3.1 Objectives of FRS 18

An entity should:

• Adopt accounting policies most appropriate to its particular circumstances for the purpose of giving a true and fair view;

• Review accounting policies regularly to ensure they remain appropriate;

• Change accounting policies when a new policy becomes more appropriate to its particular circumstances;

• Disclose sufficient information in the financial statements to enable users to understand the accounting policies adopted and how they have been implemented, as well as disclosure of details of estimation techniques.

The standard also seeks to clarify the distinction between a change of accounting policy and a change in estimation technique.

3.2 Concepts

FRS 18 regards the concepts of going concern and accruals as crucial in the selection of accounting policies. An entity should:

• Prepare financial statements on a going concern basis except where an entity is being liquidated or has ceased trading, or where the directors have no realistic alternative but to liquidate the entity or to cease trading;

• Prepare financial statements, except for cash flow information, on the accruals basis of accounting;

• Adopt accounting policies that enable the financial statements to give a true and fair view.

Accounting policies should be consistent with the requirements of accounting standards (FRSs and SSAPs), Urgent Issues Task Force Abstracts and companies legislation.

In exceptional circumstances, where compliance with Standards or Abstracts is inconsistent with requirements to give a true and fair view, an entity should depart from those requirements to the extent necessary to give a true and fair view.

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