IFRS – Refresher Workshop

(ICAP)

Syed Asmatullah FCA, FCCA

Partner
AGENDA

• IAS-1 Presentation of Financial Statements

• IAS-8 Accounting Policies, Changes in Accounting Estimates and Errors

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IAS-1 Presentation of Financial Statements

i. Conceptual Framework of IFRS

ii. Accounting Framework
iii. Presentation of Financial
Statements

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The IFRS Foundation and its boards
Public Accountability Monitoring Board

Governance Strategy and IFRS Foundation Trustees

oversight (22 Trustees)

International International
Accounting Standards Sustainability
Board Standards Board IFRS Advisory
(IASB) (ISSB) Council

Independent Provides advice to

standard-setting IFRS Accounting IFRS Sustainability IFRS Foundation
and related activity Standards Disclosure Standards Trustees, IASB and
ISSB

IFRS Interpretations
Committee
Links:

1. https://www.ifrs.org/groups/monitoring-board/#members
2. https://www.iosco.org/about/?subsection=display_committee&cmtid=11
 Objective of Conceptual Framework
The main purpose of the Framework is to:

1. Assist in the development of future IFRS and the review of existing standards
by setting out the underlying concepts

2. Promote harmonisation of accounting regulation and standards by reducing the

number of per mitted alternative accounting treatments

3. Assist the preparers of financial statements in the application of IFRS , which

would include dealing with accounting transaction s for which there is not (yet )
an accounting standard.

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Accounting Framework
Accounting and Reporting Framework in Pakistan
Applicable accounting and Reporting Frame work in Pakistan is International Financial Reporting
Standards as applicable in Pakistan.

Requirement of Accounting and Reporting Framework:

Financial reporting • International Financial Reporting Standards (IFRS)
standards (As • International Financial Reporting Standard for Small and Medium-sized
applicable in Entities (IFRS for SMEs)
Pakistan) • Revised Accounting and Reporting Standard for Small-sized Entities (AFRS
for SSEs)

Provisions and • Fourth schedule of the Companies Act

requirements of • Fifth schedule of the Companies Act
the Companies Act • Other specific requirements of the Companies Act and related laws,
2017 regulations and rules

Others • Accounting Standard for Not for Profit Organizations (NPOs)

• Islamic Financial Accounting Standards (IFAS)
• International Public Sector Accounting Standards (IPSAS)
• Required under the law and related regulations applicable to specialized
entities such as banks, DFIs, insurance companies and mordabas
Classes of Companies for Statutory Financial Reporting
The Companies Act 2017 through section 224 and related Third Schedule classifies
companies in various categorizes.

The Third schedule outlines the qualitative (legal status, nature of business)

Quantitative criterias (paid-up capital, revenue, number of employees) for the classification
and sub-categorization of companies.

Further, the third schedule also establishes applicable financial reporting framework for each
category of the company.

The four classes and underlying sub-categories of companies.

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Accounting and Reporting Standards Applicable to a Company
Listed • Public sector company • Large-sized • Medium-sized • Medium-sized • Small-sized
Company • Public utility company Company Public non- Company Private
• Company holding assets licensed / listed Company licensed / company
in fiduciary capacity registered registered
• Companies having under section • Medium-sized under
specified number of 42 or section Private section42 or
shares or assets 45 company section 45
• Companies having
specified number of • Medium-sized
shares or assets Foreign
• Large-sized non-listed company
Public company
• Large-sized Private
company
• Large-sized Foreign
company

IFRS IFRS notified by SECP IFRS notified by IFRS for SMEs IFRS for SMEs AFRS for
notified by + SECP + + SSEs
SECP Fifth schedule + Fifth schedule Fifth schedule +
+ Fifth schedule + Accounting Fifth
Fourth + Standard for schedule
schedule Accounting NPOs
Standard for
NPOs
Third Schedule section 224 of the Act
Classification of the companies
Company Sub Category Paid up Capital Turnover/Revenue No of Employees

Large Sized Company(LSC) Non-Listed Company 200 Million 1 billion 750

Large Sized Company(LSC) Foreign Company N/A 1 billion or more N/A

Large Sized Company(LSC) U/s 42 & 45 N/A 200 Million and above N/A
More than 250
Medium Sized Company Non-Listed Public Company Less than 200 Million Less than 1 billion but less than 750

