Pas 8 Accounting Policies, Changes in Accounting Estimates and Error Flashcards
What is Pas 8/ IAS 8
Accounting Policies, Changes in Accounting Estimates and Error
IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors is applied in ?
• selecting and applying accounting policies
• accounting for changes in estimates
• reflecting corrections of prior period errors
The standard requires compliance with ____________ applying to a transaction, event or condition, and provides guidance on developing accounting policies for other items that result in relevant and reliable information.
any specific IFRS
Changes in accounting policies and corrections of errors are generally ______________ accounted for
retrospectively
changes in accounting estimates are generally accounted for on a ______________ basis.
prospective
IAS 8 was reissued in _____________ and applies to annual periods beginning on or after 1 January
2005.
December 2005
are the specific principles, bases, conventions, rules and practices applied by an entity in preparing and presenting financial statements.
Accounting policies
is an adjustment of the carrying amount of an asset or liability, or related expense, resulting from reassessing the expected future benefits and obligations associated with that asset or liability.
change in accounting estimate
International Financial Reporting Standards are standards and interpretations adopted by the International Accounting Standards
Board (IASB). They comprise:
• International Financial Reporting Standards (IFRSs)
• International Accounting Standards (IASs)
• Interpretations developed by the International Financial Reporting
Interpretations Committee (IFRIC) or the former Standing Interpretations
Committee (SIC) and approved by the IAS
Information is material if omitting, misstating ornobscuring it could reasonably be expected to influence ______________________________________________ on the basis of those financial statements, which provide financial information about a specific reporting entity.
Materiality
decisions that the primary users of general purpose financial statements
make
are omissions from, and misstatements in, an entity’s financial statements for one or more prior periods arising
from a failure to use, or misuse of, reliable information that was available and could reasonably be expected to have been obtained and taken into account in preparing those statements.
Prior period errors
Prior period errors.
• Such errors result from _________ mistakes, mistakes in _________, _______ or _________ of facts, and fraud
mathematical
applying accounting policies
oversights/misinterpretations
Selection and application of accounting policies
When a Standard or an Interpretation specifically applies to a transaction, other event or condition, the accounting policy or policies applied to that item must be determined by applying the ?
Standard or Interpretation and considering any relevant Implementation Guidance issued by the IASB for the Standard or Interpretation.
Selection and application of accounting policies
In the absence of a Standard or an Interpretation that specifically applies
to a transaction, other event or condition, management must use?
its judgement in developing and applying an accounting policy that results in information that is relevant and reliable.
Selection and application of accounting policies
In making that judgement (judgement in developing and applying an accounting policy that results in information that is relevant and reliable.),
management must refer to, and consider the applicability of,
the following sources in descending order:
• the requirements and guidance in IASB standards and interpretations
dealing with similar and related issues; and
• the definitions, recognition criteria and measurement concepts for assets,
liabilities, income and expenses in the Framework. [IAS 8.11]
• Management may also consider the most recent pronouncements of
other standard-setting bodies that use a similar conceptual framework to
develop accounting standards, other accounting literature and accepted
industry practices, to the extent that these do not conflict with the
sources in paragraph 11. [IAS 8.12]
Consistency of accounting policies
• An entity shall select and apply its accounting policies consistently for similar transactions, other events and conditions, unless a ____________________ for which different policies may be appropriate.
Standard or an
Interpretation specifically requires or permits categorisation of items
Consistency of Accounting Policies
If a Standard or an Interpretation requires or permits such categorisation, an __________________ shall be selected and applied consistently to each category. [IAS 8.13]
appropriate accounting policy
Changes in accounting policies
An entity is permitted to change an accounting policy only if the change:
• is required by a standard or interpretation; or
• results in the financial statements providing reliable and more relevant information about the effects of transactions, other events or
conditions on the entity’s financial position, financial performance, or
cash flows. [IAS 8.14]
• Note that changes in accounting policies do not include applying an
accounting policy to a kind of transaction or event that did not occur previously or were immaterial. [IAS 8.16]
• If a change in accounting policy is required by a new IASB standard or
interpretation, the change is accounted for as required by that new
pronouncement or, if the new pronouncement does not include
specific transition provisions, then the change in accounting policy is
applied retrospectively. [IAS 8.1
In Changes in accounting policies
this means adjusting the opening balance of
each affected component of equity for the- earliest prior period presented and the other comparative amounts disclosed for each prior period presented as if the new accounting
policy had always been applied. [IAS 8.
Retrospective application
In Changes in accounting policies
However, if it is impracticable to determine either the period-specific effects or the cumulative effect
of the change for one or more prior periods presented, the entity shall apply ?
the new accounting policy to the carrying amounts of assets and liabilities as at the beginning of the earliest period for which retrospective application is practicable, which may be the current period, and shall make a corresponding adjustment to the
opening balance of each affected component of equity for that period
In Changes in accounting policies
Also, if it is impracticable to determine the cumulative effect, at the beginning of the current period, of applying a new accounting policy to all prior periods, the entity shall ?
adjust the comparative information to apply the new accounting policy prospectively from the earliest date practicable.
(ung mga ganito just explain pano mo nagets)
Disclosures relating to changes in
accounting policies
Disclosures relating to voluntary changes in accounting policy include: [IAS 8.29]
• the nature of the change in accounting policy
• the reasons why applying the new accounting policy. provides reliable and more relevant information
• for the current period and each prior period presented, to the extent practicable, the amount of the
adjustment:
-for each financial statement line item affected, and
-for basic and diluted earnings per share (only if the entity is
applying IAS 33)
• the amount of the adjustment relating to periods before those presented, to the extent practicable
In Disclosures relating to changes in
accounting policies
if retrospective application is impracticable, an explanation and
description of ___________
how the change in accounting policy was applied.
