Reporting Financal Performance

Question 1

What are accounting policies?

Answer 1

Specific principles, bases, rules and practices applied
The order to follow for policy selection is:
1. Standards or interpretations
2. The conceptual framework
3. Other national GAAPs or similar conceptual frameworks

Question 2

When are entities allowed to change accounting policies?

Answer 2

• required by interpretation

- change will provide more RELEVANT or RELIABLE information

Question 3

What is the accounting treatment for change in accounting policy?

Answer 3

• change retrospectively
• restate prior year p/l and SOFP
• restate opening balance of retained earnings
• include as second line in SOCIE
• show effect on prior period @ foot of PY SOCIE

Question 4

What is the accounting treatment for change in accounting estimate?

Answer 4

Apply prospectively- this includes depreciation method

Question 5

What is the accounting treatment for prior period errors?

Answer 5

• restate comparatives
• restate opening balances
• include adjustment in changes to opening equity
• disclose
  1. Nature of error
  2. Amount of the correction to prior periods for EACH LINE