Important Points for IC 26 - Life Insurance Finance Exam
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Comparability of financial statements of different companies is an important purpose of accounting standards.
Prudence, substance over form and materiality are considerations for designing accounting policies for an organization whereas going concern, consistency and accrual are fundamental accounting assumptions.
In the case of a change in accounting policy, in the current year, comparative figures of the previous year should be adjusted to reflect the change. If this is not possible, the opening balance of profit and loss should be adjusted as if the new policy had been applied since the beginning.
The following are some examples of items that require estimation : Bad debts, Inventory obsolescence (inventory that is slow moving or difficult to sell), The fair value of financial assets or financial liabilities, The useful lives of, or expected pattern of consumption of, the future economic benefits in depreciable assets.
The users of financial statements can be divided into internal and external users.
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