2. PAS 8 - Accounting Policies, Changes in Accounting Estimates and Accounting Errors

Question 1

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.

Answer 1

PAS 8: Accounting policies, Changes in Accounting Estimates and Errors

Question 2

Enhance relevance and reliability of an entity’s financial statement, and the comparability of those financial statements over time and with the financial statements of other entities.

Answer 2

PAS 8

Question 3

are specific principles, bases, conventions, rules, and practices applied by an entity in preparing and preparing and presenting financial statements.

Answer 3

Accounting policies

Question 4

Accounting policies shall disclose the summary of significant accounting policies such as:

Answer 4

(1) Measurement basis used in preparing FS
(2) Other accounting policies used that are relevant to the understanding of FS

Question 5

True or False:

When a standard or an interpretation specifically applies to a transaction, other event or condition, the accounting policy or policies applied to that item shall be determined by applying the standard or interpretation.

Answer 5

True

Question 6

True or False:

In the absence of a standard or an interpretation that specifically applies to a transaction, other event or condition,
management shall use its judgment in developing and applying an accounting policy that results in information that is relevant and reliable.

Answer 6

True

Question 7

Factors to consider in the absence of a Standard:

Answer 7

• adopt the accounting policy that result in more relevant information
• apply the accounting policy that results in reliable financial statements
• consider the applicability of:
  a. the requirements and guidance of
  standards and interpretations
  dealing with similar and related
  issues.
  b. the definitions, recognition criteria
  and measurement concepts of
  assets, liabilities, and incomes and
  expenses.

Question 8

True or False:

An entity shall change an accounting policy only if the change
► Is required by the standard or an interpretation; or
► Results in the financial statement providing reliable and more relevant information about the effects of transactions, other events or conditions on the entity’s financial position, financial
performance, and cash flows.

Answer 8

True

Question 9

An entity shall account for any change in accounting policy resulting from
initial application of a standard accordance with a specific ________

Answer 9

transitional provision

Question 10

An entity that changes an accounting policy upon initial application of a
standard that does not include specific transitional provision applying to that
change, or changes on accounting policy voluntarily, shall apply the changes
___________

Answer 10

retrospectively

Question 11

When an accounting policy is applied retrospectively, the entity shall adjust
the ________ 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.

Answer 11

opening balance

Question 12

True or False:

Change in accounting policy should be handled retrospectively
except; When it is practicable to determine the period – specific effect
on comparative information for one or more prior periods presented

Answer 12

False ; impracticable

Question 13

True or False:

Change in accounting policy should be handled retrospectively
except; When it is impracticable to determine the cumulative effect at the
beginning of the current period to all prior periods.

Answer 13

True

Question 14

AN APPROXIMATION OF THE AMOUNT OF ITEMS

Answer 14

Accounting Estimates

Question 15

An adjustment of the carrying amount of an asset or 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.

Answer 15

Change in accounting estimates

Question 16

The effect of change in accounting estimate is recognized _______ by including it in profits or loss

Answer 16

prospectively

Question 17

True or False:

The effect of change in accounting estimate is recognized prospectively by including it in profits or loss in:

Statement 1:
1. The period of change, if the change affects that period only; or

Statement 2:
2. The period of the change and future period, if the change affects
both.

Answer 17

Both statements are true

Question 18

An entity shall disclose the ________ of a change in an accounting estimate that has an effect in the current period or is expected to have an effect in future periods, except for the disclosure of the effect in future periods when it is
impracticable to estimate that effect.

Answer 18

nature and amount

Question 19

EFFECT OF MATHEMATICAL MISTAKES, MISTAKES IN APPLYING ACCOUNTING
POLICIES, OVERSIGHT OR MISINTERPRETATIONS FACTS AND FRAUDS.

Answer 19

Accounting Errors

Question 20

Are omissions from, and misstatements in the entity’s financial statements for one or more prior periods arising from a failure to use, or a misuse of reliable information

Answer 20

Prior period errors

Question 21

An entity shall correct material prior period errors ________ in the first set of financial statements authorized
for issue after the discovery.

Answer 21

retrospectively

Question 22

True or False:

entity shall correct material prior period errors retrospectively in the first set of financial statements authorized
for issue after the discovery by:

Statement 1:
a) Relating the comparative amount for the current periods presented in
which the error occurred; or

Statement 2:
b) If the error occurred before the earliest prior period presented,
restating the opening balances of assets, liabilities, and equity for the latest prior presented.

Answer 22

Statement 1: False ; prior periods
Statement 2: False ; earliest

Question 23

Limitation or Retrospective Restatement

Answer 23

(1) When it is impracticable to determine the period - specific effect or
(2) When it is impracticable to determine the cumulative effect of the error

Question 24

Disclosure of Prior Period Errors:

Answer 24

(1) Nature of prior period errors
(2) Amount of correction for each prior period presented
(3) Each financial statement line item affected
(4) Basic and diluted earnings per share
(5) Amount of correction at the beginning of the earliest prior period presented
(6) If retrospective restatement is impracticable, the circumstances
that led to the existence of the condition and a description of how and from when the error has been corrected.

Question 25

True or False:

Retrospective Restatement may be impracticable if the data may not have been collected in the prior period in a
new way that allows either retrospective application of a new accounting policy or retrospective restatement to correct prior period;

Answer 25

True

Question 26

True or False:

Prospective Restatement may be impracticable if the entity makes estimates in applying an accounting policy to elements of financial statements recognized or disclosed with
respect to transactions, other event or conditions.

Answer 26

False ; Retrospective Restatement

Question 27

True or False:

In order to apply retrospectively:

Statement 1:
a) Provides evidence of circumstances that existed on the date at
which the transaction, other events or conditions occurred; and

Statement 2:
b) Would have been available when the financial statements for that prior period were authorized for issue.

Answer 27

Both statements are true