسات المحاسبية

Example

Al Noor Trading's notes state its policies: stock at the lower of weighted average cost and net realisable value; vehicles depreciated straight line over five years; revenue recognised when goods are delivered. When a customer owing 40,000.00 goes into dispute, prudence leads it to book a provision for doubtful debts now rather than wait to see whether it pays.