Ind As 8 PDF

Educational Material on
Ind AS 8, Accounting Policies,

Changes in Accounting Estimates
and Errors
The Institute of Chartered Accountants of India

(Set up by an Act of Parliament)
NEW DELHI
© THE INSTITUTE OF CHARTERED ACCOUNTANTS OF INDIA
All rights reserved. No part of this publication may be reproduced, stored in a

retrieval system, or transmitted, in any form, or by any means, electronic,
mechanical, photocopying, recording, or otherwise without prior permission,
in writing, from the publisher.
This Educational Material has been formulated in accordance with the Ind AS
notified by the Ministry of Corporate Affairs (MCA) as Companies (Indian
Accounting Standards) Rules, 2015 vide Notification dated February 16,
2015 and other amendments finalised and notified till March 2019.
Edition : July 2019
Committee/Department : Ind AS Implementation Committee
E-mail : indas@icai.in
Website : www.icai.org
Price : ₹ 75/-
ISBN : 978-81-8441-962-7
Published by : The Publication Department on behalf of the

Institute of Chartered Accountants of India,
ICAI Bhawan, Post Box No. 7100,
Indraprastha Marg, New Delhi - 110 002.
Printed by : Sahitya Bhawan Publications, Hospital

Road, Agra - 282 003.
July/2019/1000 copies
Foreword
In this era of globalised economies, the Institute of Chartered Accountants of
India (ICAI) has been at the forefront of ensuring high quality accounting
standards in India. Financial reporting has got new dimensions after the
implementation of Indian Accounting Standards (Ind AS). The Ind AS
Implementation Committee of ICAI is playing a pivotal role in providing guidance
to the members and other stakeholders so as to enable them to implement these
Standards in the same spirit in which these have been formulated.
Moving forward in this direction, the Ind AS Implementation Committee has
brought out this Educational Material covering Ind AS 8, Accounting Policies,
Changes in Accounting Estimates and Errors. The purpose of this Educational
Material is to provide guidance by way of Frequently Asked Questions (FAQs)
and illustrations explaining the principles enunciated in the Standard. This
publication will provide guidance to the stakeholders in understanding the criteria
for selecting and changing accounting policies, together with the accounting
treatment and disclosure of changes in accounting policies, changes in
accounting estimates and corrections of errors.
At this juncture, I wish to place my appreciation for CA. Nihar Niranjan
Jambusaria, Chairman, CA. Dayaniwas Sharma, Vice-Chairman as well as
convenor of the Study Group and other members of the Ind AS Implementation
Committee for their valuable technical contribution and cooperation in bringing
out this publication.
I am sure that membership at large will benefit immensely from this publication.
New Delhi CA. Prafulla P. Chhajed

June 24, 2019 President, ICAI
Preface
In India, Ind AS has become a reality now as Ind AS are being implemented by
specified class of companies. It is a business imperative for Indian companies
today and has become new benchmark of accounting excellence. Ind AS
Implementation Committee of the Institute of Chartered Accountants of India
(ICAI) has been instrumental in making the transition to Ind AS smooth. The
Committee is working to provide guidance to the members and other
stakeholders by issuing Educational Materials on Ind AS, issuing timely
clarifications on issues being faced by the members through Ind AS Technical
Facilitation Group (ITFG) Clarification Bulletins, addressing queries through
Support-desk for implementation of Ind AS, conducting Certificate Course on Ind
AS, developing e-learning modules on Ind AS, workshops, seminars, awareness
programmes on Ind AS and series of webcasts on Ind AS etc.
I am pleased to share that the Committee has brought out the Educational
Material on Indian Accounting Standard (Ind AS) 8, Accounting Policies,
Changes in Accounting Estimates and Errors. The objective of Ind AS 8 is to
prescribe the criteria for selecting and changing accounting policies, together
with the accounting treatment and disclosure of changes in accounting policies,
changes in accounting estimates and corrections of errors. The Standard is
intended to enhance the relevance and reliability of an entity’s financial
statements and the comparability of those financial statements over time and
with the financial statements of other entities. This Educational Material on Ind
AS 8 addresses all relevant aspects envisaged in the Standard by way of brief
summary of the Standard and Frequently Asked Questions (FAQs) which are
being/expected to be encountered while implementing the Standard.
I may mention that the views expressed in this publication are the views of the
Ind AS Implementation Committee and are not necessarily the views of the
Council of the Institute. The purpose of this publication is to provide guidance for
implementing this Ind AS effectively by explaining the principles enunciated in
the Standard with the help of examples. However, while applying Ind AS in a
practical situation, reference should be made to the full text of the Standards.
I would like to convey sincere gratitude to the Hon’ble President, CA. Prafulla P.
Chhajed and Vice-President, CA. Atul Kumar Gupta for providing this opportunity
of bringing out implementation guidance on Ind AS in the form of Educational
Materials. I sincerely appreciate the untiring efforts put in by the members of the
Educational Material on Ind AS 8
Group CA. Sumit Seth, CA. Abhay Mehta, CA. Manish Sampat, CA. Shriraj
Bhandari, CA. Yagnesh Desai, CA. Archana Bhutani, CA.Gandharv Tongia and
CA.Vikas Bagaria for preparing the draft of this Educational Material. I would also
like to thank all the members of the Ind AS Implementation Committee for their
valuable & technical contributions in finalising this publication.
I also acknowledge CA. Geetanshu Bansal, Secretary, Ind AS Implementation
Committee and CA. Prachi Jain, Executive Officer for their technical and
administrative support in bringing out this publication. I would also like to thank
CA. Vidhyadhar Kulkarni, Head, Technical Directorate, for his guidance.
I am sure that, our stakeholders, particularly the preparers and auditors of
financial statements, will find this Educational Material useful in the practical
implementation of the Standard.
CA. Nihar Niranjan Jambusaria

Chairman
Ind AS Implementation Committee
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Contents
I Ind AS 8 – Summary 1
II Frequently Asked Questions (FAQs) 7
III Annexure A 43
Appendix I: Major differences between Ind AS 8, Accounting Policies, 47
Changes in Accounting Estimates and Errors and AS 5, Net Profit or
Loss for the Period, Prior Period Items and Changes in Accounting
Policies
Appendix II: Major difference between Ind AS 8, Accounting Policies, 49
Changes in Accounting Estimates and Errors and IAS 8, Accounting
Policies, Changes in Accounting Estimates and Errors
Educational Material on
Indian Accounting Standard (Ind AS) 8
Accounting Policies, Changes in
Accounting Estimates and Errors
Indian Accounting Standard (Ind AS) 8, Accounting Policies, Changes in
Accounting Estimates and Errors, was notified as part of the Companies
(Indian Accounting Standards) Rules, 2015 issued by the Ministry of
Corporate Affairs, Government of India, vide notification no. G.S.R. 111(E)
dated February 16, 2015. These Rules came into force w.e.f. April 1, 2015.
Ind AS 8 has been subsequently amended in some minor respects by the
Companies (Indian Accounting Standards) (Amendment) Rules, 2018 issued
vide notification no. G.S.R. 310(E) dated March 28, 2018.
I Ind AS 8 – Summary
[The purpose of this summary is to help the reader gain a broad
understanding of the principal requirements of Ind AS 8 (or ‘the Standard’).
Reference should be made to the complete text of the Standard for a
complete understanding of these requirements or in dealing with a practical
situation.]
Objective
Ind AS 8 specifies the criteria for selecting and changing accounting policies,
together with the accounting treatment and disclosure of changes in
accounting policies, changes in accounting estimates and corrections of
errors. The Standard is intended to enhance the relevance and reliability of
an entity’s financial statements, and the comparability of those financial
statements over time and with the financial statements of other entities.
The disclosures required in respect of changes in accounting policies are set
out in Ind AS 8. Other disclosure requirements for accounting policies are
laid down in Ind AS 1, Presentation of Financial Statements.
Selection and Application of Accounting Policies

Accounting policies are the specific principles, bases, conventions, rules and
practices applied by an entity in preparing and presenting financial
statements.
This Standard requires that when an Ind AS specifically applies to a
transaction, other event or condition, the accounting policy or policies applied
to that item shall be determined by applying the Ind AS.
In the absence of an Ind AS that specifically applies to a transaction, other
event or condition, management shall use its judgment in developing and
applying an accounting policy. The accounting policy should be such as
results in information that is:
 relevant to the economic decision-making needs of users; and
 reliable, in that the financial statements:
 represent faithfully the financial position, financial performance
and cash flows of the entity;
 reflect the economic substance of transactions, other events
and conditions, and not merely the legal form;
 are neutral, i.e., free from bias;
 are prudent; and
 are complete in all material respects.
In making the aforesaid judgement, management shall refer to, and
consider the applicability of, the following sources in descending order:
(a) the requirements in Ind ASs dealing with similar and related
issues; and
(b) the definitions, recognition criteria and measurement concepts
for assets, liabilities, income and expenses in the Framework.
Further, in making the judgement, management may also first consider
the most recent pronouncements of International Accounting
Standards Board and in absence thereof those of the other standard-
setting bodies that use a similar conceptual framework to develop
accounting standards, other accounting literature and accepted
2
industry practices, to the extent that these do not conflict with the
sources referred to in the preceding paragraph.
Consistency of Accounting Policies

An entity shall select and apply the accounting policies consistently for
similar transactions, other events and conditions, unless an Ind AS
specifically requires or permits categorisation of items for which different
policies may be appropriate. If an Ind AS requires or permits such
categorisation, an appropriate accounting policy shall be selected and
applied consistently to each category.
Changes in Accounting Policies

