IAS 8 - Accounting Policies, Changes in Accounting Estimates and Errors Flashcards
What is an example of a change in accounting policy?
Change in classification of depreciation from straight line to reducing balance
What are accounting policies?
Accounting policies are specific principles bases and rules applied by an entity in preparing financial statements.
How is a change in accounting policy made in the financial statements?
Restate retrospectively - Adjust the opening balance and the comparative.
What disclosure is required for a change in accounting policy?
Disclose - :
- The title of the IFRS
- Nature of the change in accounting policy
- Amount of adjustment for the current and prior period
Why would a change in accounting estimate be required?
Approximations based on an assessment of future events. The estimate may need revision as as result of new info & more experience.
How is a change in accounting estimate made in the financial statements?
Restate Prospectively - Change in the current year and future periods
How is a change in accounting estimate disclosed?
Disclose the nature and amount of change in accounting estimate that has an effect in the current period or is expected to have a change on future periods (where it is practical)
If it is not practical to disclose the effect in future periods because estimating it is impractical the entity shall disclose the fact.
What is the definition of a prior period error?
Omissions or misstatements. Failure to use or misuse of available information.
How is a prior period error changed in the financial statements?
Correct retrospectively - Restate the comparative amounts for the prior period however, where it is impractical to determine period specific effects of an error on comparative info restate the opening balances of assets, liabilities and equity in the current year.
How should a prior period error be disclosed?
The entity should disclose the nature of prior period error and the amount for each prior period.
