Week 5: Changes in Estimates, Accounting Polices, Error and Subsequent Events

Question 1

Under IFRS, if there is no present obligation for a situation involving uncertainty of future cash outflows, what are the reporting options?

Answer 1

False – A provision requires a present obligation. If none exists, only note disclosure may be appropriate (contingent liability).

Question 2

Under ASPE, when total contract costs will exceed total contract revenue, what must be done?

Answer 2

True – The entire expected loss is recognized immediately as an expense.

Question 3

If revenue was wrongly recognized in 2022 instead of 2023, can we leave the mistake since retained earnings balances out?

Answer 3

False – This is a prior period error and must be corrected retrospectively by restating 2022 or adjusting opening retained earnings.

Question 4

Changes in accounting estimates are based on what?

Answer 4

New information that has become available – not prior errors, hindsight, or bias.

Question 5

What is the cut-off point for determining recognition of transactions in a calendar year-end company (Dec 31)?

Answer 5

December 31, 2026 – This is the end of the reporting period under IFRS.

Question 6

What is the name of the period between the cut-off date and financial statement authorization?

Answer 6

The subsequent events period – per IAS 10, this is when adjusting and non-adjusting events are assessed.