An entity shall change an accounting policy only if the change:
(a) is required by an Ind AS; or
(b) 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.
Subject to the exception discussed below, a change in an accounting policy
shall be applied as follows:
 A change in accounting policy resulting from the initial application of
an Ind AS shall be applied as per the specific transitional provisions in
that Ind AS. If that Ind AS does not contain any transitional provisions,
the change shall be applied retrospectively.
 A voluntary change in accounting policy shall be applied
retrospectively. The Standard clarifies that an early application of an
Ind AS is not a voluntary change in accounting policy.
Retrospective application of a change in accounting policy involves
adjustment to 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.
3
An exception to giving retrospective effect to a change in accounting policy

applies where it is impracticable to determine either the period-specific
effects or the cumulative effect of the change.
When it is impracticable to determine the period-specific effects of changing
an accounting policy on comparative information 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, and shall make a
corresponding adjustment to the opening balance of each affected
component of equity for that period.
When it is impracticable to determine the cumulative effect at the beginning
of the current period, of applying the new policy to all prior periods, the entity
shall apply the new policy prospectively from the start of the earliest period
practicable. Thus, in such a situation, the entity disregards the portion of the
cumulative adjustment to assets, liabilities and equity arising before that
date.
Changing an accounting policy is permitted even if it is impracticable to apply
the policy prospectively for any prior period.
The application of an accounting policy for transactions, other events or
conditions that (a) differ in substance from those previously occurring or (b)
are applied to transactions, other events or conditions that did not occur
previously or were immaterial are not change in accounting policy.
The Standard clarifies that initial application of a policy to revalue assets in
accordance with Ind AS 16, Property, Plant and Equipment, or Ind AS 38,
Intangible Assets, is a change in an accounting policy to be dealt with as a
revaluation in accordance with Ind AS 16 or Ind AS 38, rather than in accordance
with Ind AS 8.
Changes in Accounting Estimates

The use of reasonable estimates is an essential part of the preparation of
financial statements and does not undermine their reliability. A change in
accounting estimate is an adjustment of the carrying amount of an asset or a
liability, or the amount of the periodic consumption of an asset, that results
from the assessment of the present status of, and expected future benefits
and obligations associated with, assets and liabilities. Changes in accounting
4
estimates result from new information or new developments and, accordingly,

are not corrections of errors.
To the extent that a change in an accounting estimate gives rise to changes
in assets and liabilities, or relates to an item of equity, it shall be recognised
by adjusting the carrying amount of the related asset, liability or equity item
in the period of the change.
The effects of other changes in accounting estimates shall be recognised
prospectively by including them in profit or loss in:
(a) the period of the change, if the change affects that period only; or
(b) the period of the change and future periods, if the change affects both.
Prior Period Errors

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:
(a) was available when financial statements for those periods were
approved for issue; and
(b) could reasonably be expected to have been obtained and taken into
account in the preparation and presentation of those financial
statements.
Such errors include the effects of mathematical mistakes, mistakes in
applying accounting policies, oversights or misinterpretations of facts, and
fraud.
Except to the extent that it is impracticable to determine either the period-
specific effects or the cumulative effect of an error, the Standard requires an
entity to correct material prior period errors retrospectively in the first set of
financial statements approved for issue after their discovery by:
(a) restating the comparative amounts for the prior period(s) presented in
which the error occurred; or
(b) 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.
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Potential current period errors discovered during the period are corrected
before the financial statements are approved for issue
Omissions or misstatements of items are material if they could, individually or
collectively, influence the economic decisions that users make on the basis
of the financial statements. Materiality depends on the size and nature of the
omission or misstatement judged in the surrounding circumstances. The size
or nature of the item, or a combination of both, could be the determining
factor.
6
II. Frequently Asked Questions
Accounting Policies
Selection and application of accounting policies
Question 1
Are individual entities within a group required to adopt uniform accounting
policies in their stand-alone financial statements?
Response
Ind ASs do not require accounting policies followed by group entities in their
stand-alone financial statements to be the same as those applied in the
group’s consolidated financial statements. Each entity within the group
should select and apply the appropriate accounting policies in accordance
with Ind AS 8 in its stand-alone financial statements.
However, the following requirement of Ind AS 110, Consolidated Financial
Statements, may be noted:
“Uniform accounting policies
B87 If a member of the group uses accounting policies other than those
adopted in the consolidated financial statements for like transactions and
events in similar circumstances, appropriate adjustments are made to that
group member’s financial statements in preparing the consolidated
financial statements to ensure conformity with the group’s accounting
policies.”
Thus, where accounting policies followed in stand-alone financial statements
of any group entity are different from those adopted in the consolidated
financial statements, appropriate adjustments have to be made in preparing
consolidated financial statements to achieve conformity with the group’s
accounting policies.
7
Changes in accounting policies

Question 2
What are examples of changes in accounting policies?
Response
Changes in accounting policies may relate to recognition, measurement or
presentation of an item in financial statements. The following are some
illustrative examples:
Change in recognition Paragraph 5 of Ind AS 116, Leases, provides

policy that a lessee can elect not to apply Ind AS
116’s recognition and measurement
requirements to short-term leases and/or leases
for which the underlying asset is of low value
(‘low value leases’). If an entity changes its
policy with respect to applying Ind AS 116’s
recognition and measurement requirements to
short-term leases and/or low value leases, this
constitutes a change in accounting policy.
Changes in 1. Paragraph 63 of Ind AS 115, Revenue from
measurement basis Contracts with Customers, provides that as a
practical expedient, an entity need not adjust
the promised amount of consideration for the
effects of a significant financing component if
the entity expects, at contract inception, that
the period between when the entity transfers
a promised good or service to a customer
and when the customer pays for that good or
service will be one year or less. An entity
that previously applied the practical
expedient may decide to no longer apply the
practical expedient and instead segregate
the finance component. This constitutes a
change in accounting policy.
2. Change in policy of measuring a class of
property, plant and equipment (PPE) from
cost model to revaluation model. [It may be
8
noted that such a change is dealt with

prospectively in accordance with Ind AS 16,
Property, Plant and Equipment rather than
retrospectively as per Ind AS 8.]
Changes in presentation 1. Paragraph 91 of Ind AS 1, Presentation of
Financial Statements, provides a choice
regarding manner of presentation of tax
effects of items of other comprehensive
income (OCI). An entity may present items
of OCI either (a) net of related tax effects,
or (b) before related tax effects, with one
amount shown for the aggregate amount of
income tax relating to these items. A
change in the manner of presentation of tax
effects of items of OCI is a change in
accounting policy.
2. Paragraph 24 of Ind AS 20 provides a
choice of presenting government grants
related to assets in the balance sheet
either by setting up the grant as deferred
income or by deducting the grant in arriving
at the carrying amount of the asset. A
change in the manner of presentation of
grants related to assets is a change in
accounting policy.
3. Paragraph 29 of Ind AS 20 provides a
choice of presenting grants related to
income as a part of profit or loss, either
separately or under a general heading such
as ‘Other income’ or by deducting such a
grant in reporting the related expense. A
change in the manner of presentation of
government grants related to income is a
change in accounting policy.
It may be noted that a change in composition of reportable segments as a result of
changes in the structure of entity’s internal organisation is not a change in
accounting policy. The resultant restatement of previously reported segment
9
information is dealt with in accordance with paragraphs 29 and 30 of Ind AS 108,

Operating Segments.
Question 3
Whether a change in inventory cost formula is a change in accounting policy
or a change in accounting estimate?
Response
Ind AS 8 defines ‘accounting policies’ as follows:

“Accounting policies are the specific principles, bases, conventions,
rules and practices applied by an entity in preparing and presenting
financial statements.”
Paragraph 36(a) of Ind AS 2, Inventories, specifically requires disclosure of
‘cost formula used’ as a part of disclosure of accounting policies adopted in
measurement of inventories.
Accordingly, a change in cost formula is a change in accounting policy.
Question 4
Entity ABC acquired a building for its administrative purposes and presented
the same as property, plant and equipment (PPE) in the financial year 2017-
18. During the financial year 2018-19, it relocated the office to a new building
and leased the said building to a third party. Following the change in the
usage of the building, Entity ABC reclassified it from PPE to investment
property in the financial year 2018-19. Should Entity ABC account for the
change as a change in accounting policy?
Response
Paragraph 16(a) of Ind AS 8 provides that the application of an accounting
policy for transactions, other events or conditions that differ in substance
from those previously occurring are not changes in accounting policies.
Ind AS 16, Property, Plant and Equipment, defines the term ‘property, plant
and equipment’ as follows:
“Property, plant and equipment are tangible items that:
(a) are held for use in the production or supply of goods or services,
for rental to others, or for administrative purposes; and
10
(b) are expected to be used during more than one period.”

