Accounting Policies Explained

Accounting policies are the driving procedures for preparing financial statements for companies and industries. Accounting policies may include measurement systems, disclosure procedures, and accounting methods used by the company.  

Accounting services in Halifax and worldwide include principles and policies which differ in that principles are predetermined rules, which are more lenient. Alternatively, policies provide a framework for following those rules and should always be adhered to. 

Aggressive and Conservative Policies Explained  

Conservative policies are the more sustainable approach to understating a company’s financial performance. This policy allows the company to show improvement over several years, which builds confidence in investors.  

Aggressive policies differ in that they tend to overstate the earlier performance of a company and may cause the risk of performance decline in later years. This can concern investors as they may view these figures as mismanagement of earnings and cost allocation.  


The Generally Accepted Accounting Principles (GAAP) and the International Financial Reporting Standards (IFRS) are principles providing information on how businesses must prepare their statements. While GAAP takes on a more rules-based technique, IFRS captures the economics of a transaction with its principles-based approach.  

Why Are Accounting Policies Important?  

There are many reasons why policies are such an integral aspect of any company handling financial statements. They are as follows:  

  • Government Law – Every company must follow one of the abovementioned principles when preparing statements. The government uses this information to track finances and protect potential investors. 
  • Protect Investors – When investors are on the same page regarding predetermined policies, it provides a sense of confidence, trust and surety in the company and the numbers provided. These numbers can be easily compared to other companies ensuring the formulas are correctly followed. 
  • Provides Framework – As mentioned, having a framework in place is essential to ensuring all companies comply with the same financial statement preparation to provide protection and trust for investors.
  • Disclosure – Every company must disclose the policies they follow as it forms the backbone for procedures used regarding preparing statements. This makes analyzing and interpreting financial information transparent and helps investors analyze with confidence.  

Complying with accounting policies is crucial for all companies managing financial statements. Kevin Martin Accounting provides expert accounting services in Halifax and can assist you with yours today, ensuring to adhere to all necessary protocols. 

For more information on how we can help, get in touch today.

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