IAS 8 Accounting Policies, Changes in Accouting Estimates and Errors

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Language English


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The objective of this 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. 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.

Accounting policies

Accounting policies are the specific principles, bases, conventions, rules and practices applied by an entity in

preparing and presenting financial statements. 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

and considering any relevant Implementation Guidance issued by the IASB for the IFRS.

In the absence of a Standard or an Interpretation 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 relevant and reliable. In making the judgement management shall refer to, and consider the

applicability of, the following sources in descending order:

(a) the requirements and guidance in IFRSs dealing with similar and related issues; and

(b) the definitions, recognition criteria and measurement conceptsfor assets, liabilities, income and expenses in

the Conceptual Framework.

An entity shall select and apply its accounting policies consistently for similar transactions, other events and

conditions, unless an IFRS specifically requires or permits categorisation of items for which different policies

may be appropriate. If an IFRS requires or permits such categorisation, an appropriate accounting policy shall

be selected and applied consistently to each category. An entity shall change an accounting policy only if the change:

(a) is required by an IFRS; 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


An entity shall account for a change in accounting policy resulting from the initial application of an IFRS in

accordance with the specific transitional provisions, if any, in that IFRS. When an entity changes an

accounting policy upon initial application of an IFRS that does not include specific transitional provisions

applying to that change, or changes an accounting policy voluntarily, it shall apply the change retrospectively.

However, a change in accounting policy shall be applied retrospectively except to the extent that it is

impracticable to determine either the period-specific effects or the cumulative effect of the change.

Change in accounting estimate

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 estimates result from new information or new developments and, accordingly, are not

corrections of errors. The effect of a change in an accounting estimate, shall be recognised prospectively by

including it 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 authorised 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 the error, an entity shall correct material prior period errors retrospectively in the first set of financial

statements authorised 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. Omissions or misstatements of items are material if they could, individually or collectively, influence the

economic decisions of users taken 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.


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