IAS 8 Flashcards
Main purpose of IAS 8?
Applying accounting policies, changes in estimate, reflecting corrections of prior period errors
What is a change in accounting estimate?
Adjustment of carrying amonut of asset or liability or related expense
What is materiality?
Info is material if it is expected to influence decisions that primary users of general purpose FSs make
What are prior period errors?
Omissions and misstatements in entity’s FSs for one+ prior periods arising from a failure to use reliable info
Examples of accounting estimates?
Allowance for doubtful debts
Inventory provisions
Useful lives of non-current assets
Examples of prior period errors?
Mathematical mistakes
Applying accounting policies
Oversights
Misinterpretation of facts
Fraud
Disclosures required in IAS 8?
Nature of change
Quantify effect of change
Reason for change
What is an accounting estimate?
Monetary amounts in FSs that are subject to management uncertainty
What is not accounted for restrospectively?
Changes in accounting estimates
Accounting treatment for changes in accounting estimates?
Applied prospectively (forward-looking) in SPL (e.g. current period and future periods)
A change in accounting estimate that only affects current period?
Irrecoverable debt allowance
A change in accounting estimate that only affects current and future period?
Change in life of an asset which is depreciated
Examples of changing estimates?
Loss allowance for expected credit losses (IFRS 9)
Net realisable value of inventory (IAS 2)
FV of assets/liabilities (IFRS 13)
Depreciation expense (IAS 16)
Change in warranty provisions (IAS 37)
What are accounting policies
Specific principles and practicies applied by entity in preparing/presenting financial statements
In absence of IFRS accounting standard
Management uses judgment to develop policy that is relevant and faithfully represents as outlined in Conceptual Framework
Ranking of judgment in developing a policy?
IFRS Accounting Standard > Concepital Framework > Other accepted industry practices
Key attribute for accounting policies?
Consistency across transactions
Which events don’t constitute changes in accounting policy
Adopting accounting policy for new type of transaction
Adopting a new accounting policy which is not material
Accounting treatment for changes in accounting policy?
Retrospectively, historical accounting
Retrospective change in estimate (Comparative)
Restate comparative amounts for each prior period
Retrospective change in estimate (Opening balance)
Adjusting opening balance of equity for earliest period
Retrospective change in estimate (Opening balance)
Adjustment to opening equity in SCIE
Accounting treatment for prior period errors?
Corrects material prior period errors retrospectively in first set of FSs after error discovery found
Material prior period error correction (restating)
Restating comparative amounts for each prior period where error happens
Material prior period error correction (error occured before earliest prior period)
Restate opening balance for earliest period presented AND adjustment to opening equity in SCIE
Prior-period errors retrospective or prospective?
Retrospective
Is change in depreciation method from straight line to reduceing balance a change in accounting policy?
No, it’s an accounting estimate
Is a change in valuation of inventory a change in accounting policy?
Yes
If thre’s an error
Fix in all years
A change in presentation for a transaction?
A change in account ing policy
Accounting policy (retrospective or prospective)
Retrospective
Accounting estimate (retrospective or prospective)
Prospective
Accounting policy (measurement)
Changes the measurement basis
