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2- Part 2 - Coggle Diagram
2- Part 2
Disclosures
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The name of ultimate controlling party, if different from the name of the parent, irrespective whether there have been any transactions
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Related party
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In considering any related parties relationship, attention is given to the substance over form
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Exposure Draft
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Background
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After considering the issue, they will issue agenda decision with explanatory material regarding that issue to facilitate consistency in the application of an IFRS
Agenda decisions are not authoritative, so entities are not required to change their accounting policies in response, but can do so voluntarily
Amendments
Since retrospective application is time consuming and can be a difficult task, they proposed that the changes should be applied prospectively in order to encourage the voluntary changes
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If cost of changes outweigh the benefit, it is proposed that the change should be applied prospectively
Issues
Although agenda decision may have non-mandatory status, in practice, they are treated as mandatory. The proposed amendments might exacerbate this situation
Agenda decisions are viewed as immediately effective. This will be a problem where agenda decision is published close to an entity's reporting date. The proposed amendments do not address this issue.
There is no conceptual basis for treating voluntary changes in accounting policy resulting from agenda decision differently to other voluntary changes in accounting policy
Conducting a cost-benefit analysis is as onerous as applying an accounting policy retrospectively and is inherently subjective
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IAS 8
Accounting policies
Specific principles, bases, conventions, rules and practices applied by an entity in preparing and presenting FS
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If no standards covering that specific area, management should use judgments to develop an acc. policy, giving considerations to
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The most recent pronouncement of other national GAAPs based on similar CF or accepted industry practice providing that the treatment does not conflict with extant IFRS standards or the CF
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Accounting estimate
As a result of uncertainties inherent in business activities, many items in FS cannot be measured with precision but can only be estimated
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Examples of accounting estimates include warranty obligations, useful lives
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Prior period errors
Omissions from and misstatements in the FS for one or more periods arising from the failure to use or misuse of reliable info
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Could reasonably be expected to have been obtained and taken into account in the preparation and presentation of those FS
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Creative accounting
Due to choice in accounting policy and use of judgments in acc. estimates to select the acc. treatment to present the FS in the best light rather than focusing on the most relevant and reliable acc. policy or estimate
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When choosing acc treatment, or apply judgment, they should apply the code
Related parties
Presumption
Transactions reflected in the financial statements have been carried out at an arm's length basis, unless disclosed otherwise
Therefore, transactions and relationships with related parties should be disclosed
Meaning of Arm Length
Same term as could have been negotiated with an external party, in which each side bargained knowledgeably and freely, unaffected by any relationship between them