Accounting Policies (Cambridge International IGCSE Accounting)
Exam board Cambridge International · IGCSEUpdated 2025-06-16
Accounting policies
What are international accounting standards?
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The international accounting standards are set by the International Accounting Standards Board
- These detail the standards for the financial statements
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The main purpose of following the international accounting standards is for:
- Comparability
- Relevance
- Reliability
- Understandability
| Policy | Description |
|---|---|
| Comparability | - The information for one financial period should be presented in a way such that it can used for comparisons - The information should be able to be compared with information from a previous period - The information should be able to be compared with information from a different business |
| Relevance | - The accounting information should be provided in a timely manner so that it is relevant to the users - Financial decisions affecting the future of the business should be able to be made from the information |
| Reliability | - The users of the data provided by the financial statements should be able to rely on the information provided - The information should be objective and free from bias, opinions and significant errors - The information should be capable of being independently verified |
| Understandability | - The accounting information provided should be clear so that users can easily understand it - It can be assumed that the users have a reasonable understanding of accounting terms |
Exam Hint It is common for the last question on Paper 1 to give you a statement and ask you to select the related policy. Alternatively, you could be given a policy and asked to select a statement related to it.
Worked Example The accountant for a business applied the accounting policy of relevance when they prepared the financial statements at the end of a financial period.
Which of the following is a direct effect of the relevance policy?
A Interested parties make decisions using the financial statements. B Interested parties can easily understand the financial statements. C The financial statements can be independently verified. D Comparisons can be made with the previous financial statements of the business. Answer
A Final answer: This is the correct answer B > This is understandability C > This is reliability D > This is comparability
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