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Accountancy policies - disclosure

Where a company is a service company and carries no stock, am I right in thinking that there doesn’t need to be a statement in the accounts for the accounting policy for stock, eg:

“Stock is valued at the lower of cost and net realisable value”

Or should it still be included, but a note added that the company carries no stock?

In addition, should there be a statement regarding WIP for service companies or is the treatment of this essentially included within the turnover statement, eg:

“Turnover represents the value, net of value added tax and discounts, of goods provided to customers and work carried out in respect of services provided to customers”

And on a similar vein, do you always omit other accounting policy statements where there are no associated transactions eg,

If a company doesn't have any fixed assets or depreciation, you would would omit the depreciation statement?

And if a company doesn’t have any transactions carried out in foreign currencies, do you omit the foreign currencies statement or still include it on the basis that it is still an accounting policy being applied, even though there have not actually been any transactions?


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By gitom
27th Apr 2012 10:08


FRSSE para. 2.7 and FRS 18 para. 55 both refer to the disclosure of the accounting policies that are material in the context of the financial statements.  Therefore I would say if the company holds no stock, no stock policy is required, similarly for fixed assets, foreign currency, leasing, you name it.

I think your turnover policy may need a little more meat, including when turnover is recognised.  This would tie in to an extent with a WIP policy which would not only describe at what point in a contract you would be recognising income but how you value the WIP that you are carrying.

Thanks (0)
27th Apr 2012 11:52

Right thanks.

So if there is no WIP, you do not need to include a disclosure statement for that either then.

What about deferred taxation? It was recommended to me that I should still include a disclosure statement even if the amount of deferred tax is immaterial, but include a note to that effect. This is on the basis that the policy is being applied but the value is immaterial and so is not provided for in the accounts.

Would you say that if the amount of deferred tax is immaterial, you do not have to include the policy at all?

Thanks (0)
By gitom
27th Apr 2012 14:17

I would put it in!

We actually always include policies for taxation (current and deferred), even though, as you rightly say, deferred taxation could be immaterial, or even an asset and may not meet the criteria for recognition in the financial statements (future taxable profits unlikely etc.)

Under FRSSE I don't think any separate (from the accounting policy) disclosure is required if you choose not to recognise deferred tax, though this is required under FRS 19 para. 64 (factors affecting current and future tax charges).

Also bear in mind if an accounting policy was material to your financial statements in the comparative year it should still be included this year!

Thanks (1)