Accounting Policy and Estimate Memo: AS 1 and AS 5 Evidence File
Accounting policies and estimates should be written before disputes arise. The memo explains how management recognises revenue, expenses, assets and provisions consistently.
For the connected rule, example or next step, see GST Classification Dispute: HSN, SAC and Rate Evidence File.
Detailed analysis
AS 1 deals with accounting policy disclosure and AS 5 deals with net profit/loss, prior-period items and accounting policy changes. A memo helps ensure consistent treatment across periods and audit teams.
Practical example
Company changes depreciation estimate for servers after migrating to cloud. Finance documents reason, technical evidence, impact on current/future depreciation and approval before updating the fixed asset module.
Evidence and control checklist
| Area | What to check | Evidence to save |
|---|---|---|
| Policy inventory | Revenue, inventory, PPE, provisions and FX policies. | Accounting policy manual. |
| Estimates | Useful life, bad debts, NRV, provisions and fair estimates. | Estimate workings and assumptions. |
| Changes | Policy/estimate changes and impact. | Change memo and approval. |
| Prior-period items | Nature, amount and correction logic. | Prior-period analysis and journal support. |
| Disclosure | Financial statement note support. | Disclosure checklist and draft note. |
Common mistakes
- Policy copied from old FS without current review.
- No support for estimates.
- Changing estimate to hit target profit.
- Not disclosing material changes.
- No approval for policy change.
Official reference framework
Based only on official India Code, MCA and ICAI source pages listed below. Check the latest Companies Act, Schedule III, accounting standards, Ind AS/AS applicability and auditor guidance before closing or filing.
Official sources used
This article is intentionally source-limited to official India Code, MCA and ICAI material. Source validation date: 17 June 2026. Verify final positions with latest Companies Act, Schedule III, accounting standards, Ind AS/AS applicability and auditor guidance before closing or filing.
- ICAI: Accounting Standards as on February 1, 2022
- MCA: Accounting Standard (AS) 5 Net Profit or Loss, Prior Period Items and Accounting Policies
- India Code: Companies Act, 2013 Section 129 - Financial statement
- India Code: Schedule III to the Companies Act, 2013
FAQs
To support consistency and financial-statement disclosure.
Judgements like useful life, provisions, NRV and doubtful debts.
Yes, with rationale and proper accounting treatment.
Material items related to prior periods identified in current period.
Management/controller and auditors/board as relevant.
Source and review trail
Use the current official instrument, portal or regulator publication before acting. This panel separates the category authority from page-specific references.
- Primary category
- Accounting, Audit & Ind AS
- Official starting point
- www.icai.org
Page source links
- India Code: Schedule III to the Companies Act, 2013
- ICAI: Accounting Standards as on February 1, 2022
- India Code: Companies Act, 2013 Section 129 - Financial statement
- MCA: Accounting Standard (AS) 5 Net Profit or Loss, Prior Period Items and Accounting Policies
- ICAI Accounting Standards (AS) compendium
- ICAI Accounting Standards publication portal
- Companies Act, 2013 and Companies (Accounting Standards) Rules