IAS 8 Flashcards
IAS 8 is applied in which of the following areas?
a) Selection of accounting policies
b) Accounting for changes in accounting estimates
c) Correction of prior-period errors
d) All of the above
d) All of the above
What are accounting policies?
a) Monetary amounts subject to measurement uncertainty
b) Specific principles, rules, and practices applied in preparing financial statements
c) Adjustments to the carrying amounts of assets and liabilities
d) Corrections of prior-period errors
Specific principles, rules, and practices applied in preparing financial statements
What is the key objective of selecting accounting policies?
a) To ensure maximum profit is reported
b) To enhance comparability and consistency in financial reporting
c) To adjust errors in prior periods
d) To prepare financial statements without considering IFRS
To enhance comparability and consistency in financial reporting
When can an entity change its accounting policy?
a) When required by an IFRS
b) When it provides more reliable and relevant information
c) Both a and b
d) Only when the auditor suggests it
c) Both a and b
Which of the following is not considered a change in accounting policy?
a) Applying a new policy for transactions that were previously immaterial
b) A new policy for transactions that differ in substance from previous ones
c) Changes in measurement bases required by IFRS
d) Correction of errors in prior-period financial statements
d) Correction of errors in prior-period financial statements
How are changes in accounting policies applied if no specific transitional provisions exist in IFRS?
a) Retrospectively
b) Prospectively
c) Adjusted only in the current period
d) Ignored
a) Retrospectively
What are accounting estimates?
a) Corrections of prior-period errors
b) Changes made to accounting policies
c) Monetary amounts subject to measurement uncertainty
d) None of the above
Monetary amounts subject to measurement uncertainty
How should changes in accounting estimates be applied?
a) Retrospectively
b) Prospectively
c) Only in the period of change
d) Adjusted in comparative financial statements
Prospectively
Which of the following is an example of a change in accounting estimate?
a) Adopting a new inventory valuation method
b) Revising the useful life of an asset
c) Adjusting the comparative figures for prior periods
d) Switching to fair value from the cost model for an asset
Revising the useful life of an asset
What are prior-period errors?
a) Misstatements due to fraud only
b) Omissions or misstatements from prior periods caused by misuse of reliable information
c) Changes in accounting estimates for prior periods
d) Adjustments made to align with new IFRS standards
Omissions or misstatements from prior periods caused by misuse of reliable information
How are material prior-period errors corrected?
a) Prospectively from the earliest practicable period
b) Retrospectively in the financial statements
c) Ignored if the period is closed
d) Only disclosed without adjustments
Retrospectively in the financial statements
What happens if retrospective correction of an error is impracticable?
a) The error is ignored
b) The entity applies the correction prospectively
c) The error is disclosed without adjustments
d) The auditor decides the treatment
The entity applies the correction prospectively
When is retrospective application of accounting policies considered impracticable?
a) When financial statements cannot be reproduced
b) When the cumulative effect cannot be determined after making all reasonable efforts
c) When management decides it is unnecessary
d) When the error is immaterial
When the cumulative effect cannot be determined after making all reasonable efforts
Which of the following is not required to be disclosed when retrospective application is impracticable?
a) Nature of the change or error
b) Circumstances leading to the impracticability
c) Description of the effect on future financial statements
d) The reason why retrospective application was not preferred
The reason why retrospective application was not preferred
What should an entity do if it is impracticable to determine the cumulative effect of a new accounting policy?
a) Apply the policy prospectively
b) Ignore the change
c) Adjust for the current year only
d) Disclose the change but make no adjustments
Apply the policy prospectively
Which of the following must be disclosed when a change in accounting policy affects prior periods?
a) Nature of the change
b) Reasons for the change
c) Amount of adjustment for prior periods, if practicable
d) All of the above
d) All of the above
What is required if a prior-period error is corrected?
a) Explanation of the error
b) Amount of correction for each affected period, if practicable
c) Restated comparative information
d) All of the above
All of the above
What is retrospective application?
a) Applying a new accounting policy to only future transactions
b) Adjusting past transactions as if the policy had always been applied
c) Adjusting only the current period’s financial statements
d) Ignoring the impact on prior periods
Adjusting past transactions as if the policy had always been applied
What is prospective application?
a) Applying a new accounting policy to transactions after the date of change
b) Applying a policy retrospectively to previous periods
c) Adjusting all past and future periods uniformly
d) Only making adjustments for material changes
Applying a new accounting policy to transactions after the date of change
What is the minimum number of financial statements required when retrospective restatement is applied?
a) Two statements of financial position
b) Three statements of financial position
c) Two statements of profit or loss
d) None of the above
Three statements of financial position
Initial Application of Revaluation
9.1 Is the initial application of the revaluation model under IAS 16 or IAS 38 considered a change in accounting policy under IAS 8?
a) Yes, it is always a change in accounting policy.
b) No, it is not considered a change in accounting policy.
c) Yes, but only if it leads to more relevant financial information.
d) No, unless it involves prior-period adjustments.