Ind AS 40, Investment Property, defines the term ‘investment property’ as
follows:
“Investment property is property (land or a building—or part of a
building—or both) held (by the owner or by the lessee as a right-of-use
asset) to earn rentals or for capital appreciation or both, rather than
for:
(a) use in the production or supply of goods or services or for
administrative purposes; or
(b) sale in the ordinary course of business.”
As per the above definitions, whether a building is an item of property, plant
and equipment (PPE) or an investment property for an entity depends on the
purpose for which it is held by the entity. It is thus possible that due to a
change in the purpose for which it is held, a building that was previously
classified as an item of property, plant and equipment may warrant
reclassification as an investment property, or vice versa.
Whether a building is in the nature of PPE or investment property is
determined by applying the definitions of these terms from the perspective of
that entity. Thus, the classification of a building as an item of property, plant and
equipment or as an investment property is not a matter of an accounting policy
choice. Accordingly, a change in classification of a building from property,
plant and equipment to investment property due to change in the purpose for
which it is held by the entity is not a change in an accounting policy.
Question 5
Whether change in functional currency of an entity represents a change in
accounting policy?
Response
Paragraph 16(a) of Ind AS 8 provides that the application of an accounting
policy for transactions, other events or conditions that differ in substance
from those previously occurring are not changes in accounting policies.
Ind AS 21, The Effects of Changes in Foreign Exchange Rates, defines

functional currency as the currency of the primary economic environment in
which the entity operates.
11
Paragraphs 9-12 of Ind AS 21 list factors to be considered by an entity in

determining its functional currency. It is recognised that there may be cases
where the functional currency is not obvious. In such cases, Ind AS 21
requires the management to use its judgement to determine the functional
currency that most faithfully represents the economic effects of the
underlying transactions, events and conditions.
Paragraph 13 of Ind AS 21 specifically notes that an entity’s functional
currency reflects the underlying transactions, events and conditions that are
relevant to it. Accordingly, once determined, the functional currency is not
changed unless there is a change in those underlying transactions, events
and conditions. Thus, functional currency of an entity is not a matter of an
accounting policy choice.
In view of the above, a change in functional currency of an entity does not
represent a change in accounting policy and Ind AS 8, therefore, does not
apply to such a change. Ind AS 21 requires that when there is a change in an
entity’s functional currency, the entity shall apply the translation procedures
applicable to the new functional currency prospectively from the date of the
change.
Question 6
Whether a change in an accounting policy is always required to be applied
retrospectively? If not, what are the exceptions?
Response
Paragraph 19 of Ind AS 8 states as follows:
“ Subject to paragraph 23:
(a) an entity shall account for a change in accounting policy resulting
from the initial application of an Ind AS in accordance with the
specific transitional provisions, if any, in that Ind AS; and
(b) when an entity changes an accounting policy upon initial application
of an Ind AS that does not include specific transitional provisions
applying to that change, or changes an accounting policy voluntarily,
it shall apply the change retrospectively.”
In accordance with the above, a change in an accounting policy that results
from the initial application of an Ind AS should be accounted for in
accordance with the specific transitional provisions, if any, of that Ind AS.
12
Those transitional provisions may or may not require retrospective

application of the new accounting policy. In the absence of specific
transitional provisions, or when an entity changes an accounting policy
voluntarily, it is required to apply the change retrospectively. However, as per
paragraph 17 of Ind AS 8, retrospective application of a change in accounting
policy is subject to the following exceptions:
(i) The initial application of a policy to revalue assets in accordance with
Ind AS 16, Property, Plant and Equipment, or Ind AS 38, Intangible
Assets is accounted for as a revaluation under Ind AS 16 /Ind AS 38
rather than under Ind AS 8.
(ii) Where it is impracticable to determine the period-specific effect or the
cumulative effects of changing an accounting policy.
Paragraph 22 of Ind AS 8 provides that when a change in accounting policy
is applied retrospectively, the entity shall adjust 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.”
For example, if an accounting policy change is made in financial year ended
31 March 2019, the entity shall adjust the comparative information for the
year ended 31 March 2018. The cumulative adjustment for periods up to 31
March 2017 shall be adjusted in the retained earnings balance or other
affected component of equity as at 1 April 2017.
Question 7
Whether an entity can change its accounting policy of subsequent
measurement of property, plant and equipment (PPE) from revaluation model
to cost model?
Response
Paragraph 29 of Ind AS 16, Property, Plant and Equipment provides that an
entity shall choose either the cost model or the revaluation model as its
accounting policy for subsequent measurement of an entire class of PPE.
13
Paragraph 14 of Ind AS 8 states as follows: –

“ An entity shall change an accounting policy only if the change:
(b) 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.”
Thus, a change from revaluation model to cost model for a class of PPE can
be made only if it meets the condition specified in Ind AS 8 paragraph 14(b)
i.e. the change results in the financial statements providing reliable and more
relevant information to the users of financial statements. For example, an
unlisted entity planning IPO may change its accounting policy from
revaluation model to cost model for some or all classes of PPE to align the
entity’s accounting policy with that of listed markets participants within that
industry so as to enhance the comparability of its financial statements with
those of other listed market participants within the industry. Such a change –
from revaluation model to cost model is not expected to be frequent.
Where the change in accounting policy from revaluation model to cost model
is considered permissible in accordance with Ind AS 8 paragraph 14(b), it
shall be accounted for retrospectively, in accordance with Ind AS 8.
Question 8
Can an entity voluntarily change one or more of its accounting policies? What
could be an example of a voluntary change?
Response
A change in an accounting policy can be made only if the change is required
or permitted by Ind AS 8. Regarding the circumstances in which an
accounting policy should, or can, be changed, paragraphs 14-15 of Ind AS 8
state as follows:
“14 An entity shall change an accounting policy only if the change:
(b) results in the financial statements providing reliable and more
relevant information about the effects of transactions, other
14
events or conditions on the entity’s financial position, financial

performance or cash flows.
15 Users of financial statements need to be able to compare the financial
statements of an entity over time to identify trends in its financial
position, financial performance and cash flows. Therefore, the same
accounting policies are applied within each period and from one
period to the next unless a change in accounting policy meets one of
the criteria in paragraph 14.”
Further, paragraph 19 of Ind AS 8 states as follows:
“ Subject to paragraph 23:
(a) an entity shall account for a change in accounting policy
resulting from the initial application of an Ind AS in accordance
with the specific transitional provisions, if any, in that Ind AS;
and
(b) when an entity changes an accounting policy upon initial
application of an Ind AS that does not include specific
transitional provisions applying to that change, or changes an
accounting policy voluntarily, it shall apply the change
retrospectively.”
A change in accounting policy other than a change required by an Ind AS can
be made by an entity only if it is permitted to do so under paragraph 14(b) of
Ind AS 8. According to paragraph 14(b), a voluntary change in an accounting
policy can be made only if the change “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. Thus, paragraph 14(b) lays down two
requirements that must be complied with in order to make a voluntary change
in an accounting policy. First, the information resulting from application of the
changed (i.e., the new) accounting policy must be reliable. Second, the
changed accounting policy must result in “more relevant” information being
presented in the financial statements.
Whether a changed accounting policy results in reliable and more relevant
financial information is a matter of assessment in the particular facts and
circumstances of each case. In order to ensure that such an assessment is
made judiciously (such that a voluntary change in an accounting policy does
15
not effectively become a matter of free choice), paragraph 29 of Ind AS 8

requires an entity making a voluntary change in an accounting policy to
disclose, inter alia, “the reasons why applying the new accounting policy
provides reliable and more relevant information.”
The following is an example of a voluntary change in accounting policy:
As per Ind AS 27, Separate Financial Statements, investments in
subsidiaries, associates and joint ventures are accounted for in an entity’s
separate financial statements at cost or in accordance with Ind AS 109 (i.e.,
at fair value). The same accounting is required to be applied for each
category of investments1. Assume that an entity decides to change its policy
of measuring investments in subsidiaries (or associates or joint ventures)
from cost to fair value in accordance with Ind AS 109, as this will result in the
financial statements providing reliable and more relevant information. This
would constitute a voluntary change in accounting policy.
Question 9
An entity developed one of its accounting policies by considering a
pronouncement of an overseas national standard-setting body in due
accordance with Ind AS 8. Would it be permissible for the entity to change the
said policy to reflect a subsequent amendment in that pronouncement?
Response
Paragraphs 10-12 of Ind AS 8 state as follows:
“10 In the absence of an Ind AS that specifically applies to a
transaction, other event or condition, management shall use its
judgement in developing and applying an accounting policy that results
in information that is:
(a) ……….
11 In making the judgement described in paragraph 10,
management shall refer to, and consider the applicability of, the
following sources in descending order:
(a) the requirements in Ind ASs dealing with similar and related
issues; and
1For meaning of ‘category of investments’, reference may be made to Educational
Material on Ind AS 27 Separate Financial Statements & Ind AS 28 Investments in
Associates and Joint Ventures.
16
(b) the definitions, recognition criteria and measurement concepts

for assets, liabilities, income and expenses in the Framework.
12 In making the judgement described in paragraph 10,
management may also first consider the most recent pronouncements
of International Accounting Standards Board and in absence thereof
those of the 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.”
In accordance with paragraph 12 above, an entity might develop an
accounting policy by considering the pronouncements of other standard-
setting bodies in the absence of pronouncement of International Accounting
Standards Board on the relevant subject.
“In the absence of an Ind AS that specifically applies to a transaction,
other event or condition, management may, in accordance with
paragraph 12, apply an accounting policy from the most recent
pronouncements of International Accounting Standards Board and in
absence thereof those of the other standard-setting bodies that use a
similar conceptual framework to develop accounting standards. If,
following an amendment of such a pronouncement, the entity
chooses to change an accounting policy, that change is accounted
for and disclosed as a voluntary change in accounting policy.”
It would be noted from the above that paragraph 21 of Ind AS 8 specifically
deals with change in an accounting policy that is based on a pronouncement
of IASB/other standard-setting body when the relevant pronouncement is
amended by the standard-setting body. As such a change is a voluntary
change in accounting policy, it can be made only if it results in information
that is reliable and more relevant (and does not conflict with the sources in
Ind AS 8 paragraph 11).
17
Question 10
How should an entity account for the income-tax effects of retrospective
application of changes in accounting policies (or correction of prior period
errors)?
Response
“The tax effects of corrections of prior period errors and of
retrospective adjustments made to apply changes in accounting
policies are accounted for and disclosed in accordance with Ind AS 12,
Income Taxes.”
Paragraphs 61A and 62A of Ind AS 12 state as follows:
“61A Current and deferred tax shall be recognised outside profit or
loss if the tax relates to items that are recognised, in the same or a
different period, outside profit or loss. Therefore, current tax and
deferred tax that relates to items that are recognised, in the same or a
different period:
(a) in other comprehensive income, shall be recognised in other
comprehensive income (see paragraph 62).
(b) directly in equity, shall be recognised directly in equity (see
paragraph 62A).”
“62A Indian Accounting Standards require or permit particular items to
be credited or charged directly to equity. Examples of such items are:
(a) an adjustment to the opening balance of retained earnings
resulting from either a change in accounting policy that is
applied retrospectively or the correction of an error (see Ind AS
8, Accounting Policies, Changes in Accounting Estimates and
Errors); and….”
Where an entity applies a change in accounting policy retrospectively or
corrects prior period errors, it should include the related tax effect as part of
the prior period adjustments.
Therefore, income-tax effects of adjustments to the opening balance of
retained earnings (or another component of equity) as at the beginning of
the earliest prior period presented, resulting from either a change in
18
accounting policy that is applied retrospectively or the correction of an error,

