PAS 8 – ACCOUNTING POLICIES, ESTIMATE  Useful life, residual value and expected pattern

AND ERRORS of consumption of benefit of depreciable asset.

Accounting Policies
are the specific principles, bases, conventions,
rules and practices applied by an entity in preparing and
presenting financial statements.
 Warranty cost
 Fair value of asset and liability
The effect of a change in accounting estimate shall
be recognized currently and prospectively by including it
in income or loss of:

Accounting policies are essential for a proper
understanding of the information contained in the
financial statements.
Changes in Accounting policies
An entity is permitted to change an accounting
policy only if the change:
 Is required by a standard or interpretation
 Results in the financial statements providing
reliable and more relevant information about the
financial position, financial performance and cash flows
of the entity.
Reporting a change in accounting policy
If a change in accounting policy is required by a
standard or interpretation, the change is accounted for as
required by that new pronouncement.
If the standard or interpretation contains no
transitional provisions, or if an accounting policy is
changed voluntarily, the change shall be applied
retrospectively.
Retrospective application
means that any resulting adjustment from the
change in accounting policy shall be reported a s an
adjustment to the opening balance of retained earnings.
 The period of change if the change affects that
period only.
 The period of change and future periods if the
change affects both.
Changes in accounting estimates are to be handled
currently and prospectively, if necessary.
Prospective recognition
means that the change is applied to transactions,
other events and conditions from the date of change in
estimate.
Prior period errors
are omissions and misstatements in the financial
statements for one or more periods arising from a failure
to use or misuse of reliable information.
Errors may occur as a result of mathematical
mistakes, mistakes in applying accounting policies,
misinterpretation of facts, fraud or oversight.
Treating prior period errors
Prior period errors shall be corrected retrospectively by
adjusting the opening balance of retained earnings and
affected assets and liabilities.

Change in accounting estimate

a normal recurring correction or adjustment of
an asset or liability which is the natural result of the use
of an estimate.
Examples of accounting estimate
Estimates may be required for the following:
 Doubtful accounts
 Inventory obsolescence