Accounting policies, estimates and errors (IAS8)

Question 1

IAS 8 defines accounting policies as

Answer 1

the specific principles, bases, conventions, rules, and practices applied by an entity in preparing and presenting information

Question 2

Estimates

Answer 2

many items in financial statements cannot be measured with precision but can only be estimated

Question 3

examples of estimates

Answer 3

receivables and the useful lives of depreciable assets

Question 4

IAS8 defines prior period errors as

Answer 4

omissions from, and misstatements in, the entity’s financial statements for one or more periods arising from a failure to use, or misuse, reliable information

Question 5

material prior period errors should

Answer 5

be corrected

Question 6

changes in accounting policies can only take place if…

Answer 6

• it is required by an international standard
• it would result in an increase in reliability and relevancy within the fs

Question 7

impact on fs of a change in accounting policy

Answer 7

users of the fs may not be able to compare an entity’s fs from one accounting period to another