Change in Accounting Estimates Flashcards
What is PAS 8?
Accounting policies, changes in accounting estimates and errors.
This is a monetary amount in the financial statements that is subject to measurement uncertainty.
Accounting estimate
This arises when monetary amounts in the financial statements cannot be observed directly and must instead be estimated.
Measurement uncertainty
What does IASB stand for?
International Accounting Standards Board
The IASB considered whether the definition of accounting estimate should also refer to non monetary amounts. What is their conclusion?
Including non monetary amounts is unnecessary because the change in input in developing an accounting estimate is a change in accounting estimate.
What are examples of accounting estimates?
- loss allowance expected
- NRV of inventory or inventory obsolence
- FV of asset or liability
- depreciation expense for PPE
- provision for warranty obligation
True or False: A change in accounting estimate is a prior period error correction.
False
This is a normal, recurring correction or adjustment which is the natural result of the use of estimate.
Change in accounting estimate
How should the effect of change in accounting estimate be recognized?
Prospectively and currently
Where do you include the effect of change in accounting estimate?
- the period of change if the change affects that period only
- the prior of change and future period if the change affects both
When do you adjust the carrying amount of the related asset or liability in a change in accounting estimate?
In the period of change
True or False: A change in accounting estimate shall not be accounted for by restating amounts reported in financial statements of prior periods.
True. Since it is handled prospectively, any FS prior to the change, should not be restated (kasi retrospective na pag ganon)
This means that the change is applied to transactions, other events and conditions from the date of change in estimate.
Prospective recognition
Which PAS provides that the depreciation method be reviewed at least at each financial year-end.
PAS 16 Property, Plant and Equipment
True or False: An accounting policy may require items in financial statements to be measured in a way that involves measurement uncertainty.
True
Developing accounting estimate involves the use of _____ or ________ based on the latest available reliable information.
Judgment, assumption
Are valuation techniques accounting estimates or policies?
estimates
When it is difficult to distinguish a change in accounting estimate from a change in accounting policy, the change is treated as?
Change in accounting estimate with appropriate disclosure
If there is no residual value stated in a change in depreciation method, what to do? haha
Use the stated residual value still
