CT2-07: Introduction to accounts Page 19 The Actuarial Education Company © IFE: 2014 Examinations 5 Accounting concepts Accounting standards are based on concepts and conventions which have gradually come together and evolved over many years since bookkeeping and accountancy came into being. In more recent years accounting standards bodies have attempted to put more cohesion behind these concepts and conventions. For example, the International Accounting Standards Board published IAS 1 “Presentation of Accounting Statements” and IAS 8 “Accounting Policies, Changes in Accounting Estimates and Errors”. Accounting Standards have placed greater emphasis on neutrality, rather than prudence, and there has also been a move away from historical cost towards “fair values”. In very broad terms, this means revaluing assets (and liabilities) in the statement of financial position at the end of each accounting period. Any loss on revaluation should be included in that period’s income statement. Any gain on revaluation is taken to the revaluation reserve in the statement of financial position, where it is held until the gain is realised (iethe asset is sold). A consequence is volatility in the financial statements and so this move is controversial. We will discuss revaluation further in Chapters 8 and 9. The 11 accounting concepts we discuss in detail are: the cost concept (often called “historical cost”) the money measurement concept the business entity concept the realisation concept the accruals concept the matching concept the dual aspect concept the materiality concept prudence the going concern concept consistency.