No, it is not considered a change in accounting policy.
How is the initial application of the revaluation model under IAS 16 or IAS 38 treated?
a) As a prospective change in accounting estimate
b) In accordance with the specific provisions of IAS 16 or IAS 38
c) As a retrospective change in accounting policy
d) As an adjustment only in the current period
In accordance with the specific provisions of IAS 16 or IAS 38
When applying the revaluation model for the first time, which standard provides specific guidance for the change?
a) IAS 8
b) IAS 16 (Property, Plant, and Equipment) or IAS 38 (Intangible Assets)
c) IAS 1 (Presentation of Financial Statements)
d) IFRS 13 (Fair Value Measurement)
IAS 16 (Property, Plant, and Equipment) or IAS 38 (Intangible Assets)
Which of the following is not considered an accounting policy change under IAS 8?
a) Changing the measurement basis of investment property from cost to fair value
b) Adopting the revaluation model for property, plant, and equipment for the first time
c) Switching inventory valuation from FIFO to weighted average
d) Transitioning to the fair value model for biological assets
Adopting the revaluation model for property, plant, and equipment for the first time
Why is the initial application of the revaluation model not considered a change in accounting policy under IAS 8?
a) Because it is specifically addressed in IAS 16 and IAS 38
b) Because it involves only prospective adjustments
c) Because it does not affect prior-period financial statements
d) All of the above
Because it is specifically addressed in IAS 16 and IAS 38
When an entity transitions from the cost model to the revaluation model for property, plant, and equipment, how should it account for the change?
a) Retrospectively in line with IAS 8
b) Prospectively, as permitted by IAS 16
c) As a correction of an error
d) By restating comparative figures
Prospectively, as permitted by IAS 16
If an entity changes from the revaluation model to the cost model, how should the change be treated
a) Retrospectively, as it is a change in accounting policy
b) Prospectively, following IAS 16 guidance
c) As a prior-period error correction under IAS 8
d) No adjustment is required
Retrospectively, as it is a change in accounting policy
When an entity changes an accounting policy due to an IFRS requirement, what disclosure is required under IAS 8?
a) The title of the IFRS requiring the change
b) The nature of the change in the accounting policy
c) Transitional provisions and their effect on future periods (if applicable)
d) All of the above
All of the above
Which of the following must be disclosed for voluntary changes in accounting policies?
a) The reason why the new policy provides more reliable and relevant information
b) The financial impact of the change, to the extent practicable
c) A description of how the change has been applied retrospectively
d) All of the above
All of the above
When retrospective application of a new accounting policy is impracticable, IAS 8 requires the entity to disclose:
a) The nature of the change
b) The circumstances that made retrospective application impracticable
c) How and from when the change was applied
d) All of the above
All of the above
For prior-period errors, which of the following disclosures is required under IAS 8?
a) The nature of the prior-period error
b) The correction amount for each financial statement line item affected
c) Whether the retrospective restatement was impracticable
d) All of the above
Answer: d) All of the above
If retrospective restatement for a prior-period error is impracticable, what must the entity disclose?
a) A detailed calculation of the correction amount
b) A description of the circumstances making it impracticable
c) A revised presentation of the financial statements
d) An explanatory note about materiality
b) A description of the circumstances making it impracticable
Disclosures for Changes in Accounting Estimates
13.1 What must an entity disclose for a change in an accounting estimate under IAS 8?
a) The nature of the change
b) The amount of the effect of the change on the current period
c) The estimated effect of the change on future periods (if practicable)
d) All of the above
All of the above
If it is impracticable to disclose the effect of a change in an accounting estimate on future periods, what must the entity do?
a) Provide a general note about the change
b) Disclose that it is impracticable to determine the effect and explain why
c) Leave the disclosure out altogether
d) Adjust the comparative figures instead
Disclose that it is impracticable to determine the effect and explain why
Which disclosures apply both to IFRS-mandated and voluntary changes in accounting policies?
a) Title of the IFRS (if applicable)
b) The nature of the change
c) Amount of the adjustment for prior periods, to the extent practicable
d) All of the above
All of the above
Which of the following do not need to be repeated in subsequent financial periods for changes in accounting policy?
a) The title of the IFRS requiring the change
b) The reason for the voluntary change
c) The financial effect of the change on prior periods
d) All disclosures related to the change
All disclosures related to the change
