Formation of accounting policies: fundamentals and principles. Accounting policies for accounting purposes

Accounting policies (UP) are specific principles and procedures used by company management to prepare financial statements. It has certain differences from the principles of accounting in that the latter are rules, and politics is the way a company adheres to these rules.

The concept

An accounting policy for accounting purposes is a set of standards that determine how a company prepares financial statements. They are used specifically to solve complex accounting problems, such as depreciation methods, recognition of financial results, preparation of research and development costs (R&D), inventory costs and consolidation of financial statements.

Accounting policies for reporting in accordance with international standards. International Accounting Standard (IAS 8) defines UP as principles, conventions, rules and practices used by an organization in preparing and presenting financial statements.

Accounting policies are critical to understanding the information contained in the financial statements and statements. An entity shall clearly state its principles that it used in preparing the financial statements. The formation of such a document in the company is important, since many accounting standards allow alternative methods of processing the same operation.

For example, IAS 2 provides enterprises with a choice between using the weighted average method or the FIFO inventory valuation method. If an entity does not disclose its accounting policies regarding the choice of inventory valuation method, users of the financial statements will not be able to make comparisons with other entities.

IAS 8 contains the following guidelines regarding the choice and use of an entity.

It can be seen as the structure in which the company is supposed to operate. However, the structure is somewhat flexible, and company management can choose a specific policy for accounting purposes, which is beneficial for the financial statements of the company.

Necessity

Many enterprises underestimate the importance of accounting policies, interpreting them formally, therefore they do not take into account the effects that lead to inefficient management of the company, since various indicators of the company’s activities, such as production costs, profit, tax and others, depend on the chosen option.

The financial and economic activity of the enterprise is considered effective if the result is positive. If the financial result is analyzed from the point of view of accounting, then it is the most complex object of analysis, therefore, it needs to be improved, updated in accordance with new studies.

Appointment

When a company prepares a complex report or introduces an accounting method, it needs to adhere to guidelines.

The accounting policies for accounting purposes may be different in companies: but whatever the firm does with respect to a business entity, it must comply with the principles of accounting (GAAP) or IFRS.

As senior management establishes criteria for maintaining the quality of products or services in a company, this policy is also set as criteria for presenting a reliable and accurate picture of accounting practices.

Accounting principles are soft at times, and company specific policies are important. External accountants hired to verify the financial statements of the company should check this document of the company to make sure that it complies with standard accounting principles.

UP is important for the following reasons:

1. Creating the right foundation for bookkeeping. To formulate the financial affairs of the company, it needs to prepare financial statements. And if the financial statements are simply prepared without any indication, then there will be no consistency in them. Accounting policies help determine the consistency between financial statements. It also offers a solid foundation so that the company can adhere to the correct structure and prepare its financial statements.
2. Information disclosure. It is important that the company disclose which accounting policies it followed. Since accounting standards allow any balance sheet item to be presented in various aspects, proper disclosure of this document is important.
3. Providing benefits to investors. If companies mention the accounting policies that they used to prepare the financial statements, this will also help investors. In setting it out, companies ensure consistency in the preparation of financial statements. This consistency helps investors look at the financial statements and compare them with other companies from similar and different industries.
4. The state may influence the financial statements of the company. Since such documentation should be compiled in accordance with accounting policies, companies always follow the correct structure. These firms should also keep in mind that they can only follow the UP that is done according to GAAP or IFRS. Thus, the state can have a direct impact on the financial statements of the company, and the government can protect the interests of investors.

Accounting Policy Requirements

In paragraph 6 of PBU 1/2008 the requirements for accounting policies are indicated:

• the need to reflect all operations and factors of economic activity;
• accounting operations must be done in a timely manner;
• the economic content of factors is superior to their legal form.

Revenue recognition moment

Companies adhere to generally accepted accounting principles for revenue recognition. Revenue recognition is important for a company because it positively or negatively affects investors. A firm cannot recognize its revenue until it is earned by it. This does not mean that all income will be in cash. In the case of credit sales, earnings are also real.

For accounting policies in which companies sell goods on credit and recognize it as income, two things are important. First, how the first company can collect money for sales on credit. And secondly, when income is recognized: at the time of taking credit funds or at the time of receipt of finances. UP significantly affects how revenue is recognized in the company.

Accounting policies

UP varies in different organizations in different ways. Ultimately, the choice is based on determining the methods of assessment, the procedure for managing accounts, etc.

The principles of formation of accounting policies are quite specific. They look like this:

1. The principle of completeness. Information must be as complete as possible, reflect the real picture of the financial work of the company.
2. The principle of timeliness. Data should be reported on time.
3. The principle of caution. Information must be real, not have hidden reserves.
4. The principle of priority of content in form.
5. The principle of consistency.
6. The principle of rationality. Accounting should be optimal, based on the size of the organization or company.

Composition

UE should include:

• working chart of accounts;
• various accounting registers;
• primary forms of documents;
• inventory methodology and procedure;
• methods for valuing assets and liabilities;
• document management, information processing;
• audit and control of business operations;
• other elements.

Basics of accounting policy

The economic conditions prevailing at the present stage of development require accounting and reporting enterprises in compliance with certain rules, which must be applied every year. There are regulatory acts of companies through which accounting is carried out, but freedom of choice is provided. Companies can choose from a variety of accounting methods that are most suitable for displaying business transactions in accounting. Limits on the use of any method are limited by applicable law and the professionalism of the head, chief accountant.

If the organization has just been created and registered, then the approval of the accounting policy is 90 days from the date of registration.

The main purpose of forming a unitary enterprise is to document accounting methods acceptable for work. Given the constant changes that are taking place in the economy, it seems appropriate to study the definition of the essence of the concept of "accounting policy" in the regulatory framework, which in turn underlies the foreign economic activity of business entities.

