Lecture 7 Accounting policy choice & presentation Flashcards
What are the qualitative characteristics of useful information?
Relevance
Faithful representation
What are the enhancing qualitative characteristics?
Comparability
Verifiability
Timeliness
Understandability
What are financial statement elements?
Assets Liabilities Equity Income Expenses
What is recognition?
Recognition is the process of incorporating an element into the financial statements. Must therefore first meet the definition of an element.
An element is recognised only if recognition provides users of financial statements with information that is useful, i.e?
provides information that is relevant and a faithful representation.
An element is recognised if the costs of _____do not outweigh its _____.
Recognition
Benefits
Measurement involves assigning valuations on what?
All elements reported in financial statements.
What are measurement bases?
Historical cost
Current value:
Fair value
Value in use
Current cost
Accounting policies are what things applied by an entity in preparing and presenting financial statements?
Specific principles
[Measurement] bases
[Accounting] conventions
Rules and practices
Changes in accounting policy should be
How often should accounting policies change?
Infrequently
AASB 108, paragraph 14, identifies two situations when a change in accounting policy is likely to occur. These are where:
A change in accounting policy is required to comply with an accounting standard or interpretation, or
Where a decision to change an accounting policy will result in the financial statements providing reliable and more relevant information.
If a new standard does not specify, or when the change is voluntary, the effects of the change in accounting policy is to be accounted for how?
Retrospectively
What happens when a change in accounting policy is made retrospectively?
The opening balance is adjusted to the earliest period and other everything is adjusted as if the new policy has always applied.
A change in accounting estimate is an adjustment of what?
The carrying amount of an asset or a liability, or the amount of the periodic consumption of an asset.
What does and does not cause changes in accounting estimates?
Caused by new information or new developments.
Not caused by errors.
If the change in estimate affects current period only, when is it recognised?
Recognised in the period of change.
If changes in estimates current and future periods, when is it recognised?
Recognise in period of change and future periods.
Prior period errors are omissions from, and misstatements in, the entity’s financial statements for one or more prior periods arising from a failure to use, or misuse of, reliable information that:
Was available when the financial statements for those periods were authorised for issue, and
Could reasonably be expected to have been obtained and taken into account in the preparation and presentation of the financial statements
Prior period errors include what?
Math mistakes
Mistakes in applying accounting policies
Oversights or misinterpretations of facts
Fraud
An entity shall correct material prior period errors retrospectively in the first set of financial statements authorised for issue after their discovery by:
Restating the comparative amounts for the prior period(s) presented in which the error occurred;
or if the error occurred before the earliest prior period presented, restating the opening balances of assets, liabilities and equity for the earliest prior period presented.