shall be recognised directly in such component of equity. Similarly, income-
tax effects of adjustments to the comparative amounts for the prior period(s)
presented shall be included in the comparative amount of tax expense for the
prior period(s) in accordance with paragraph 61A of Ind AS 12.
Question 11
When is an entity required to present a third balance sheet as at the
beginning of the preceding period?
Response
As per paragraph 40A of Ind AS 1, Presentation of Financial Statements, an
entity shall present a third balance sheet as at the beginning of the preceding
period in addition to the minimum comparative financial statements required
by paragraph 38A of the standard if:
(a) it applies an accounting policy retrospectively, makes a retrospective
restatement of items in its financial statements or reclassifies items in
its financial statements; and
(b) the retrospective application, retrospective restatement or the
reclassification has a material effect on the information in the balance
sheet at the beginning of the preceding period.
Annexure A to this Educational Material provides an illustration of
presentation of a third balance sheet.
Question 12
Is a third balance sheet required in condensed interim financial statements
when there is a change in accounting policy?
Response
As per Ind AS 34, Interim Financial Reporting, interim financial report means
a financial report containing either a complete set of financial statements (as
described in Ind AS 1, Presentation of Financial Statements), or a set of
condensed financial statements (as described in Ind AS 34) for an interim
period.
As per paragraph 10 of Ind AS 1, a complete set of financial statements
includes, inter alia, a balance sheet as at the beginning of the preceding
period when an entity applies an accounting policy retrospectively or makes
19
a retrospective restatement of items in its financial statements, or when it

reclassifies items in its financial statements in accordance with paragraphs
40A–40D of Ind AS 1.
Ind AS 34 does not include the requirements of Ind AS 1 in respect of
comparative information. As a consequence, in condensed interim financial
statements, it is not necessary to provide an additional balance sheet as at
the beginning of the earliest comparative period presented where an entity
has made a retrospective change in an accounting policy (or a retrospective
restatement or a retrospective reclassification).
However, an entity may present a third balance sheet on a voluntary basis.
Question 13
What are the disclosures required when an accounting policy is changed
voluntarily?
Response
Paragraph 29 of Ind AS 8 states that, “when a voluntary change in
accounting policy has an effect on the current period or any prior period,
would have an effect on that period except that it is impracticable to
determine the amount of the adjustment, or might have an effect on future
periods, an entity shall disclose:
(a) the nature of the change in accounting policy;
(b) the reasons why applying the new accounting policy provides reliable
and more relevant information;
(c) for the current period and each prior period presented, to the extent
practicable, the amount of the adjustment:
(i) for each financial statement line item affected; and
(ii) if Ind AS 33, Earnings per Share applies to the entity, for basic
and diluted earnings per share;
(d) the amount of the adjustment relating to periods before those
presented, to the extent practicable; and
(e) if retrospective application is impracticable for a particular prior period,
or for periods before those presented, the circumstances that led to
the existence of that condition and a description of how and from when
the change in accounting policy has been applied.”
20
The above disclosures are not required to be repeated in the financial

statements of subsequent periods.
Illustration of the above disclosure requirements
(Tax effects are ignored for the purpose of this illustration)
During the financial year ended 31 March 2019, the entity has changed the
cost formula applied in measuring the cost of materials consumed from First-
in-First out (FIFO) to weighted average cost. This change aligns the entity’s
accounting policy with the general industry practice, thereby enhancing the
comparability of the entity’s financial statements with those of other market
participants within the industry. This voluntary change in accounting policy
has been accounted for by restating the comparative information for the
preceding period. The entity has also presented a third balance sheet as at
the beginning of the preceding period. The change in accounting policy has
impacted the financial statements as follows:
Balance 31 March Increase/ 31 March 31 March Increase/ 31 1 April Increase/ 1 April
sheet 2019 (decrease) 2019 (after 2018 (as (decrease) March 2017 (as (decrease) 2017 (re-
(without due to considering previously due to 2018 previously due to stated)
considering change in the effect of reported) change in (re- reported) change in
the effect of accounting change in accounting stated) accounting
change in policy accounting policy policy
accounting policy)
policy)
Inventory 700 (100) 600 600 (170) 430 700 (200) 500
Total 1,000 (100) 900 1,500 (170) 1,330 1,700 (200) 1,500
current
assets
Total 3,000 (100) 2,900 4,000 (170) 3,830 5,000 (200) 4,800
assets
Retained 1,300 (100) 1,200 1,100 (170) 930 1,000 (200) 800
earnings
Total 1,800 (100) 1,700 1,600 (170) 1,430 1,500 (200) 1,300
equity
21
Statement of 31 March Increase/ 31 March 31 March Increase/ 31 March

profit and 2019 (without (decrease) 2019 (after 2018 (as (decrease) 2018
loss considering due to considering previously due to (restated)
the effect of change in the effect of reported) change in
change in accounting change in accounting
accounting policy accounting policy
policy) policy)
Cost of 500 (70) 430 500 (30) 470
materials
consumed
Profit for the 200 70 270 100 30 130
year
Earnings per share (basic as well as diluted) for the current year and the
preceding year increased by ₹0.70 per share and ₹0.30 per share
respectively consequent to the change in accounting policy.
Question 14
What disclosures are required for new or revised Ind ASs which have been
notified by the Ministry of Corporate Affairs but are not yet effective?
Response
Paragraphs 30 and 31 of Ind AS 8 state as follows:
“30 When an entity has not applied a new Ind AS that has been
issued but is not yet effective, the entity shall disclose:
(a) this fact; and
(b) known or reasonably estimable information relevant to
assessing the possible impact that application of the new Ind AS
will have on the entity’s financial statements in the period of
initial application.
31 In complying with paragraph 30, an entity considers disclosing:
(a) the title of the new Ind AS;
(b) the nature of the impending change or changes in accounting
policy;
(c) the date by which application of the Ind AS is required;
(d) the date as at which it plans to apply the Ind AS initially; and
(e) either:
22
(i) a discussion of the impact that initial application of the Ind

AS is expected to have on the entity’s financial
statements; or
(ii) if that impact is not known or reasonably estimable, a
statement to that effect.”
In accordance with the above requirements, where a new standard or an
amendment to an existing standard has been notified by the Ministry of
Corporate Affairs but the standard or the amendment has not yet come into
effect, entities are required to make certain disclosures if they have not
applied the standard or the amendment in the financial statements. The
disclosures are intended to enable the user to assess the possible effects of
the new accounting pronouncements or of the revisions to existing ones on
the entity’s financial statements. Judgement may be required in determining
whether a new accounting pronouncement or a revision is expected to have
a material effect. Some new pronouncements provide accounting alternatives
that could have an effect on the entity. Management can consider disclosing
its expectation on the use of accounting alternatives.
Entities can consider making these disclosures even if the new accounting
pronouncement is issued after the balance sheet date but before the date of
approval of the financial statements.
As an example, Ind AS 116, which was notified under the Companies (Indian
Accounting Standards) (Amendments) Rules, 2019 issued vide MCA
notification dated 30 March, 2019 is applicable for annual reporting periods
beginning on or after 1 April, 2019. Accordingly, an entity is required to make
disclosures concerning the possible impact of Ind AS 116 in the financial
statements for the year ended 31 March, 2019.
Changes in accounting estimates
Question 15
What are the examples of changes in accounting estimates?
Response
Ind ASs do not define the term ‘accounting estimate’. However, the term
‘change in accounting estimate’ is defined in Ind AS 8 as follows:
“A change in accounting estimate is an adjustment of the carrying
amount of an asset or a liability, or the amount of the periodic
23
consumption of an asset, that results from the assessment of the

