Disclosure of Prior-period Items
A company is in the business of providing telecommunication services. It has adopted a policy on disclosing of prior period items. As per the policy, income of prior years will be disclosed as prior period income only if it exceeds threshold of Rs xxxx.
Whether the company's accounting policy is in order ?
It needs to be determined if prior-period items are disclosed then whether it can influence the decision of the user. Materiality concept involves not only quantitative factors but also qualitative factors as well. For e.g. outstanding of vendors are taken less seriously than outstanding of a statutory dues. Further the impact of the prior period amount on profit/ loss should also be looked into. Based on the above factors and based on the materiality of the amount, the decision for disclosure should be taken.Guidance should be derived from SA 320 (as issued by ICAI) 'Materiality in planning and performing an audit'.