Accounting policies
Also called: significant accounting policies
The methods a company uses to prepare its accounts, such as when it records revenue and how it depreciates assets, set out in the notes.
Accounting standards leave room for choices and judgements, and a company's policies describe the choices it has made. A change in policy or in a key estimate can move reported profit without any change in the business, so the notes must explain it.
Example
Extending machines' useful lives from 10 to 15 years lowers yearly depreciation and raises reported profit.
Learn more in these lessons
- Notes to the financial statementsWhat do the notes to the accounts tell you?
- Indian accounting standards (Ind AS)What are Ind AS, and why do accounting rules matter when comparing companies?
- Quality of earningsHow can you tell whether a company's reported profit is reliable?
Related terms
Spotted a mistake or something unclear? Report it by email. Here is how corrections work.