Greater than Rs 100

Greater than 10 Million Million but not exceeding More than 250
Medium Sized Company Private Company Not exceeding 200 million Rs 1 Billion but less than 750

Medium Sized Company Foreign Company N/A Less than 1 billion N/A
Small Sized Company
(SSC) Private Company 10 Million Not exceeding 100 Milllion Not more than 250

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International Financial Reporting Standards

What does IFRS Framework comprises of:

• International Financial Reporting Standards (IFRS) are a set of international accounting standards and reporting
standards stating how particular types of transactions and other events should be reported in financial
statements. IFRS Comprises of:

a. International Financial Reporting Standards (IFRS)

b. International Accounting Standards (IAS)
c. International Financial Reporting Interpretations Committee (IFRIC) interpretations
d. Standing Interpretations Committee (SIC) interpretations

Issued by

• IFRS are issued by the International Accounting Standards Board (IASB)

Purpose

• specify exactly how accountants must maintain and report their accounts. IFRS were established in order to
have a common accounting language, so business and accounts can be understood from company to company
and country to country.

• Differences exist between IFRS and United States Generally Accepted Accounting Principle (US GAAP) and other
reporting standards in different jurisdictions.
List of International Financial Reporting Standards
IFRSs

Standard Standard Name Effective Date

IFRS 1 First-time Adoption of International Financial 1 July 2009

Reporting Standards
IFRS 2 Share-based Payment 1 January 2005
IFRS 3 Business Combinations 1 July 2009
IFRS 4 Insurance Contracts 1 January 2005
IFRS 5 Non-current Assets Held for Sale and Discontinued 1 January 2005
Operations
IFRS 6 Exploration for and Evaluation of Mineral Resources 1 January 2007
IFRS 7 Financial Instruments - Disclosures 1 January 2007
IFRS 8 Operating Segments 1 January 2009
IFRS 9 Financial Instruments 1 January 2015
IFRS 10 Consolidated Financial Statements 1 January 2013
IFRS 11 Joint Arrangements 1 January 2013
IFRS 12 Disclosure of Interests in Other Entities 1 January 2013
IFRS 13 Fair Value Measurement 1 January 2013
IFRS 14 Regulatory Deferral Accounts 1 January 2016
IFRS 15 Revenue from Contracts with Customers 1 January 2018
IFRS 16 Leases 1 January 2019
IFRS 17 Insurance Contracts 1 January 2023
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List of International Accounting Standards
IASs

Standard Standard Name Effective Date

IAS 1 Presentation of Financial Statements 1 January 2005

IAS 2 Inventories 1 January 2005
IAS 7 Statement of Cash Flows 1 January 1994
IAS 8 Accounting Policies, Changes in Accounting Estimates 1 January 2005
and Errors
IAS 10 Events After the Reporting Period 1 January 2005
IAS 11 Construction Contracts 1 January 1995
IAS 12 Income Taxes 1 January 1998
IAS 16 Property, Plant and Equipment 1 January 2005
IAS 17 Leases (Superseded by IFRS 16) 1 January 2005
IAS 18 Revenue (Superseded by IFRS 15) 1 January 1995
IAS 19 Employee Benefits 1 January 2013
IAS 20 Accounting for Government Grants and Disclosure 1 January 2009
of Government Assistance
IAS 21 The Effects of Changes in Foreign Exchange Rates 1 January 2005
IAS 23 Borrowing Costs 1 January 2009
IAS 24 Related Party Disclosures 1 January 2005
IAS 26 Accounting and Reporting by Retirement Benefit Plans 1 January 1988
IAS 27 Separate Financial Statements 1 January 2013
IAS 28 Investments in Associates and Joint Ventures 1 January 2013
IAS 29 Financial Reporting in Hyperinflationary Economies 1 January 2009
IAS 32 Financial Instruments – Presentation 1 January 2005
IAS 33 Earnings per Share 1 January 2005
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List of International Accounting Standards

IASs

Standard Standard Name Effective Date

IAS 34 Interim Financial Reporting 1 January 1999

IAS 36 Impairment of Assets 1 January 2004
IAS 37 Provisions, Contingent Liabilities and Contingent Assets 1 January 1999

