Accounting policy
An accounting policy is a principle, basis, convention, rule or practice used when preparing financial statements. Policies determine how transactions are recognised, measured and presented under the applicable reporting framework. Examples include the permitted inventory cost formula and a permitted measurement model for property, plant and equipment. Applying a policy may require estimates, but the policy and the estimate are different concepts.
Worked example
A business applies FIFO to determine the cost of interchangeable inventory. That is its inventory cost-formula policy. Estimating how much an obsolete item can sell for is an estimate used when testing that inventory’s net realisable value.
Common mistake
Do not describe every changed number as a changed policy. At FA, understand consistency and relevant disclosures; advanced transition and retrospective-restatement rules belong to deeper financial-reporting study.
Where it appears in your exams
| Qualification | Exam | Relationship | Period |
|---|---|---|---|
| ACCA | F1 | Supporting | July 2027–August 2028 |
| ACCA | FA | Direct | September 2026–June 2027 |
| ACCA | FR | Direct | Official assessment-window verification pending |
| ACCA | FR | Direct | September 2026–June 2027 |
| ACCA | K1 | Supporting | July 2027–August 2028 |
| ACCA | SBR | Direct | Official assessment-window verification pending |
| ACCA | SBR | Direct | September 2026–June 2027 |
| CIMA | BA3 | Direct | Official assessment-window verification pending |
| FIA | FFA | Direct | September 2026–June 2027 |
Related terms
Also called: accounting policies