From the basis of the formation of accounting policies begins any organization of accounting. In order for the company to have the most efficient accounting system, the head and chief accountant should choose from the available options the most suitable for reflecting the economic life of the company in the reports (choice of materiality level, depreciation method, asset disposal assessment method, method for determining the allowance for doubtful debts, calculation methods etc.).

Undoubtedly, these options have different consequences and lead to different results. Obviously, the influence of some elements (for example, depreciation) can be traced over several years, the influence of others can only be found in the interim financial statements, and some do not affect the financial results.

A good choice of such methods as depreciation, estimation of inventory disposals, accounting for transportation and purchasing costs, determination of estimated reserves for doubtful debts is the key to further effective enterprise management.

The responsible person for the formation of the policy is the chief accountant, which corresponds to paragraph 4 of Article 6 of the Federal Law "On Accounting".

The formation of accounting policies is a difficult process, which is the choice and justification of one of several ways of organizing accounting. These methods must be permitted by law. The chief accountant should have knowledge of the regulatory framework.

In the absence of a document, the company faces a fine under Art. 126 Tax Code of the Russian Federation in the amount of 200 rubles for the company itself, and 300-500 rubles for the head.

Aggressive and conservative

As a rule, firms operate on the periphery of two extremes in relation to accounting policies. Either the firm follows an aggressive approach, or a conservative one.

Regardless of which approach the company follows, it should reflect the same in its accounting statements and in how accounting policies are followed in preparing the financial statements.

Similarly, the effect on profit. An aggressive approach can ultimately bring more / less profit. And a conservative approach can do the same. A company must take one specific approach in order to maintain data consistency.

If a company changes its approach from aggressive to conservative or from conservative to aggressive, you should mention this point and explain why it does this to protect the interests of investors.

Accounting standards

IAS 8 is applied when selecting and applying accounting policies, accounting for changes in estimates and reflecting corrections of errors of the previous period.

The standard requires compliance with any IFRS applicable to a transaction, event or condition, and contains recommendations for the development of a statement of financial position for balance sheet items that lead to reliable information. Changes in accounting policies and corrections of errors are usually accounted for retrospectively, while changes in accounting estimates are usually taken into account on a prospective basis.

An entity shall consistently choose and apply its accounting policies for similar transactions, other events and conditions, unless the standard requires or allows the categorization of elements for which another policy may be appropriate. If the standard requires or allows such categorization, then the appropriate policy is selected and applied sequentially to each category.

Accounting policies and accounting for 2018

Among the main changes in 2018, it can be noted:

1. The concept of policy for the accounting of different companies is defined. A rule was introduced on the independent choice of accounting method, regardless of the choice of other companies. However, if the parent company has approved its own standards, which are mandatory for use by affiliates, subsidiaries choose management methods based on these standards that have been approved by the parent company. Since it is possible to ensure comparability of organized data in a situation if they are reflected in agreement with the same rules. In the previous edition of PBU 1/2008, the procedure for the formation of UP by affiliated organizations was not specified.
2. The method of forming a unitary enterprise for the purposes of organization accounting has been clarified.
3. The organization now has the opportunity to unify policies in accordance with IFRS and Russian standards.
4. The order of deviations from the general algorithm for creating an accounting policy is considered.
5. Now the accounting policy has a need to fix its independence.
6. The concept of non-materiality is introduced, it is understood as data that does not affect management decision-making in accounting.
7. Simplified entities have acquired the right to apply the principle of rationality in relation to accounting methods and methods.
8. For companies that prepare IFRS financial statements, they are allowed to give preference to IFRS over PBU.
9. It is possible to adjust a number of certain indicators at the beginning of the year.

UP when using simplified

Firms that are granted the right to use simplified financial statements should pay attention to the specifics of compiling accounting policies. These are usually small organizations. Such enterprises, when forming a unitary enterprise, provide for accounting according to a simple system.

For them, it is possible to reduce the number of accounts in the work plan, the use of simplified registers. Some entities may generally keep records without the use of such registers, only using the Sales Book and simplified financial statements.

Value for tax

The organization of accounting policies for tax accounting implies the method chosen by the taxpayer for recognition of income (revenue) or expenses, as well as the method of accounting for other indicators. Income (revenue) is the central starting point in the study of this issue.

Among the changes in the UE for tax accounting in 2018, the following are highlighted:

1. The accounting of expenses for the acquisition of OS facilities has changed. The list of objects has been expanded for which accelerated depreciation can be applied with a special coefficient that cannot be higher than 3.
2. Changes in accounting for R&D expenses touched the list of costs, where new types of expenses were added.

The situation with the general tax system

The features of accounting policies in applying the OSNO are as follows:

• property isolation;
• the implementation of activities is allowed continuously;
• consistent use of UP;
• Clear temporal certainty is required.

The changes also affected the information that is used in drafting the policy.

Information requirements for the purposes of the accounting policy of the OSNO:

• the most detailed reflection;
• timely action;
• rational accounting.

Simplified Accounting Policies

Accounting policy of the simplified tax system "Income - expenses":

• you must use one of the methods for determining the amount of material costs: at the cost of a unit of stock, at average cost, at the cost of the first at the time of acquisition, at the cost of the latter at the time of acquisition;
• interest on loans can be taken into account;
• You can take into account expenses in the form of rental payments.

For tax accounting features of the studied concepts are as follows:

• in the tax policy, it must be indicated that the organization applies the simplified tax system for the corresponding object;
• indicate by what method the organization estimates the value of goods sold.

Features for budget institutions

The accounting policy for taxation of a budgetary institution has its own specifics:

• depends on the goals of creating the institution;
• depends on funding sources;
• depends on the type of founders;
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