QUESTION 1 (A)

a. According to MFRS 108 Accounting Policies, Changes in Accounting Estimates and

Errors, company is allowed to change its accounting policy. The standard prescribes
that an entity shall change an accounting policy only if the change:
i. Is required by an MFRS; or
ii. Results in the financial statements providing reliable and more relevant
information about the effects of transaction, other events or conditions
on the entity’s financial position, financial performance or cash flows.

b. Classification of change in accounting policy, change in accounting estimation or an

error based on the situation given.

Situation Remarks
Revision of remaining useful life of equipment from Change in accounting estimates
10 years to 8 years
An amount of RM15,000 receipt from account An error
receivables was fraudulently credited to employee’s
bank account
Change of depreciation method of machinery from Change in accounting estimates
straight line to reducing balance
Change from measuring investment property using Change in accounting policy
cost model to fair value model

QUESTION 1 (B)

a. Classification of change in accounting policy, change in accounting estimation or an

error based on the situation given.

Situation Remarks
On 1 July 2018, the company acquired two machines Change in accounting estimates
costing RM500,000. The company depreciates its
machine using the straight-line method. The estimated
useful life of both machines is 10 years. However, due
to changes in the machine's consumption pattern, the
 company decided to use the reducing balance method
at the rate of 25% per annum starting from 1 July
2020.

Berjaya Bhd's accountant observed that the opening Prior year error
carrying amount of the plant account was overstated
by RM14,000 when preparing the company's financial
statements for the year ended 30 June 2021. Upon an
investigation, the accounts clerk revealed that for the
year ended 30 June 2020, he failed to account for
depreciation charges on plant.
On 1 July 2020, Berjaya Bhd decided to use Change in accounting policy
revaluation model for subsequent measurement of its
land and buildings rather than cost model. Fair value
of the land and building as at 30 June 2021 was
RM2,000,000.

b. The accounting treatment for situation (i), (ii) and (iii) in accordance with MFRS 108
Accounting policies, Changes in accounting estimates and errors.

Situation Accounting Treatment

On 1 July 2018, the company acquired two The change in the depreciation policy from
machines costing RM500,000. The straight-line to reducing balance is
company depreciates its machine using the accounted as a change in estimate. It should
straight-line method. The estimated useful be adjusted prospectively, in the period of
life of both machines is 10 years. However, change (2020) and future periods (if the
due to changes in the machine's change affects future years).
consumption pattern, the company decided
to use the reducing balance method at the
rate of 25% per annum starting from 1 July
2020.

Berjaya Bhd's accountant observed that the This is prior period errors.
opening carrying amount of the plant The adjustment must be done
 account was overstated by RM14,000 when retrospectively by adjusting the opening
preparing the company's financial balance of retained earning and accumulated
statements for the year ended 30 June 2021. depreciation of the plant.
Upon an investigation, the accounts clerk
revealed that for the year ended 30 June
2020, he failed to account for depreciation
charges on plant.
On 1 July 2020, Berjaya Bhd decided to use The changes in accounting policy must be
revaluation model for subsequent applied retrospectively by applying the
measurement of its land and buildings rather change to the earliest period reported in the
than cost model. Fair value of the land and financial statements. Cumulative effect of
building as at 30 June 2021 was the change is adjusted through the opening
RM2,000,000. balance of retained earnings.

c. The restated opening balance of the retained earnings as at 1 July 2020.

RM
Opening balance 150,000
Depreciation overstated (14,000)
Restate amount 136,000