present status of, and expected future benefits and obligations
associated with, assets and liabilities. Changes in accounting
estimates result from new information or new developments and,
accordingly, are not corrections of errors.”
Further, paragraphs 32 and 33 of Ind AS 8, inter alia, state as follows:
“32 As a result of the uncertainties inherent in business activities,
many items in financial statements cannot be measured with precision
but can only be estimated. Estimation involves judgements based on
the latest available, reliable information.”
“33 The use of reasonable estimates is an essential part of the
preparation of financial statements and does not undermine their
reliability.”
Paragraph 32 of Ind AS 8 further provides the following examples of matters
requiring estimates:
(a) bad debts;
(b) inventory obsolescence;
(c) the fair value of financial assets or financial liabilities;
(d) the useful lives of, or expected pattern of consumption of the future
economic benefits embodied in, depreciable assets; and
(e) warranty obligations.
Apart from the above, other examples of estimates include recoverability of
deferred tax assets and actuarial assumptions relating to defined benefit
pension schemes.
Question 16
How are changes in accounting estimates accounted for?
Response
Paragraphs 36-38 of Ind AS 8 state the following with regard to recognition of
effects of changes in accounting estimates:
“36 The effect of change in an accounting estimate, other than a
change to which paragraph 37 applies, shall be recognised
prospectively by including it in profit or loss in:
24
(a) the period of the change, if the change affects that period only;
or
(b) the period of the change and future periods, if the change
affects both.
37 To the extent that a change in an accounting estimate gives rise
to changes in assets and liabilities, or relates to an item of equity, it
shall be recognised by adjusting the carrying amount of the related
asset, liability or equity item in the period of the change.”
38 Prospective recognition of the effect of a change in an accounting
estimate means that the change is applied to transactions, other
events and conditions from the date of the change in estimate. A
change in an accounting estimate may affect only the current period’s
profit or loss, or the profit or loss of both the current period and future
periods. For example, a change in the estimate of the amount of
warranty provision affects only the current period’s profit or loss and
therefore is recognised in the current period. However, a change in the
estimated useful life of, or the expected pattern of consumption of the
future economic benefits embodied in, a depreciable asset affects
depreciation expense for the current period and for each future period
during the asset’s remaining useful life. In both cases, the effect of the
change relating to the current period is recognised as income or
expense in the current period. The effect, if any, on future periods is
recognised as income or expense in those future periods.”
The following example illustrates how the effects of changes in accounting
estimates are accounted for:
During the financial year ended 31 March, 2018, Entity ABC introduced a
new range of electric motors. It sold the motors with a standard warranty of
two years. Warranty provides assurance that a product will function as
expected and in accordance with certain specifications and it has been
assessed that it is not a separate performance obligation under Ind AS 115.
Based on results of testing of the motors during trials prior to commercial
production, Entity ABC made a provision for warranty costs amounting to
₹1,00,000 for motors sold during the year ended 31 March, 2018.
During financial year 2018-19, a defect was discovered in the motors that
had not come to light during the trials. The defect resulted in the entity
25
incurring an amount of ₹2,00,000 during the financial year 2018-19 on

repairs of motors sold during the financial year 2017-18. Besides, the entity
expects to incur ₹1,50,000 as costs during the year 2019-20 on meeting its
warranty obligations in respect of motors sold during the financial year 2017-
18.
In preparing its financial statements for the year ended 31 March, 2019, the
entity would carry forward a warranty provision of ₹1,50,000 in respect of
motors sold during the financial year 2017-18. It would recognise an amount
of ₹2,50,000 (₹2,00,00 plus ₹1,50,000 minus ₹1,00,000) in respect of
motors sold during the financial year 2017-18 as an expense in profit or loss
for the financial year 2018-19. The warranty provision included in the
comparatives for financial year ended 31 March, 2018 would not be adjusted.
The provision for warranty costs in respect of motors sold during the financial
year 2018-19 would be made by considering the information concerning the
defect in motors that came to light during the financial year.
Question 17
Is change in the depreciation method for an item of property, plant and
equipment a change in accounting policy or a change in accounting
estimate?
Response
Paragraphs 60 and 61 of Ind AS 16, Property, Plant and Equipment, state as
follows:
“60 The depreciation method used shall reflect the pattern in which
the asset’s future economic benefits are expected to be consumed by
the entity.
61 The depreciation method applied to an asset shall be reviewed
at least at each financial year-end and, if there has been a significant
change in the expected pattern of consumption of the future economic
benefits embodied in the asset, the method shall be changed to reflect
the changed pattern. Such a change is accounted for as a change in
an accounting estimate in accordance with Ind AS 8.”
As per the above, depreciation method for a depreciable asset has to reflect
the expected pattern of consumption of future economic benefits embodied in
the asset. Determination of depreciation method thus involves an accounting
estimate; depreciation method is not a matter of an accounting policy.
26
Accordingly, Ind AS 16 requires a change in depreciation method to be

accounted for as a change in an accounting estimate, i.e., prospectively.
Question 18
Whether a parent entity needs to align the depreciation method(s) applied by
its subsidiaries in their stand-alone financial statements with its own
depreciation method(s) in the consolidated financial statements?
Response
Paragraph 19 and paragraph B87 of Ind AS 110, Consolidated Financial
Statements, state as follows:
“19 A parent shall prepare consolidated financial statements using
uniform accounting policies for like transactions and other events in
similar circumstances.”
“B87 If a member of the group uses accounting policies other than
those adopted in the consolidated financial statements for like
transactions and events in similar circumstances, appropriate
adjustments are made to that group member’s financial statements in
preparing the consolidated financial statements to ensure conformity
with the group’s accounting policies.”
It may be noted that the above mentioned paragraphs require an entity to
apply uniform accounting policies for like transactions and events in similar
circumstances in consolidated financial statements. These paragraphs do not
apply to accounting estimates used in preparing consolidated financial
statements.
As discussed in Question 17 of this Educational Material depreciation
method for an item of property, plant and equipment is an accounting
estimate and not an accounting policy. Each member of a group determines
an appropriate depreciation method(s) in accordance with the requirements
of Ind AS 16 to be applied in preparing its stand-alone financial statements.
The method(s) so determined is(are) not changed while consolidating the
subsidiaries in the consolidated financial statements.
Question 19
What are the disclosures to be made in respect of changes in accounting
estimates?
27
Response
Paragraphs 36 and 37 of Ind AS 8 state as follows:
“36 An entity shall disclose the nature and amount of a change in an
accounting estimate that has an effect in the current period or is
expected to have an effect in future periods, except for the disclosure
of the effect on future periods when it is impracticable to estimate that
effect.
37 If the amount of the effect in future periods is not disclosed
because estimating it is impracticable, an entity shall disclose that
fact.”
Illustration of disclosures for changes in accounting estimates
Change in accounting estimate
During the financial year ended 31 March 2019, the management of XYZ
Limited performed an operational review of its plant in Gujarat, India, which
resulted in changes in expected usage of certain items of property, plant and
equipment. Certain machinery, which was expected to be used in production
for period of seven years from the date of acquisition, is now expected to be
used in production for a period of five years from the date of acquisition,
considering the introduction of new technology in the market. This has
resulted in decrease in useful life of the machinery. The effect of this change
on actual and expected depreciation expense, in current and future years, is
as follows:
2018-19 2019-20 2020-21

Increase in depreciation 150 60 11
expense
Correction of prior period errors

Question 20
How is a material prior period error corrected?
Response
Paragraph 41 of Ind AS 8, inter alia, states that errors can arise in respect of
the recognition, measurement, presentation or disclosure of elements of
financial statements.
28
Paragraph 42 of Ind AS 8 provides that except where it is impracticable to do

so, an entity shall correct material prior period errors retrospectively in the
first set of financial statements approved for issue after their discovery by:
(a) restating the comparative amounts for the prior period(s) presented in
which the error occurred; or
(b) 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.
In accordance with the above, if an error discovered is material, the entity
should correct it in the first set of financial statements approved for issue
after its discovery restating the comparative amounts for the prior period(s)
presented, as if the error had never occurred.
Question 21
What disclosures are required by an entity in relation to corrections of prior
period errors?
Response
Paragraph 49 of Ind AS 8 requires an entity to disclose the following:
(a) the nature of the prior period error;
(b) for each prior period presented, to the extent practicable, the amount
of the correction:
(i) for each financial statement line item affected; and
(ii) if Ind AS 33 applies to the entity, for basic and diluted earnings
per share;
(c) the amount of the correction at the beginning of the earliest prior
period presented; and
(d) if retrospective restatement is impracticable for a particular prior
period, the circumstances that led to the existence of that condition
and a description of how and from when the error has been corrected.
(e) Financial statements of subsequent periods need not repeat these
disclosures.
Annexure A to this Educational Material provides an illustration of the
disclosures pursuant to the above requirements.
29
Question 22
An entity has presented certain material liabilities as non-current in its
financial statements for periods upto 31 March 2018. While preparing annual
financial statements for the year ended 31 March 2019, management
discovers that these liabilities should have been classified as current. The
management intends to restate the comparative amounts for the prior period
presented (i.e., as at 31 March 2018). Would this reclassification of liabilities
from non-current to current in the comparative amounts be considered to be
correction of an error under Ind AS 8? Would the entity need to present a
third balance sheet?
Response
“Errors can arise in respect of the recognition, measurement, presentation or
disclosure of elements of financial statements. Financial statements do not
comply with Ind ASs if they contain either material errors or immaterial errors
made intentionally to achieve a particular presentation of an entity’s financial
position, financial performance or cash flows. Potential current period errors
discovered in that period are corrected before the financial statements are
approved for issue. However, material errors are sometimes not discovered
until a subsequent period, and these prior period errors are corrected in the
comparative information presented in the financial statements for that
subsequent period.” [Emphasis added]
In accordance with the above, the reclassification of liabilities from non-
current to current would be considered as correction of an error under Ind AS
8. Accordingly, in the financial statements for the year ended March 31,
2019, the comparative amounts as at 31 March 2018 would be restated to
reflect the correct classification.
Ind AS 1 requires an entity to present a third balance sheet as at the
beginning of the preceding period in addition to the minimum comparative
financial statements, if, inter alia, it makes a retrospective restatement of
items in its financial statements and the restatement has a material effect on
the information in the balance sheet at the beginning of the preceding period.
Accordingly, the entity should present a third balance sheet as at the
beginning of the preceding period, i.e., as at 1 April 2017 in addition to the
comparatives for the financial year 2017-18.
30
Question 23
An entity charged off certain expenses as finance costs in its financial
statements for the year ended 31 March 2018. While preparing annual
financial statements for the year ended 31 March 2019, management
discovered that these expenses should have been classified as other
expenses instead of finance costs The error occurred because the
management inadvertently misinterpreted certain facts. The entity intends to
restate the comparative amounts for the prior period presented in which the
error occurred (i.e., year ended 31 March 2018). Would this reclassification
of expenses from finance costs to other expenses in the comparative
amounts be considered to be correction of an error under Ind AS 8? Would
the entity need to present a third balance sheet?
Response
In accordance with the above, the reclassification of expenses from finance
costs to other expenses would be considered as correction of an error under
Ind AS 8. Accordingly, in the financial statements for the year ended 31
March, 2019, the comparative amounts for the year ended 31 March 2018
would be restated to reflect the correct classification.
Ind AS 1 requires an entity to present a third balance sheet as at the
beginning of the preceding period in addition to the minimum comparative
financial statements if, inter alia, it makes a retrospective restatement of
items in its financial statements and the restatement has a material effect on
the information in the balance sheet at the beginning of the preceding period.
31
In the given case, the retrospective restatement of relevant items in

