Accounting Policies

AAA

DEFINITION of 'Accounting Policies'

The specific policies and procedures used by a company to prepare its financial statements. These include any methods, measurement systems and procedures for presenting disclosures. Accounting policies differ from accounting principles in that the principles are the rules and the policies are a company's way of adhering to the rules.

INVESTOPEDIA EXPLAINS 'Accounting Policies'

Accounting principles are lenient at times, so the policies of a company can be very important. Looking into a specific company's accounting policies can signal whether management is conservative or aggressive when reporting earnings. This should be taken into account by investors when reviewing earnings reports. Also, outside accountants that are hired to review a company's financial statements should check the company's policies to ensure they conform to accounting principles.

RELATED TERMS
  1. Voodoo Accounting

    Creative rather than conservative accounting practices. Voodoo ...
  2. Walk-Through Test

    A procedure used during an audit of an entity's accounting system ...
  3. Metcalf Report

    A critical report on the U.S. accounting profession released ...
  4. Underlying Profit

    A term used to describe the actual reflection of a company's ...
  5. Liability

    A company's legal debts or obligations that arise during the ...
  6. Certified Public Accountant - CPA

    A designation given by the American Institute of Certified Public ...
RELATED FAQS
  1. What is the difference between IAS and GAAP?

    To answer this question, we must first define what IAS and GAAP are, in order to get a better grasp of the function they ... Read Full Answer >>
  2. When should a company recognize revenues on its books?

    When a company makes revenues from its operations, it must be recorded in the general ledger and then reported on the income ... Read Full Answer >>
  3. What is the difference between principles-based accounting and rules-based accounting?

    Almost all companies are required to prepare their financial statements as set out by the Financial Accounting Standards ... Read Full Answer >>
  4. How does the combined ratio measure the financial health of insurance companies?

    The combined ratio measures the profitability of an insurance company by examining its earned premium from its policyholders ... Read Full Answer >>
  5. What are the key barriers to entry for companies in the electronics sector?

    The electronics industry includes consumer electronics, specialized electronics for other industries and component parts ... Read Full Answer >>
  6. What is the difference between work in progress (WIP) and finished goods in accounting?

    Work in progress (WIP) and finished goods are broad classification terms used in accounting for inventory to specify the ... Read Full Answer >>
Related Articles
  1. Investing Basics

    The Flow Of Company Information

    Learn how to gather all the pieces before you start to put together your puzzle.
  2. Retirement

    The Ghouls And Monsters On Wall Street

    Learn about some of the creepiest cases of fraud and the characters behind them.
  3. Insurance

    International Reporting Standards Gain Global Recognition

    Comparing financial numbers from corporations in different countries is possible with the adoption of IFRS.
  4. Fundamental Analysis

    Why Last In First Out Is Banned Under IFRS

    We explain why Last-In-First-Out is banned under IFRS
  5. Economics

    Understanding Carrying Value

    Carrying value is the value of an asset as listed on a company’s balance sheet. Carrying value is the same as book value.
  6. Economics

    International Financial Reporting Standards (IFRS)

    International Financial Reporting Standards are accounting rules and guidelines governing the reporting of different types of accounting transactions.
  7. Economics

    Explaining Property, Plant and Equipment

    Property, plant and equipment are company assets that are vital to business operations, but not easily liquidated.
  8. Economics

    How to Calculate Trailing 12 Months Income

    Trailing 12 months refers to the most recently completed one-year period of a company’s financial performance.
  9. Economics

    What is Unearned Revenue?

    Unearned revenue can be thought of as a "pre-payment" for goods or services which a person or company is expected to produce to the purchaser.
  10. Economics

    What is a Capital Lease?

    A lease considered to have the economic characteristics of asset ownership.

You May Also Like

Hot Definitions
  1. Adverse Selection

    1. The tendency of those in dangerous jobs or high risk lifestyles to get life insurance. 2. A situation where sellers have ...
  2. Wash Trading

    The process of buying shares of a company through one broker while selling shares through a different broker. Wash trading ...
  3. Fixed-Income Arbitrage

    An investment strategy that attempts to profit from arbitrage opportunities in interest rate securities. When using a fixed-income ...
  4. Venture-Capital-Backed IPO

    The selling to the public of shares in a company that has previously been funded primarily by private investors. The alternative ...
  5. Merger Arbitrage

    A hedge fund strategy in which the stocks of two merging companies are simultaneously bought and sold to create a riskless ...
  6. Market Failure

    An economic term that encompasses a situation where, in any given market, the quantity of a product demanded by consumers ...
Trading Center