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Summary of IAS 8

The summary provides an overview of key concepts from IAS 8 regarding accounting policies, changes in estimates, errors, and disclosures. It states that IAS 8 addresses the selection and application of accounting policies, consistency of policies, changes in policies and estimates, and corrections of prior period errors. It notes that changes are permitted if required by a new standard or result in more reliable information, and that retrospective application is required except in certain circumstances.

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Mae Gamit Lagliva
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196 views

Summary of IAS 8

The summary provides an overview of key concepts from IAS 8 regarding accounting policies, changes in estimates, errors, and disclosures. It states that IAS 8 addresses the selection and application of accounting policies, consistency of policies, changes in policies and estimates, and corrections of prior period errors. It notes that changes are permitted if required by a new standard or result in more reliable information, and that retrospective application is required except in certain circumstances.

Uploaded by

Mae Gamit Lagliva
Copyright
© © All Rights Reserved
Available Formats
Download as PDF, TXT or read online on Scribd
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Summary of IAS 8

• 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 liability,


or related expense, resulting from reassessing the expected future benefits and obligations
associated with that asset or liability.

• Prior period errors are omissions from, and misstatements in, an entity's financial statements for
one or more prior periods arising from a failure to use, or misuse of, reliable information that was
available and could reasonably be expected to have been obtained and taken into account in
preparing those statements. Such errors result from mathematical mistakes, mistakes in applying
accounting policies, oversights or misinterpretations of facts, and fraud.

• International Financial Reporting Standards are standards and interpretations adopted by the
International Accounting Standards Board (IASB). They comprise: (IFRSs, IASs, IFRIC, SIC)

• Materiality. Information is material if omitting, misstating or obscuring it could reasonably be


expected to influence decisions that the primary users of general purpose financial statements make
on the basis of those financial statements, which provide financial information about a specific
reporting entity.
Selection and application of accounting policies

1. Standard or Interpretation and considering any relevant Implementation Guidance issued by the IASB for
the Standard or Interpretation. [IAS 8.7]

2. In the absence of a Standard or an Interpretation that specifically applies, management must use its
judgement (the following sources in descending order):

• the requirements and guidance in IASB standards and interpretations dealing with similar and related
issues; and

• the definitions, recognition criteria and measurement concepts for assets, liabilities, income and
expenses in the Framework. [IAS 8.11]

Management may also consider the most recent pronouncements of other standard-setting bodies that
use a similar conceptual framework.

Consistency of accounting policies

An entity shall select and apply its accounting policies consistently for similar transactions, other events
and conditions, unless a Standard or an Interpretation specifically requires or permits categorisation of
items for which different policies may be appropriate and the accounting policy shall be selected and
applied consistently to each category.
Changes in accounting policies - permitted to change an accounting policy only if the change:
* is required by a standard or interpretation; or
* results in the financial statements providing reliable and more relevant information about the effects of
transactions, other events or conditions on the entity's FS.
Do not include applying an accounting policy to a kind of transaction or event that did not occur previously or were immaterial.

The change is accounted for as required by that new pronouncement or, if the new pronouncement does not include
specific transition provisions, then the change in accounting policy is applied retrospectively (adjusting the opening
balance of each affected component of equity for the earliest prior period presented and the other comparative amounts
disclosed for each prior period presented as if the new accounting policy had always been applied)

If an entity has not applied a new standard or interpretation that has been issued but is not yet effective, the entity
must disclose that fact and any and known or reasonably estimable information relevant to assessing the possible
impact that the new pronouncement will have in the year it is applied. [IAS 8.30]

Impracticable to determine MUST


period-specific effects or the apply the new accounting policy to the carrying amounts of A/L as at
cumulative effect of the change the beginning of the earliest period for which retrospective application
for one or more prior periods is practicable, which may be the current period, and shall make a
corresponding adjustment to the opening balance of each affected
component of equity for that period.
cumulative effect at the adjust the comparative information to apply the new accounting policy
beginning of the current period prospectively from the earliest date practicable
Changes in accounting estimates - The effect of a change in an accounting estimate
shall be recognised prospectively by including it in profit or loss in: [IAS 8.36]

• the period of the change, if the change affects that period only,

-- changes in assets and liabilities, or relates to an item of equity, it is recognised by adjusting the
carrying amount of the related asset, liability, or equity item in the period of the change. [IAS 8.37]

• the period of the change and future periods, if the change affects both.

Errors - entity must correct all material prior period errors retrospectively in the first set of
financial statements authorised for issue after their discovery by:

• restating the comparative amounts for the prior period(s) presented in which the error occurred;

• 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.

Impracticable to determine Must RESTATE


period-specific effects opening balances of assets, liabilities, and equity for the earliest period
for which retrospective restatement is practicable (current period)
cumulative effect comparative information to correct the error prospectively from the
earliest date practicable.
DISCLOSURES:

Change in Accounting Policy Prior Period Error Accounting Estimate


nature and amount of the change in accounting policy/prior period error/accounting estimate
a description of the transitional provisions, and each prior period presented, disclose that fact if
the amount of the adjustment: the amount of the
-- for each financial statement line item affected, and effect in future
-- for basic and diluted earnings per share (only if the entity is applying IAS 33. periods is not
if retrospective application is impracticable, an explanation and disclosed because it is
description of how the change in accounting policy was applied/ how the error impracticable
has been corrected.
title of standard caused the change
Financial statements of subsequent periods need not repeat these disclosures.
* Relating to voluntary changes in accounting policy also includes the reasons why applying the new
accounting policy provides reliable and more relevant information

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