IAS 38 Intangible Assets 31 March 2004

IAS 39 Financial Instruments - Recognition and Measurement 1 January 2005
(superseded by IFRS 9)
IAS 40 Investment Property 1 January 2005
IAS 41 Agriculture 1 January 2009

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List of International Financial Reporting Interpretations Committee (IFRIC)
Interpretation Interpretation Name Effective Date

IFRIC 1 Changes in Existing Decommissioning, Restoration and 1 September 2004

Similar Liabilities
IFRIC 2 Members’ Shares in Co-operative Entities and Similar 1 January 2005
Instruments
IFRIC 4 Determining whether an Arrangement contains a 1 January 2006
Lease
IFRIC 5 Rights to Interests arising from Decommissioning, 1 January 2006
Restoration and Environmental Rehabilitation Funds
IFRIC 6 Liabilities arising from Participation in a Specific Market - 1 December 2005
Waste Electrical and Electronic Equipment
IFRIC 7 Applying the Restatement Approach under IAS 29 1 March 2006
Financial Reporting in Hyperinflationary Economies
IFRIC 9 Reassessment of Embedded Derivative 1 June 2006
IFRIC 10 Interim Financial Reporting and Impairment 1 November 2006
IFRIC 12 Service Concession Arrangements 1 January 2008
IFRIC 13 Customer Loyalty Programmes 1 July 2008
IFRIC 14 IAS 19 - The Limit on a Defined Benefit Asset, Minimum 1 January 2008
Funding Requirements and their Interaction
IFRIC 15 Agreements for the Construction of Real Estate 1 January 2009
IFRIC 16 Hedges of a Net Investment in a Foreign Operation 1 October 2008
IFRIC 17 Distribution of Non-Cash Assets to Owners 1 July 2009
IFRIC 18 Transfers of Assets from Customers 1 July 2009
IFRIC 19 Extinguishing Financial Liabilities with Equity 1 July 2010
Instruments
IFRIC 20 Stripping Costs in the Production Phase of a Surface 1 January 2013
Mine
IFRIC 21 Levies 1 July 2014
IFRIC 22 Foreign Currency Transactions and Advance 1 January 2017
Consideration
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 Standing Interpretations Committee (SIC)
interpretations

SICs

Interpretation Interpretation Name Effective Date

SIC-7 Introduction of the Euro 1 June 1998

SIC-10 Government Assistance - No Specific Relation to 1 January 1998

Operating Activities

SIC-15 Operating Leases - Incentives 1 January 1999

SIC-25 Income Taxes - Changes in the Tax Status of an Entity or 15 July 2000
its Shareholders

SIC-27 Evaluating the Substance of Transactions Involving the 31 December 2001

Legal Form of a Lease

SIC-29 Service Concession Arrangements - Disclosure 31 December 2001

SIC-31 Revenue - Barter Transactions Involving 31 December 2001

Advertising Services

SIC-32 Intangible Assets - Website Costs 25 March 2002

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International Financial Reporting Standards
applicable in Pakistan
Following standards which have not been adopted locally by the Securities and Exchange
Commission of Pakistan

• IFRS 1 – First Time Adoption of International Financial Reporting Standards

• IFRS 14 – Regulatory Deferral Accounts
• IFRS 17 – Insurance Contracts

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Various exemptions given to particular industries

Banks and Financial institutions

The implementation of IAS 39 was deferred for banks and financial institutions by SBP till further notice.
The SBP has prescribed its own criteria for recognition and measurement of financial instruments for such
financial entities.

Additionally, IFRS 9, IFRS 7 and IAS 40 are not yet implemented for banking companies due to the
current regulations prescribed by the SBP addressing the accounting of financial instrument and Financial
reporting Format.

IAS 40 Investment Property has been deferred for banks and other financial institutions regulated by the
SBP. Investment properties are accounted for applying IAS 16. The disclosure requirements are also set
out by SBP in the format for financial statements prescribed for them.

Banks and other entities (e.g. investment management companies) have been exempted from
consolidation requirements of IFRS 10 for their holdings in mutual funds

Power-sector
companies have been exempted by the SECP from the requirements of IAS 21 The Effects of Changes in
Foreign Exchange Rates to the extent of capitalisation of a foreign exchange loss.

All companies have been exempted to apply ECL application requirements on Government Receivables
and its departments and Entities.

