Chapter 8 - Other Standards Flashcards
(33 cards)
What is the definition of accounting policies?
the specific principles, bases, conventions, rules and practices applied by an entity in preparing and presenting financial statements
What are accounting estimates?
the estimates required when inherent uncertainties impact on the application of an accounting policy
What is an example of an accounting policy?
to depreciate plant and machinery
What is an example of an accounting estimate?
the useful economic life, residual value, pattern of consumption/creation of the net benefits
IAS 8 requires an entity to select and apply appropriate accounting policies to ensure what?
that the information in the financial statements
- is relevant to the decision making needs of the user
- faithfully represents the entity’s performance and position
What occurs with a change in accounting policy?
- applied retrospectively, as if new policy had always been in place
- restate comparatives
- restate relevant b/frwd balances
What occurs with a change in accounting estimate?
- applied prospectively, from current period onwards
- disclose, if impact if material
What is a prior period error?
omissions from, and misstatements in financial statements arising from a failure to use, or misuse of, reliable info that was available and could reasonably be expected to have been obtained
When identified how are prior period errors adjustments done?
- applied retrospectively
- restate affected comparatives
- restate relevant b/frwd balances
What is fair value?
the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants
What is level 1 of the hierarchy of inputs?
- quoted prices (observable) in active markets for identical items, the most reliable evidence of fair value
What is level 2 of the hierarchy of inputs?
observable inputs other than level 1, e.g., similar items in active markets or identical items in inactive markets. Some adjustments necessary to reach fair value
What is level 3 of the hierarchy of inputs?
unobserved inputs, based upon best information available
IFRS 13 does not apply to what?
- leases
- inventories
- impairments
What is the basic rule for valuing inventory?
inventories should be stated at the lower of cost and net realisable value, on an item by item basis
What is cost?
all costs of purchase, costs of conversion and other costs incurred in bringing the inventories to their present location and condition
What costs would be excluded?
- abnormal waste
- storage costs
- admin overheads
- selling costs
What is the net realisable value?
the estimated selling price in the ordinary course of business, less the estimated costs required to complete and sell the item
What are the 2 methods of identifying cost?
- unit cost
- average cost
- first in-first out
What is unit cost?
where each unit of inventory is separately identified, we simply value the items of closing inventory at the actual cost of purchasing those items.
What is average cost?
found by dividing the cost of items by the number of items held in inventory.
What is FIFO?
assume that items purchases first are sold first.
What is a biological asset?
a living plant or animal
What is agricultural produce?
is the produce harvested from a biological asset
