This document provides an overview of IAS 8 which establishes principles for selecting accounting policies, accounting for changes to accounting policies, changes in accounting estimates, and corrections of errors.
The key points covered are:
- IAS 8's objective is to prescribe criteria for selecting and changing accounting policies as well as treatment of changes and errors.
- Definitions of accounting policies, changes in estimates, and prior period errors are provided.
- Guidance is given on selecting and applying accounting policies consistently, changing accounting policies, and disclosing accounting policy information.
- Changes in estimates are accounted for prospectively while changes to accounting policies and corrections of prior period errors require retrospective treatment.
This document provides an overview of IAS 8 which establishes principles for selecting accounting policies, accounting for changes to accounting policies, changes in accounting estimates, and corrections of errors.
The key points covered are:
- IAS 8's objective is to prescribe criteria for selecting and changing accounting policies as well as treatment of changes and errors.
- Definitions of accounting policies, changes in estimates, and prior period errors are provided.
- Guidance is given on selecting and applying accounting policies consistently, changing accounting policies, and disclosing accounting policy information.
- Changes in estimates are accounted for prospectively while changes to accounting policies and corrections of prior period errors require retrospective treatment.
This document provides an overview of IAS 8 which establishes principles for selecting accounting policies, accounting for changes to accounting policies, changes in accounting estimates, and corrections of errors.
The key points covered are:
- IAS 8's objective is to prescribe criteria for selecting and changing accounting policies as well as treatment of changes and errors.
- Definitions of accounting policies, changes in estimates, and prior period errors are provided.
- Guidance is given on selecting and applying accounting policies consistently, changing accounting policies, and disclosing accounting policy information.
- Changes in estimates are accounted for prospectively while changes to accounting policies and corrections of prior period errors require retrospective treatment.
This document provides an overview of IAS 8 which establishes principles for selecting accounting policies, accounting for changes to accounting policies, changes in accounting estimates, and corrections of errors.
The key points covered are:
- IAS 8's objective is to prescribe criteria for selecting and changing accounting policies as well as treatment of changes and errors.
- Definitions of accounting policies, changes in estimates, and prior period errors are provided.
- Guidance is given on selecting and applying accounting policies consistently, changing accounting policies, and disclosing accounting policy information.
- Changes in estimates are accounted for prospectively while changes to accounting policies and corrections of prior period errors require retrospective treatment.
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IAS 8
Accounting Policies, Changes in
Accounting Estimates and Errors By:- Yohannes Negatu (ACCA,DipIFR,Cert IPSAS,Cert BV) Overview OBJECTIVE SCOPE DEFINITIONS ACCOUNTING POLICIES Selection and application of accounting policies Consistency of accounting policies Changes in accounting policies Disclosure of accounting policy CHANGES IN ACCOUNTING ESTIMATES Disclosure of Change in accounting estimates ERRORS Disclosure of prior period errors OBJECTIVE
The objective of the Standard 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. SCOPE For all IAS 8 issues DEFINITIONS Accounting policies :- are the specific principles, bases, conventions, rules and practices applied by an entity in preparing and presenting financial statements.
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 estimates result from new information or new developments and, accordingly, are not corrections of errors. continued 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. Retrospective application :- is applying a new accounting policy to transactions, other events and conditions as if that policy had always been applied. Retrospective restatement :- is correcting the recognition, measurement and disclosure of amounts of elements of financial statements as if a prior period error had never occurred. ACCOUNTING POLICIES Selection and application of accounting policies When an IFRS specifically applies to a transaction, other event or condition, the accounting policy or policies applied to that item shall be determined by applying the IFRS. In the absence of an IFRS that specifically applies to a transaction, other event or condition, management shall use its judgment in developing and applying an accounting policy that results in information that is: continued (a) relevant to the economic decision-making needs of users; and (b) reliable Consistency of accounting policies
An entity shall select and apply its accounting
policies consistently for similar transactions, other events and conditions, unless an IFRS specifically requires or permits categorization of items for which different policies may be appropriate. Changes in accounting policies
An entity shall change an accounting policy only if
the change: (a) is required by an IFRS (b) is required by statute (c) is required by an accounting standard setting body (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 performanceor cash flows. continued The following are not changes in accounting policies: (a) Adopting an accounting policy for a new type of transaction. (b) the application of a new accounting policy for transactions, other events or conditions that did not occur previously or were immaterial. continued A change in accounting policy must be applied retrospectively Disclosure of accounting policy The following will be disclosed (a) the title of the IFRS (b) reasons for change (c) the nature of the change in accounting policy; (d) the amount of the adjustment (e) the circumstances impracticability of retrospective application if any CHANGES IN ACCOUNTING ESTIMATES
As a result of the uncertainties inherent in business
activities estimates may be required for (a) bad debts; (b) inventory obsolescence; (c) the fair value (d) the useful lives (e) warranty obligations continued An estimate may need revision if changes occur in the circumstances on which the estimate was based or as a result of new information or more experience. Changes in accounting estimates applied prospectively. The effect of a change in an accounting estimate should be included in profit or loss. continued A change in the measurement basis applied is a change in an accounting policy, and is not a change in an accounting estimate. When it is difficult to distinguish a change in an accounting policy from a change in an accounting estimate, the change is treated as a change in an accounting estimate. Disclosure of Change in accounting estimates The following will be disclosed (a) the nature of the estimate (b) the amount of the estimate ERRORS Errors can arise in respect of the recognition, measurement, presentation or disclosure of elements of financial statements. Prior period error must be applied retrospectively. The effect of prior period error should be included in profit or loss. Disclosure of prior period errors
The following will be disclosed
(a) the nature of the prior period error (b) the amount of the correction (c) the circumstances impracticability of retrospective application if any Thank You Questions and Discussion