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IAS 1 - Presentation of Financial Statements
IAS 1 - Presentation of Financial Statements

Components of Financial Statements

• Complete set of financial statements comprises:

1. Statement of financial position (balance sheet)

2. Statement of profit or loss and other comprehensive income
3. Statement of changes in equity
4. Statement of cash flows
5. Explanatory Notes to the Accounts

• At least 1 year of comparative information is required (unless impractical ).

Identification of the Financial Statements

• Financial statements must be clearly identified and distinguished from

other information in the same published document, and must identify:

• Name of the reporting entity

• Whether the financial statements cover the individual entity or a
• Group of entities
• The Date of statement of financial position
• The presentation currency
• The level of rounding used.
IAS 1 - Presentation of Financial Statements

Statement of Financial Position

• Present current and non current items separately; or
• Present items in order of liquidity

Current Assets:

• Expected to be realised in, or is intended for sale or consumption in the entity’s normal
operating cycle (normally one year)
• Held primarily for trading
• Cash or cash equivalents

All other assets are required to be classified as non-current (normally more than one year)

Current Liabilities:

• Expected to be settled in the entity’s normal operating cycle

• Held primarily for trading
• Due to be settled within 12 months
• The entity does not have an unconditional right to defer settlement of the liability for at least
12 months.

All other liabilities are required to be classified as non-current.

Example: Current and non-current classification

Imagine a manufacturing company, ABC Manufacturing, has taken out a long-term

loan of $1,000,000 to expand its production capacity and improve its facilities. The
loan has a term of 10 years, with a monthly payment schedule. How should ABC
Manufacturing classify this long-term loan on its balance sheet?
Example: Current and non-current classification

Imagine a manufacturing company, ABC Manufacturing, has taken out a long-term

loan of $1,000,000 to expand its production capacity and improve its facilities. The
loan has a term of 10 years, with a monthly payment schedule. How should ABC
Manufacturing classify this long-term loan on its balance sheet?

• Non-Current Liability (Long-Term Debt):

The principal amount of the loan that will be repaid beyond the next 12 months
should be classified as a non-current liability. Since the loan has a 10-year term,
the majority of the loan falls into this category.

• Current Liability (Current Portion of Long-Term Debt):

The portion of the loan that is due within the next 12 months should be
classified as a current liability. In this case, it would be the principal amount of
the first year's monthly payments.
IAS 1 - Presentation of Financial Statements

Line items:

The line items to be included on the face of the statement of financial position
(balance sheet) are:

a) property, plant and equipment

b) investment property
c) intangible assets
d) financial assets (excluding amounts shown under (e), (h), and (i))
e) investments accounted for using the equity method
f) biological assets
g) Inventories
h) trade and other receivables
i) cash and cash equivalents
j) assets held for sale
k) trade and other payables
l) Provisions
m) financial liabilities (excluding amounts shown under (k) and (l))
n) current tax liabilities and current tax assets
o) deferred tax liabilities and deferred tax assets
p) liabilities included in disposal groups
q) non-controlling interests, presented within equity

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IAS 1 - Statement of Financial Position (Balance sheet)

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IAS 1 - Statement of Financial Position (Balance sheet)

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IAS 1 - Statement of Financial Position (Balance sheet)

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IAS 1 - Presentation of Financial Statements

Statement of Comprehensive Income

• An entity presents all items of income and expense recognized in a period, either:

• In a single statement of comprehensive income

• In two statements: a statement displaying components of profit or loss
(separate income statement) and a second statement of other comprehensive
income.

• Information required to be presented in the:

• Profit or loss as defined in IAS 1.88 (refer next slide)
• Statement of comprehensive income is defined in IAS 1.82 - 87
• Further information required to be presented on the face or in the notes to the
Statement of Comprehensive Income is detailed in IAS 1.97

Entities must choose between ‘function of expense method’ (i.e. sale cost of sale,
selling, marketing) and ‘nature of expense method’ (i.e. material, labour, rent etc.) to
present expense items.

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IAS 1 - Presentation of Financial Statements

Statement of Comprehensive Income

• The following minimum line items must be presented in the profit or loss section (or
separate statement of profit or loss, if presented)

• Revenue
• Cost of sales
• gains and losses from the de-recognition of financial assets measured at
amortized cost
• Admin and General expenses
• finance costs
• share of the profit or loss of associates and joint ventures accounted for using
the equity method
• tax expense
• a single amount for the total of discontinued items

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IAS 1 - Presentation of Financial Statements

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IAS 1 - Presentation of Financial Statements

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IAS 1 - Presentation of Financial Statements

Statement of Changes in Equity

Information required to be presented:

• For each component in equity a reconciliation between the carrying amount at the
beginning and end of the period, separately disclosing each change.

