Other Standards Flashcards
What does IAS 8 Cover?
IAS 8 covers Accounting Policies, Changes in Accounting policies and Errors.
How is an accounting policy described and what must it cover?
An accounting policy is the specific principles, bases, conventions, rules & practices applied by an entity in preparing and presenting financial statements.
The policy must ensure that the information in the financial statements is:
Relevant to the decision making needs of the users
Faithfully represents the entities performance and position.
When might changes in accounting policy occur and how would they be dealt with?
Changes in accounting policy may occur where there are changes to the underlaying standards.
The changes are applied retrospectively, as if the new policy had always been in place, meaning that;
Comparatives should be restated.
Relevant b/f balances should be restated.
A change in policy can be identified when it affects one of the following;
- Presentation
- Recognition
- Measurement basis
What might be considered a change in accounting estimate and how is a change to this dealt with?
A change in accounting estimate could be where the useful life of an asset has been amended.
This change is dealt with prospectively, from the current period onwards.
How is an error described and how are they corrected in financial statements?
A prior period error is a omission or misstatement arising from failure to use or misuse of reliable information that was available and could reasonably be expected to have been obtained.
Errors are corrected retrospectively, meaning that;
Effected comparatives must be restated.
Relevant b/f balances must be restated.
What is IFRS 13?
IFRS deals with fair value measurement.
Fair value is described as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants.
NOTE - IFRS 13 does not apply to leases, inventories or impairments.
What is the hierarchy of inputs used to determine fair value?
Level 1 - Quoted prices (observable) in an active market for identical items. This is the most reliable evidence of fair value.
Level 2 - Observable inputs other than level 1. Similar items in active markets or identical items in inactive markets. This evidence may need to be adjusted to reach fair value.
Level 3 - Unobservable, based on the best information available. e.g. valuation of a private company.
For IAS 2 how is the value to be used for cost determined?
Cost may include:
- Purchase cost
- Conversion Cost
- Other costs to bring inventories to present location and condition
The cost may be calculated on one of the following bases;
- Actual unit cost
- Average cost
- First in First out (FIFO)
What may cost not include?
- Abnormal waste
- Storage costs
- Administration overheads.
Under IAS 2 how is NRV calculated
Net Realisable Value is calculated as;
Expected selling price less costs to complete and sell.
What does IAS 41 Cover?
IAS 41 covers Agriculture where;
- Agricultural activity is the management of the biological transformation of biological assets for sale, in to agricultural produce or in to additional biological assets.
- A biological asset is a living plant or animal.
- Agricultural produce is the harvest from a biological asset.
How are agricultural grants dealt with?
An agricultural grant will be recognised in the SPL once the conditions attached to the grant have been met.
Therefore a grant with no conditions will be recognised in advance.
A grant with staged conditions may be recognised in sections as each stage conditions are met.
How are biological assets valued?
Biological assets are initially recognised at fair value less costs to sell.
Each year changes in the fair value will be recognised in the SPL as a gain or loss.
How is agricultural produce valued and recognised?
Agricultural produce is recognised and valued only once it has been harvested:
- Value - fair value less cost to sell
- Immediately reclassified as inventory.
What is a bearer plant?
A bearer plant is an asset which is expected to produce agricultural produce for may years.
And has a low likelihood of being sold as agricultural produce.
These are accounted for under IAS 16.
