FR - Accounting for Changes

Question 1

Explain what accounting changes are

Answer 1

• IFRS address:
  1. Changes in accounting estimate
  2. Change in accounting policy
  3. Correction of prior period error

Question 2

What are the two approaches that can be used for reporting accounting changes

Answer 2

1. Prospective - THe affect of changes is limited to the current and future statements only
2. Retrospective - Past financial statements that are affected by the changes are adjusted. Also impact the current period

Question 3

How do you determine the nature of accounting changes

Answer 3

1. Is the acocunting changes made by choice - Yes - Accounting is not Retrospectively
   If no
2. Is the change required by initial application of IFRS or new IFRS standard
   Yes - Accounting for set out in transactional guidance - retrospectively
   No
3. Is the change the result of information that was known or available in prior period
   Yes - Retrospectively
   No - Is prospectively

• Most changes in estimate are accounted for prosectively, while most voluntary change in accounting policy and application of new standard are accounted for retro
• When it is difficult to distinguish a change in accounting policy from change in accounting estimate, change is treated as change in accounting estimate

Question 4

When it is impracticable to be adjustment

Answer 4

• WHen companies can be exempt from requirement to restate prior period under the gorun
• Means that although the entity has made every reasonable effort to determine the impact of accounting change
• For specific period - entity shall apply the new accounting changes policy to the carrying amount of the net asset at the beginning of earliest period
  Cucumulative effect - requires change at the beginning of the current period, change in accounting policy

Question 5

Accounting for changes in accounting policy

Answer 5

-Typically involves changing from one acceptable manner of accounting for a particular item to another acceptable way of accounting for same item
- IAS 8 - Accounting policies, changes in estimate and error

• Choice gives management flexibility to best accounting for transactions based on the economic substance of the transaction

Accounting policy change
1. The effect of the voluntary change provides reliable and more relevant information to users of F/S
2. Standard or interpretation of the standard, require the change

Question 6

What is the disclosure for the changes of accounting policy

Answer 6

• Changes in accounting policy are govern by IAS 6. While all requirement must be met
• Nature of the change in accounting policy
• Amount of the adjustment for each of the F/S line for the current period

Question 7

Explain what the changes in estimates

Answer 7

An estimate is management’s best idea of how a transaction will occur in the future

Ex. AFDA
- Estimated useful life and residual or salvage value of PP&E
- Warranty provision
- Lawsuit provision
- Decommissioning provision

Changes in estimate - Is a result of new information that was not available at the statement of FP date

Question 8

What disclosure is used for change in accounting estimate

Answer 8

• Change in estiamte include
• Nature and amount of the change in estimate that affect the current period, or is expected to have an effect on future period

Question 9

What is the difference between IFRS and ASPE

Answer 9

ASPE 1506 - Accounting Changes govern accounting changes
- Allow for change in purpose - Consolidating subsidiaries, to account for them using the equity method or in accordance ASPE 3856

ASPE - Accounting for interest in jointly controlled enterprise using cos tor equity method or right to individual asset and obligation for individual liabilities.