The purpose of SSAP 2: Disclosure of Accounting Policies is to ensure that the fundamental bases on which the accounts of a company are prepared are disclosed in notes to the published accounts, thus enabling any person to understand and interpret them in the light of the information disclosed.
The statement distinguishes between fundamental accounting concepts, accounting bases and accounting policies.
Accounting concepts
These are defined as broad basic assumptions which underline the periodic financial accounts of business enterprises. Four are singled out for special mention . The Companies Act 1985 refers to these four accounting concepts as "fundamental principles", gives them statutory force and takes into account two additional principles, i.e. non-aggregation (assets must be valued individually) and set- off (assets or income cannot be set off against liabilities of expenditure or vice-versa).
Accounting bases
These are different methods that have been developed for expressing or applying the fundamental accounting concepts, e.g. calculation of depreciation, valuation of stocks.
Accounting policies
These are the specific accounting bases judged by business enterprises to be the most appropriate to their circumstances and adopted by them for the purpose of preparing their financial accounts.
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