IAS 8: Changes in Accounting policies, estimates & prior period errors

Definitions

Accounting Policies

Accounting Estimates
(inputs used within a policy)

Accounting Policies

Prior Period Errors

Selection of acc policies (p.7-13)

Use accounting policy specified by IFRS/IAS (p.7)

Management use judgement if IFRS doesn't cater for specific transaction (p.10)

Consistent application (p.13)

Changes in acc policies (14-17)

When is change permitted? (p.14)

Required by IFRS

Results in relevant & reliable info

What are NOT changes in Acc Policy (p.16)

change in substance

transaction did not previously occur or was immaterial

How is change in acc policy applied? p.19-22

Initial (out of scope)

voluntarily

RETROSPECTIVE APPLICATION para 22

  • adjust balance of affected line item for Current Y & PriorY
  • OB of equity(Retained earnings) earliest prior period presented

Impractability p.23

physically not possible to apply change

reasons must be disclosed

  • can't determine retrospective application
  • retrospect requires assumptions

Change to revalution of IAS 16 & IAS 38

USE the STANDARD - NOT IAS 8 (par 17)

DISCLOSURE

  1. Initial application
  2. Voluntary Change
  3. IFRS issued not effective

Voluntary (p.29)

Nature

Reasons

Amounts

line items & equity

periods before adjustment

impractical - disclose details

click to edit

Narration

amount when used OLD policy?
amount when use NEW policy
movement/difference?
What do I tell the users?

  • changed from THIs to THAT
  • Why did I change?
  • what is the effect?

Accounting Estimates

principles used in preparing FS

amounts subject to uncertainty

Material

omission makes significant difference in financial information

Prior Period errors

omissions due to negligence

Retrospective Application

Apply new policy as if AP has always been applied

Retrospective restatement

correcting IRMPD as if error never occurred

Impracticability
(requirements)

not physically possible to effect change

Prospective Application

applying AE after change effected & correcting error current & future

Why have acc estimate? (para 32)

amounts in AP have uncertainty

use judgement & assumptions achieve objective of AP

use latest available reliable information

Types of estimates (p.32A)

estimation techniques(allowance for expected credit losses)

valuation techniques(FV of A/L)

What is change in AE (para 34)

estimate changes based on

  • new info, experience, developments

does not relate to prior periods

NOT correction of error

What is change in meaurement basis? (para 35)

It is change in AP

the inputs/amounts of AP are change in AE

How is change in AE applied? (para 36 - 38)

PROSPECTIVELY

Include in P/L of current period affected by change

include in P/L in current & future period affected by change

Change in AE affects A,L & E - adjust CA (para 37)

How is AE disclosed? (para. 39-40)

nature & amount in current & future period

if impracticable - disclose facts

FS do not comply with IFRS if material or immaterial errors made intentionally (para. 41)

Error implies incorrect application OR not making effort to obtain info

How should Errors be corrected? para. 42

retrospectively
As if error never occured

comparative figures period error occurred

restate opening balances if error occurred before earliest period

What are limitations on impracticability (para. 44-45)

comparative info - restate OB retrospectively

cumulative effect - correct error prospectively

Disclosure of Prior Period errors