• Total comprehensive income for the period, showing separately attributable to

owners or the parent and non-controlling interest.

• The amounts of transactions with owners in their capacity as owners, showing

separately contributions by and distributions to owners.

• Amount of dividends recognised as distributions to owners during the period (can

alternatively be disclosed in the notes)

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IAS 1 - Presentation of Financial Statements

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IAS 1 - Presentation of Financial Statements
Statement of Cash Flows`
• Provides users of financial statements with cash flow information
• Separate standard IAS 7 Statement of Cash Flows.

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IAS 1 - Presentation of Financial Statements

Notes to the Financial Statements

• Statement of compliance with IFRSs

• Significant accounting policies, estimates, assumptions, and judgements must be

disclosed

• Additional information useful to users understanding/ decision making to be presented

• Information that enables users to evaluate the entity’s objectives, policies and
processes for managing capital.

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IAS 1 - Presentation of Financial Statements

IAS 1 - Presentation of Financial Statements

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Summing up your learning points – IAS 01

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IAS-8 Accounting Policies, Changes in Accounting
Estimates and Errors

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IAS-8 Accounting Policies, Changes in Accounting Estimates
and Errors

Objective SCOPE

The objective of this Standard is to This Standard shall be applied in

 prescribe the criteria for selecting and changing  Selecting and applying accounting
accounting policies, together with the accounting policies; and
treatment and disclosure of changes in accounting
policies;  Accounting for changes in
accounting policies, changes in
 changes in accounting estimates; and accounting estimates and
 corrections of errors.  Corrections of prior period errors.
The Standard is intended to enhance the relevance and
reliability of an entity’s financial statements, and the
comparability of those financial statements over time and
with the financial statements of other entities.

 Disclosure requirements for accounting policies, except

those for changes in accounting policies, are set out in
IAS 1 Presentation of Financial Statements

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IAS-8 Accounting Policies, Changes in Accounting Estimates and
Errors
DEFINITIONS

Accounting policies are the specific principles, bases, conventions, rules and practices
applied by an entity in preparing and presenting financial statements

A change in accounting
is an adjustment of the carrying amount of an asset or a liability, or the
estimate amount of the periodic consumption of an asset, that results from the
assessment of the present status of, and expected future benefits and
obligations associated with, assets and liabilities. Changes in accounting
estimates result from new information or new developments and,
accordingly, are not corrections of errors.

are omissions from, and misstatements in, the entity’s financial

Prior period errors statements for one or more prior periods arising from a failure to use, or
misuse of, reliable information that:

(a) was available when financial statements for those periods were
authorized for issue; and

(b) could reasonably be expected to have been obtained and taken into
account in the preparation and presentation of those financial
statements.

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IAS-8 Accounting Policies, Changes in Accounting Estimates and
Errors

Applying a requirement is impracticable when the entity cannot apply it after

Impracticable making every reasonable effort to do so. For a particular prior period, it is
impracticable to apply a change in an accounting policy retrospectively or to make
a retrospective restatement to correct an error if:

(a)the effects of the retrospective application or retrospective restatement are not

determinable;

(b) the retrospective application or retrospective restatement requires assumptions

about what management’s intent would have been in that period; or

(c) the retrospective application or retrospective restatement requires significant

estimates of amounts and it is impossible to distinguish objectively information
about those estimates that:

(i) provides evidence of circumstances that existed on the date(s) as at which

those amounts are to be recognized, measured or disclosed; and

(i) (ii) would have been available when the financial statements for that prior
period were authorized for issue from other information.

Only costs does not mean it is impracticable

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IAS-8 Accounting Policies, Changes in Accounting Estimates
and Errors
Materiality

Information is material if omitting, misstating or obscuring it could reasonably be expected to

influence decisions that the primary users of general purpose financial statements make on the
basis of those financial statements, which provide financial information about a specific
reporting entity.

