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Accounting Policies - Coggle Diagram
Accounting Policies
Accounting estimates
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Changes in accounting estimates result from new developments or information and should be confused as correction of errors
The effect of a change in an accounting estimate is recognised prospectively by including it in the statement of P&L and OCI
If the change affects that period only, the effect is recognised in the period of the change
If the change affects both the period of the change and future periods, the effect is recognised in the current and future periods
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The only disclosure required is the nature and amount of change that has an effect in the current period (or is expected to have in future)
Prior period errors
IAS 8 defines prior period errors as 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
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Could have been reasonably expected to be taken into account in the preparation and presentation of those financial statements
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Omissions or misstatements of items are material if they could, individually or collectively, influence the financial decisions of users taken on the basis of the financial statements
Examples include
A material over/understatement of revenue, inventory or other expenses due to mathematical mistakes
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Errors should be corrected retrospectively in the first set of financial statements after their discovery by
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If the error occurred before the earliest prior period presented, the opening balance of assets, liabilities and equity for the earliest period presented should be restated
In this set of financial statements, full disclosure of the following should be made at the end of the first accounting period in which a material prior period error was discovered
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For each prior period presented, if practicable, disclose the correction to each line item affected and EPS
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Objectives & IAS 8
Accounting policies are defined in IAS 8 as the specific principles, bases, conventions, rules and practices applied by an entity in preparing and presenting financial statements
IAS 8 prescribes 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 correction of errors
The standard is intended to enhance the relevance and reliability of an entity's financial statements
Aims to improve the comparability of those financial statements over time and with the financial statements of other entities
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