A ltd purchased 0% DDD of Rs.25,00,000/- (maturity period 20 years) at Rs. 250,000/-. Company is not accounting for accrued income as per policy consistently followed by it and intends to account for either at the time of redemption or when its right to receive is actually established (i.e. either on receipt of TDS certificate or notice of early exit option etc). By following this policy the company is avoiding MAT but is in contravention of AS-1 (accrual basis of accounting). Please advice whether Notes on account is sufficient (disclosing consistent policy of company) or auditors is inclined to qualify the AS-1 violation in his report ?

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