statement of profit and loss has no effect on the information in the balance
sheet at the beginning of the preceding period (1 April 2017). Therefore, the
entity is not required to present a third balance sheet.
Question 24
While preparing the annual financial statements for the year ended 31 March
2019, an entity discovers that a provision for constructive obligation for
payment of bonus to selected employees in corporate office (material in
amount) which was required to be recognised in the annual financial
statements for the year ended 31 March 2017 was not recognised due to
oversight of facts. The bonus was paid during the financial year ended 31
March 2018 and was recognised as an expense in the annual financial
statements for the said year. Would this situation require retrospective
restatement of comparatives considering that the error was material?
Response
As per paragraph 40A of Ind AS 1, an entity shall present a third balance
sheet as at the beginning of the preceding period in addition to the minimum
comparative financial statements if, inter alia, it makes a retrospective
restatement of items in its financial statements and the retrospective
restatement has a material effect on the information in the balance sheet at
the beginning of the preceding period.
In the given case, expenses for the year ended 31 March 2017 and liabilities
as at 31 March 2017 were understated because of non-recognition of bonus
expense and related provision. Expenses for the year ended 31 March 2018,
32
on the other hand, were overstated to the same extent because of

recognition of the aforesaid bonus as expense for the year. To correct the
above errors in the annual financial statements for the year ended 31 March
2019, the entity should:
(a) restate the comparative amounts (i.e., those for the year ended 31
March 2018) in the statement of profit and loss; and
(b) present a third balance sheet as at the beginning of the preceding
period (i.e., as at 1 April 2017) wherein it should recognise the
provision for bonus and restate the retained earnings.
Question 25
An entity recognised a material amount of expenditure on development of an
intangible item as an expense in its financial statements for the year ended
31 March 2018. During the financial year 2018-19, the management
discovers that the expenditure should have been capitalised. The error
occurred as the management inadvertently failed to use certain reliable (and
relevant) information that was available when financial statements for the
year ended 31 March 2018 were approved for issue and that ought to have
been taken into account in preparation of those financial statements.
The management intends to correct prior period error by restating the
comparative amounts for the year ended 31 March 2018. However, it notes
that paragraph 71 of Ind AS 38, Intangible Assets, prohibits an entity from
subsequently recognising an expenditure on an intangible item that was
initially recognised as an expense as part of the cost of an intangible asset.
Whether the requirements of Ind AS 38 would override Ind AS 8?
Response
Ind AS 38 requires expenditure on research (or on the research phase of an
internal project) to be recognised as an expense when it is incurred.
Likewise, it requires expenditure on development (or on the development
phase of an internal project) to be recognised as an expense when it is
incurred except where an entity can demonstrate compliance with the criteria
laid down in the standard for inclusion of the expenditure in the cost of an
internally generated intangible asset.
33

“Expenditure on an intangible item that was initially recognised as an
expense shall not be recognised as part of the cost of an intangible
asset at a later date.”
Paragraph 71 of Ind AS 38 applies to those items of expenditure on an
intangible item that were correctly recognised initially as an expense in
accordance with the requirements of the standard. If an item is incorrectly
recognised initially as an expense, the correction of the error in a later period
in accordance with Ind AS 8 by including the expenditure in the cost of an
intangible asset is not inconsistent with, and therefore does not tantamount
to non-compliance of paragraph 71 of Ind AS 38.
In the given case, in determining the treatment of the relevant expenditure,
the management made a mistake in using reliable information that was
already available when the financial statements for the year ended 31 March
2018 were approved for issue. Had the management not made the mistake,
the said expenditure would have been capitalised rather than being
expensed. The expensing of the expenditure in the financial statements for
the year ended 31 March 2018 thus represents a prior period error. Ind AS 8
requires correction of material prior period errors by retrospectively adjusting
the comparative financial information. When an entity retrospectively restates
its comparative information under Ind AS 8, it corrects the error in such a
way as if the prior period error had never occurred.
Thus, in the given case, the relevant expenditure would be retrospectively
included in the cost of the relevant intangible asset.
Question 26
Entity A acquired Entity B on 15 April 2017. While preparing annual financial
statements for the year ended 31 March 2019, Entity A noted a material error
in the purchase price allocation relating to acquisition of Entity B which would
have reduced the goodwill recognised on acquisition of Entity B as at the
date of acquisition and consequently at 31 March 2018. How should this
material error be corrected?
Response
If the initial accounting for a business combination is incomplete by the end of the
reporting period in which the combination occurs, paragraph 45 of Ind AS 103,
Business Combinations, requires the acquirer to report provisional amounts for
34
the items for which the accounting is incomplete. Retrospective adjustments are
required to be made to provisional amounts during the ‘measurement period’.
Paragraph 46 of Ind AS 103 states that the measurement period is the period
after the acquisition date during which the acquirer may adjust the
provisional amounts recognised for a business combination. The
measurement period provides the acquirer with a reasonable time to obtain
the information necessary to identify, and measure the following as of the
acquisition date in accordance with the requirements of Ind AS 103:
(a) the identifiable assets acquired, liabilities assumed and any
non-controlling interest in the acquiree.
(b) the consideration transferred for the acquiree (or other amount
used in measuring goodwill).
(c) in a business combination achieved in stages, the equity
interest in the acquiree previously held by the acquirer.
(d) the resulting goodwill or gain on a bargain purchase.
Paragraph 45 of Ind AS 103, inter alia, states that, the measurement period
ends as soon as the acquirer receives the information it was seeking about
facts and circumstances that existed as of the acquisition date or learns that
more information is not obtainable. However, the measurement period shall
not exceed one year from the acquisition date.
Although the measurement period for Entity A under Ind AS 103 has ended
not later than 14 March, 2018, Entity A would still be required to comply with
the requirements of Ind AS 8 relating to correction of material prior period
errors. The error in goodwill computation should be corrected as if the error
35
had never occurred, i.e. by retrospectively adjusting the comparative

financial information as of and for the year ended 31 March 2018. It would
also need to be examined whether the correction has any additional
implications, e.g., with regard to initial or subsequent measurement of
another asset or liability, tax effects or impairment.
Question 27
While preparing interim financial statements for the half-year ended 30
September 2018, an entity discovers a material error (an improper expense
accrual) in the interim financial statements for the period ended 30
September 2017 and the annual financial statements for the year ended 31
March 2018. The entity does not intend to restate the comparative amounts
for the prior period presented in the interim financial statements as it believes
it would be sufficient to correct the error by restating the comparatives in the
annual financial statements for the year ended 31 March 2019. Is this
acceptable?
Response
Paragraph 42 of Ind AS 8, inter alia, states that an entity shall correct
material prior period errors retrospectively in the first set of financial
statements approved for issue after their discovery by restating the
comparative amounts for the prior period(s) presented in which the error
occurred.
Paragraph 28 of Ind AS 34 requires an entity to apply the same accounting
policies in its interim financial statements as are applied in its annual
financial statements ( except for accounting policy changes made after the
date of the most recent annual financial statements that are to be reflected in
the next annual financial statements).
Paragraph 15B of Ind AS 34 cites ‘corrections of prior period errors’ as an
example of events or transactions which need to be explained in an entity’s
interim financial report if they are significant to an understanding of the
changes in financial position and performance of the entity since the end of
the last annual reporting period.
Paragraph 25 of Ind AS 34, Interim Financial Statements, states as follows:
“While judgement is always required in assessing materiality, this Standard
bases the recognition and disclosure decision on data for the interim period
by itself for reasons of understandability of the interim figures. Thus, for
36
example, unusual items, changes in accounting policies or estimates, and

