IAS8 - Accounting Policies, Changes in Accounting Estimates and Errors Flashcards
IAS8?
prescribes accounting treatment for changes in accounting policies, changes in accounting estimates and corrections of errors
accounting policies?
the specific principles, bases, conventions, rules and practices applied by an entity in preparing and presenting FS
prior period errors?
omissions and misstatements in an entity’s FS for one or more prior periods
retrospective application?
applying a new accounting policy to transactions, other events and conditions as if that policy had always been applied
retrospective restatement?
correcting the recognition and measurement of amounts of elements of FS as if a prior period error had never occurred
prospective application?
applying a new policy to transactions/events after the date at which the policy was changed
must an entity apply an accounting policy consistently for similar transactions?
yes
when should an entity change its accounting policy?
if it results in the FS providing reliable and more relevant info
must changes in accounting policies be applied prospectively or retrospectively?
retrospectively
accounting estimate?
purpose is to achieve the objective set out by the accounting policy
uses judgements/assumptions based on reliable/relevant info
examples of changes in accounting estimates?
- NRV of inventory
- FV of an asset
- depreciation expense for PPE
how are changes in accounting estimates applied?
prospectively
when can an entity change their accounting estimate?
when it results in more reliable/relevant information
doesn’t relate to prior periods and are therefore applied prospectively
accounting errors?
can arise in respect of omissions or misstatements
