Ias 8 Flashcards
(11 cards)
What is an accounting policy?
Accounting policies are the specific principles, bases, conventions, rules and practices applied by an entity in preparing and presenting financial statements. 
How are accounting policies selected
1. An entity looks at the accounting policies of the particular effort that relates to that transaction or event
2. If there is no effort that applies to the transaction, management shall use its judgement in developing and applying an accounting policy that results in information that is relevant and reliable and it does this by
a) using the requirements in IFRS dealing with similar and related issues
b) it uses the definitions recognition criteria and measurement concepts for the elements in the conceptual framework
How are accounting policies applied
Accounting policies are applied and selected consistently for similar transactions
If an IFRS specifically requires categorisation of items, an appropriate accounting policy shall be selected and snd applied consistently to each category.
This ensures that there is comparability in the financial statements from one year to the next and from one entity to the other .
What gives rise to a change in accounting policy
An entity cannot change its accounting policy whenever it wants, otherwise the financial statements would not be comparable from year to year and between entities.
A change can only take place if:
1. The change in accounting policy is required by a standard
2. The change in accounting policy results in the financial statements providing reliable and more relevant information about the effects of transactions, other events or conditions on the entities financial position, financial performance or cash flows (voluntary)
Changing from cost model to revaluation model is a change in accounting policy but excluded from IAS 8 and is accounted for as a revaluation under IAS 16
How is a change in accounting policy accounted for
A change in accounting policy is accounted for through retrospective application.
By adjusting the opening balances of assets call My liabilities and equity for the earliest period presented, adjusting the comparative amount presented and adjusting the current amount presented. 
What is an accounting estimate
Accounting estimates are monetary amounts in the financial statements that are subject to measurement uncertainty
Many amounts in the financial statements cannot be determined precisely and must therefore be estimated.
Estimation involves judgements by management based on the latest reliable information that is available when the financial statements are prepared.
These judgements may be about the input or techniques/methods used to estimate a monetary amount that is presented in the financial statements. 
What is a change in accounting estimate
A change in accounting estimate is:
- An adjustment to the carrying amount often asset/liability or to the amount of the periodic consumption of an asset
- As a result of new information or a change in circumstances
- That changes the inputs or methods used to calculate that amount (estimate)
How is a change in accounting estimate accounted for
A change in accounting estimate is accounted for per perspectively
By recognise the effect of the change in the accounting estimate in the current year and in future periods affected by that change in estimate 
What is a prior period era
Prior period errors are omissions from, and misstatements in, the entities financial statements for one or more prior periods arising from a failure to use, or misuse of, reliable information that:
- Was made available when financial statements for those periods were authorised for issue and
- Could reasonably be expected to have been obtained and taken into account and the preparation and presentation of those financial statements
What is a material prior period error
A prior period error is material if it could reasonably be expected to influence the decisions that the primary users of general purpose financial statements make on the basis of those financial statements
How is a material prior period error accounted for
A material prior period era is accounted for retrospectively
- By stating the comparative amount for the prior periods presented in which the error occurred or
- if the error occurred before the earliest period presented, rest stating the opening balances of assets liabilities and equity for the earliest period presented 