errors are recognised and disclosed on the basis of materiality in relation to
interim period data to avoid misleading inferences that might result from non-
disclosure. The overriding goal is to ensure that an interim financial report
includes all information that is relevant to understanding an entity’s financial
position and performance during the interim period.” [Emphasis added]
In view of the above, the entity is required to correct the error and restate the
comparative amounts in interim financial statements for the half-year ended
30 September 2018.
Question 28
While preparing interim financial statements for the half-year ended 30
September 2018, an entity notes that there has been an under-accrual of
certain expenses in the interim financial statements for the first quarter
ended 30 June 2018. The amount of under accrual is assessed to be
material in the context of interim financial statements. However, it is
expected that the amount would be immaterial in the context of the annual
financial statements. The management is of the view that there is no need to
correct the error in the interim financial statements considering that the
amount is expected to be immaterial from the point of view of the annual
financial statements. Whether the management’s view is acceptable?
Response
Paragraph 41 of Ind AS 8, inter alia, states that financial statements do not
position, financial performance or cash flows.
As regards the assessment of materiality of an item in preparing interim
financial statements, paragraph 25 of Ind AS 34, Interim Financial
Statements, states as follows:
“While judgement is always required in assessing materiality, this Standard
bases the recognition and disclosure decision on data for the interim period
by itself for reasons of understandability of the interim figures. Thus, for
example, unusual items, changes in accounting policies or estimates, and
errors are recognised and disclosed on the basis of materiality in relation to
interim period data to avoid misleading inferences that might result from non-
disclosure. The overriding goal is to ensure that an interim financial report
37
includes all information that is relevant to understanding an entity’s financial

position and performance during the interim period.”
As per the above, while materiality judgements always involve a degree of
subjectivity, the overriding goal is to ensure that an interim financial report
includes all the information that is relevant to an understanding of the
financial position and performance of the entity during the interim period. It is
therefore not appropriate to base quantitative assessments of materiality on
projected annual figures when evaluating errors in interim financial
statements.
Accordingly, the management is required to correct the error in the interim
financial statements since it is assessed to be material in relation to interim
period data.
Others
Question 29
Ind AS 8 requires changes in accounting policies and corrections of prior
period errors to be carried out retrospectively but makes an exception where it
is impracticable to do so. Similarly, the standard does not require an entity to
disclose the effect of a change in an accounting estimate on future periods
when it is impracticable to estimate that effect. What is the meaning of the
term ‘impracticable’ in the above context?
Response
Paragraph 5 of Ind AS 8 defines ‘impracticable’ as follows:
“Applying a requirement is impracticable when the entity cannot apply
it after making every reasonable effort to do so. For a particular prior
period, it is impracticable to apply a change in an accounting policy
retrospectively or to make a retrospective restatement to correct an
error if:
(a) the effects of the retrospective application or retrospective
restatement are not determinable;
(b) the retrospective application or retrospective restatement
requires assumptions about what management’s intent would
have been in that period; or
38
(c) the retrospective application or retrospective restatement

requires significant estimates of amounts and it is impossible to
distinguish objectively information about those estimates that:
(i) provides evidence of circumstances that existed on the
date(s) as at which those amounts are to be recognised,
measured or disclosed; and
(ii) would have been available when the financial statements
for that prior period were approved for issue from other
information.”
Paragraphs 50-53 of Ind AS 8 provide further guidance on meaning of
‘impracticable’. For example, paragraph 50 of Ind AS 8 notes that in some
circumstances, it may be impracticable to adjust comparative information for
one or more prior periods to achieve comparability with the current period as
data may not have been collected in the prior period(s) in a way that allows
retrospective application of a new accounting policy or retrospective
restatement to correct a prior period error, and it may be impracticable to
recreate the information.
Another example, given in paragraph 52 of Ind AS 8, of a situation of
impracticability of retrospectively applying a new accounting policy or
correcting a prior period error is where retrospective application or correction
requires distinguishing information that-
(a) provides evidence of circumstances that existed on the date(s) as at
which the transaction, other event or condition occurred, and
(b) would have been available when the financial statements for that prior
period were approved for issue
from other information and it is impossible to distinguish these two types of
information.
Question 30
Can hindsight be applied when applying a change in an accounting policy
retrospectively or correcting a prior period error?
39
Response
“Hindsight should not be used when applying a new accounting policy to, or
correcting amounts, for a prior period, either in making assumptions about
what management’s intentions would have been in a prior period or
estimating the amounts recognised, measured or disclosed in a prior period.
For example, when an entity corrects a prior period error in calculating its
liability for employees’ accumulated sick leave in accordance with Ind AS 19,
Employee Benefits, it disregards information about an unusually severe
influenza season during the next period that became available after the
financial statements for the prior period were approved for issue. The fact
that significant estimates are frequently required when amending
comparative information presented for prior periods does not prevent reliable
adjustment or correction of the comparative information.”
Another example of application of paragraph 53 of Ind AS 8 is given below-
:An entity made a material error in the previous financial statements in
relation to measurement of a financial asset which was classified as at
amortised cost as per Ind AS 109, Financial Instruments (as the asset was
held within a business model to hold financial assets to collect contractual
cash flows and the contractual terms of the financial asset gave rise on
specified dates to cash flows that are solely payments of principal and
interest on the principal amount outstanding). During the current financial
year, the asset was sold off due to some reasons that were not previously
foreseen. Paragraph B4.1.3 of Ind AS 109, inter alia, states that although the
objective of an entity’s business model may be to hold financial assets in
order to collect contractual cash flows, the entity need not hold all of those
instruments until maturity. Accordingly, while correcting the prior period error
in its financial statements for the current year, the entity shall disregard the
fact of sale of the asset during the current year for amortised cost
measurement purposes.
Question 31
Paragraph 41 of Ind AS 1, Presentation of Financial Statements, inter alia,
states that if an entity changes the presentation or classification of items in
its financial statements, it shall reclassify comparative amounts unless
reclassification is impracticable. What could be an example of changes in the
presentation or classification of items envisaged in Ind AS 1?
40
Response
Paragraph 45 of Ind AS 1, inter alia, states as follows:
“An entity shall retain the presentation and classification of items in the
financial statements from one period to the next unless:
(a) it is apparent, following a significant change in the nature of the
entity’s operations or a review of its financial statements, that another
presentation or classification would be more appropriate having regard
to the criteria for the selection and application of accounting policies in
Ind AS 8; or
(b) an Ind AS requires a change in presentation.”
Further, paragraph 46 of Ind AS 1, inter alia, states that “an entity changes
the presentation of its financial statements only if the changed presentation
provides information that is reliable and more relevant to users of the
financial statements and the revised structure is likely to continue, so that
comparability is not impaired. When making such changes in presentation,
an entity reclassifies its comparative information in accordance with
paragraphs 41 and 42.”
The following is an example of changes in the presentation or classification
of items envisaged in Ind AS 1:
In previous financial years, an entity included derivatives in the aggregate of
‘other financial assets’ presented on the face of the balance sheet. The
amount of derivatives as at 31 March 2019 is significantly higher than the
amounts reported in previous balance sheets. The management expects the
amounts of derivatives in succeeding periods too to be significant. The
management intends to present derivatives separately on face of the balance
sheet as it believes that such presentation is relevant to an understanding of
the entity’s financial position.
Neither Ind AS 1 nor Division II of Schedule III to the Companies Act, 2013
which contains general instructions and formats for preparation of financial
statement of a company required to comply with Ind ASs requires
presentation of derivatives on the face of the balance sheet. However,
paragraph 55 of Ind AS 1 states that an entity shall present additional line
items (including by disaggregating the line items listed in paragraph 54 of the
standard), headings and sub-totals in the balance sheet when such
presentation is relevant to an understanding of the entity’s financial position.
41
Similarly, Division II of Schedule III to the Companies Act, 2013 states that
line items, sub-line items and sub-totals shall be presented as an addition or
substitution on the face of the financial statements when such presentation is
relevant to an understanding of the company’s financial position or
performance or to cater to industry or sector-specific disclosure requirements
or when required for compliance with the amendments to the Companies Act,
2013 or under the Indian Accounting Standards.
In view of the above, it would be appropriate to present derivatives
separately on the face of the balance sheet on the basis of the
management’s assessment that the changed presentation provides
information that is reliable and more relevant to users of the financial
statements.
The entity will have to reclassify the comparative amounts in accordance with
paragraph 41 of Ind AS 1.
Paragraph 40A of Ind AS 1 requires an entity to present a third balance sheet
as at the beginning of the preceding period in addition to the minimum
comparative financial statements if, inter alia, it reclassifies items in its
financial statements and the reclassification has a material effect on the
information in the balance sheet at the beginning of the preceding period.
In the given case, if the reclassification of items has a material effect on the
information in the balance sheet at the beginning of preceding period, the
entity would be required to present a third balance sheet as at the beginning
of the preceding period, i.e., 01 April, 2017.
42
Annexure A - Retrospective restatement: Correction of

errors
ABC Ltd has an investment property with an original cost of ₹1,00,000 which
it inadvertently omitted to depreciate in previous financial statements. The
property was acquired on 1 April 2016. How should the error be corrected in
the financial statements for the year ended 31 March 2019, assuming the
impact of the same is considered material? The property has a useful life of
10 years and is depreciated using straight line method. Estimated residual
value at the end of 10 year is Nil. For simplicity, ignore tax effects.
The error shall be corrected by retrospectively restating the comparatives. A
third balance sheet as at the beginning of the earliest period shall also be
presented. Relevant extracts of balance sheet, statement of profit and loss
and statement of changes in equity are reproduced below:
Balance sheet Restated Restated
31 March 31 March 2018 1 April 2017
2019
₹ ₹ ₹
Non-current assets
Property, plant and 60,500 64,500 70,000
equipment
Investment property 70,000 80,000 90,000
(refer note 1 below)
Total non-current 130,500 144,500 160,000
assets
Current Assets
Cash 50,000 40,000 60,000
Trade receivables 80,000 100,000 90,000
Total current assets 130,000 140,000 150,000
Total assets 260,500 284,500 310,000
Equity and liabilities

Equity
Equity share capital 50,000 50,000 50,000
43
Other equity
Reserves and surplus 80,500 60,500 40,000
Total equity 130,500 110,500 90,000
Liabilities
Current liabilities
Financial liabilities
Trade payables 100,000 135,000 122,000
Other financial 30,000 39,000 98,000
liabilities
Total Equity and 260,500 284,500 310,000
Liabilities
Statement of profit and loss Restated

31 March 2019 31 March
2018
₹ ₹
Revenue from operations 48,000 50,000
Other income 2,000 3,000
Total Income 50,000 53,000
Expenses
Purchases of stock-in-trade 15,500 16,700
(Increase)/Decrease in inventories of 500 300
Stock-in-Trade
Depreciation expense (refer note 1 14,000 15,500
below)
Total expenses 30,000 32,500
Profit for the year 20,000 20,500
44
Statement of changes in equity Restated

Equity share Retained
capital earnings
₹ ₹
Balance as at 1 April 2017 as 50,000 50,000
previously reported
Impact of the depreciation on investment - (10,000)
property for FY 2016-17 (Refer note 1)
Restated balance as at 1 April 2017 50,000 40,000
Profit for the FY 2017-18 (restated) - 20,500
Balance as at 31 March 2018 50,000 60,500
Profit for the FY 2018-19 - 20,000
Balance as at 31 March 2019 50,000 80,500
Note 1:
During the year ended 31 March 2019, the management undertook a detailed
review of its accounting policies and observed that investment property had
not been depreciated in previous financial statements due to oversight. As a
consequence, the investment property had been incorrectly measured at the
original historical cost instead of the depreciated carrying value.
Due to this error, the investment property and retained earnings as at 1 April
2017 were overstated by ₹10,000 each. The error also affected the profit for
the year ended 31 March 2018 which was overstated by ₹10,000. The
investment property and retained earnings as at 31 March 2018 were
overstated by ₹20,000 each.
45
The error has been corrected by restating each of the affected financial
statement line items for the prior periods as follows:
(All figures in ₹)
Balance 31 March Increase/ 31 March 1 April 2017 Increase/ 1 April
sheet 2018 (as (decrease) 2018 (as (decrease) 2017
previously due to (restated) previously due to (restated)
reported) correction reported) correction
of error of error
Invest- 100,000 (20,000) 80,000 100,000 (10,000) 90,000
ment
property
Total 164,500 (20,000) 144,500 170,000 (10,000) 160,000
Non-
current
assets
Total 304,500 (20,000) 284,500 320,000 (10,000) 310,000
assets
Retained 80,500 (20,000) 60,500 50,000 (10,000) 40,000
earnings
Total 130,500 (20,000) 110,500 100,000 (10,000) 90,000
equity
Statement of profit and 31 March 2018 Increase/ 31 March 2018

loss (as previously (decrease) due (restated)
reported) to correction of
error
Depreciation 5,500 10,000 15,500
Total expenses 22,500 10,000 32,500
Profit for the year 30,500 (10,000) 20,500
Basic and diluted earnings per share for the prior year have also been
restated. The amount of the correction for both basic and diluted earnings
per share was a decrease of ₹0.20 per share.
The correction of the error had no impact on previously reported cash flows
from operating, investing and financing activities.
46
Appendix I
Major differences between Ind AS 8, Accounting Policies, Changes in
Accounting Estimates and Errors and AS 5, Net Profit or Loss for the
Period, Prior Period Items and Changes in Accounting Policies
(i) There are some differences in the scope of the two standards. For
example, unlike AS 5, Ind AS 8 also deals with the criteria for selection
of accounting policies. Under ASs, selection of accounting policies is
dealt with in AS 1, Disclosure of Accounting Policies.
(ii) Under Ind ASs, presentation of any items of income or expense as
extraordinary items is explicitly prohibited by Ind AS 1. AS 5, on the
other hand, requires separate presentation of extraordinary items in
the statement of profit and loss. AS 5 defines extraordinary items as
income or expenses that arise from events or transactions that are
clearly distinct from the ordinary activities of the enterprise and,
therefore, are not expected to recur frequently or regularly. As per AS
5, extraordinary items should be disclosed in the statement of profit
and loss as a part of net profit or loss for the period. The nature and
the amount of each extraordinary item should be separately disclosed
in the statement of profit and loss in a manner that its impact on
current profit or loss can be perceived.
(iii) Ind AS 8 requires that, subject to limited exceptions, changes in
accounting policies should be accounted for retrospectively by
restatement of comparative information. In addition, a third balance
sheet as of the beginning of the preceding period is also required to be
presented by an entity where it applies an accounting policy
retrospectively and the retrospective application has a material effect
on the information in the balance sheet at the beginning of the
preceding period. While AS 5 does not clearly specify how changes in
accounting policies other than those dealt with by specific transitional
provisions of an accounting standard should be accounted for (i.e.,
whether retrospectively or prospectively), it requires that the impact of,
and the adjustments resulting from, a change in an accounting policy,
if material, should be shown in the financial statements of the period in
which the change is made.
(iv) AS 5 defines the term ‘prior period items’ as incomes or expenses
which arise in the current period as a result of errors or omissions in
47
the preparation of financial statements of one or more prior periods.

Ind AS 8 instead uses the term ‘errors’.
(v) Ind AS 8 requires, subject to limited exception, retrospective correction
of material prior period errors, i.e., restatement of comparative
information and presentation of a third balance sheet as in case of a
retrospective change in an accounting policy where the retrospective
correction has a material effect on the information in the balance sheet
at the beginning of the preceding period. Thus, under Ind AS 8,
material prior period errors are corrected by correcting the recognition,
measurement and disclosure of amounts of elements of financial
statements retrospectively as if the prior period errors had never
occurred. Unlike Ind AS 8, AS 5 requires the correction of prior period
items by including the required adjustments in the determination of net
profit or loss for the current period, though the standard also permits
an alternative approach under which the adjustments are included in
the statement of profit and loss after determination of current net profit
or loss.
(vi) Disclosure requirements of Ind AS 8 are more detailed as compared
to the disclosure requirements of AS 5, e.g. in case of a voluntary
change in accounting policy, an entity is required to disclose the
reasons why applying the new accounting policy provides reliable and
more relevant information.
48
Appendix II
Major differences between Ind AS 8, Accounting Policies,
Changes in Accounting Estimates and Errors and IAS 8,
Accounting Policies, Changes in Accounting Estimates and Errors
Some of the IFRSs are accompanied by guidance to assist entities in
applying their requirements. All such guidance states whether or not it is an
integral part of IFRSs. Guidance that is an integral part of the IFRSs is
mandatory. Guidance that is not an integral part of the IFRSs does not
contain requirements for financial statements. The above position has been
explained in paragraph 9 of IAS 8. Only guidance that is an integral part of
IFRSs has been included in corresponding Ind ASs. Accordingly, paragraph
9 of Ind AS 8 has been suitably reworded.
49

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Educational Material on

Ind AS 8, Accounting Policies,

The Institute of Chartered Accountants of India

All rights reserved. No part of this publication may be reproduced, stored in a

Edition : July 2019

Committee/Department : Ind AS Implementation Committee

Published by : The Publication Department on behalf of the

Printed by : Sahitya Bhawan Publications, Hospital

New Delhi CA. Prafulla P. Chhajed

CA. Nihar Niranjan Jambusaria

Selection and Application of Accounting Policies

Consistency of Accounting Policies

Changes in Accounting Policies

An exception to giving retrospective effect to a change in accounting policy

Changes in Accounting Estimates

estimates result from new information or new developments and, accordingly,

Prior Period Errors

II. Frequently Asked Questions

Changes in accounting policies

Change in recognition Paragraph 5 of Ind AS 116, Leases, provides

noted that such a change is dealt with

information is dealt with in accordance with paragraphs 29 and 30 of Ind AS 108,

Ind AS 8 defines ‘accounting policies’ as follows:

(b) are expected to be used during more than one period.”

Ind AS 21, The Effects of Changes in Foreign Exchange Rates, defines

Paragraphs 9-12 of Ind AS 21 list factors to be considered by an entity in

Those transitional provisions may or may not require retrospective

Paragraph 14 of Ind AS 8 states as follows: –

events or conditions on the entity’s financial position, financial

not effectively become a matter of free choice), paragraph 29 of Ind AS 8

(b) the definitions, recognition criteria and measurement concepts

accounting policy that is applied retrospectively or the correction of an error,

a retrospective restatement of items in its financial statements, or when it

The above disclosures are not required to be repeated in the financial

Statement of 31 March Increase/ 31 March 31 March Increase/ 31 March

(i) a discussion of the impact that initial application of the Ind

consumption of an asset, that results from the assessment of the

incurring an amount of ₹2,00,000 during the financial year 2018-19 on

Accordingly, Ind AS 16 requires a change in depreciation method to be

2018-19 2019-20 2020-21

Correction of prior period errors

Paragraph 42 of Ind AS 8 provides that except where it is impracticable to do

In the given case, the retrospective restatement of relevant items in

on the other hand, were overstated to the same extent because of

Paragraph 71 of Ind AS 38 states as follows:

had never occurred, i.e. by retrospectively adjusting the comparative

example, unusual items, changes in accounting policies or estimates, and

includes all information that is relevant to understanding an entity’s financial

(c) the retrospective application or retrospective restatement

Annexure A - Retrospective restatement: Correction of

Equity and liabilities

Statement of profit and loss Restated

Profit for the year 20,000 20,500

Statement of changes in equity Restated

Statement of profit and 31 March 2018 Increase/ 31 March 2018

the preparation of financial statements of one or more prior periods.

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