Consistency of Accounting Policies

An entity shall select and apply its accounting policies consistently for similar transactions,
other events and conditions, unless a Standard or an Interpretation specifically requires or
permits categorisation of items for which different policies may be appropriate. If a Standard or
an Interpretation requires or permits such categorisation, an appropriate accounting policy shall
be selected and applied consistently to each category.
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IAS-8 Accounting Policies, Changes in Accounting Estimates and
Errors

Changes in Accounting Policies

An entity shall change an accounting policy only if the change:

a)is required by an IFRS; or

b) results in the financial statements providing reliable and more relevant information about the
effects of transactions.

Applying changes in Accounting policy

Account for a change in accounting policy resulting from the initial application of an IFRS in
accordance with the specific transitional provisions, if any, in that IFRS; and

if change initial application of an IFRS that does not include specific transitional provisions
applying to that change, or changes an accounting policy voluntarily, it shall apply the change
retrospectively.

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IAS-8 Accounting Policies, Changes in Accounting Estimates and
Errors

Retrospective Application due to Change in Accounting Policies

 Change in accounting policy shall be applied retrospectively and applied if accounting

policy is applicable from day first unless there is specific transitional provision in
specific IFRS

 the opening balance of each affected component of equity for the earliest prior period
presented and the other comparative amounts disclosed for each prior period
presented

 When it is impracticable to apply change in policy from day first apply it from earliest
date for which it is applicable.

 If it impracticable to apply change of cumulative effect from beginning of current

period apply it from where it is practicable.

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IAS-8 Accounting Policies, Changes in Accounting Estimates and
Errors

the title of the IFRS;

the nature of the change in accounting policy
a description of the transitional provisions
for the current period and each prior period presented, to the extent practicable, the amount of the
adjustment

(i) for each financial statement line item affected; and

(ii)(ii) if IAS 33 Earnings per Share applies to the entity, for basic and diluted earnings per share;

Financial statements of subsequent periods need not repeat these disclosures.

When an entity has not applied a new IFRS that has been issued but is not yet effective, the entity
shall disclose:

(a)this fact; and

(b)known or reasonably estimable information relevant to assessing the possible impact that application
of the new IFRS will have on the entity’s financial statements in the period of initial application.

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IAS-8 Accounting Policies, Changes in Accounting Estimates and
Errors

Disclosure in Financial Statements

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IAS-8 Accounting Policies, Changes in Accounting Estimates
and Errors
Questions

Question 1?
A
What is the Criteria for selecting accounting policy in absence of
an IFRS Interpretation?

B Question 2?
Company is currently using Weighted Average method for
inventory valuation and prefer to use FIFO does IAS 8 permit this?

Question 3?
C
Company is valuing Expected credit losses for trade debts using
General approach and prefer to use simplified approach? Is this
change in estimate?

D Question 4?

Change in depreciation policy for estimated useful lives is change

in accounting policy or estimate?

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IAS-8 Accounting Policies, Changes in Accounting Estimates
and Errors
Answers

A Use judgement in developing and applying an accounting policy that results in relevant and reliable
information P
B Yes if required by relevant IFRS and results in the financial statements providing reliable and more P
relevant information

C No, this is change in accounting Policy

D This is change in accounting estimate and shall be accounted for prospectively. P

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IAS-8 Accounting Policies, Changes in Accounting Estimates and
Errors
Estimates Need to Know

Changes in accounting Estimates

On 12 February 2021, the IASB
The effect of a change in an accounting estimate shall be issued amendments to IAS 8 to
recognized prospectively by including it in profit or loss introduce a new definition of
in; accounting estimates.

 the period of the change Accounting estimates are

defined as “monetary amounts in
 the period of the change and future periods, if the
change affects both.
financial statements that are
Adjust the carrying amounts of assets, liabilities or subject to measurement
equity if change in estimate give rise to change in uncertainty”.
carrying amount of assets, liabilities or equity.
The amendments clarify what
changes in accounting estimates
Disclosures are and how these differ from
An entity shall disclose the nature and amount of a changes in accounting policies and
change in an accounting estimate that has an effect in corrections of errors.
the current period or is expected to have an effect in
future periods. The amendments become effective
for annual reporting periods
If the amount of the effect in future periods is not
beginning on or after 1 January
disclosed because estimating it is impracticable, an
entity shall disclose that fact.
2023, with earlier application
permitted.

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IAS-8 Accounting Policies, Changes in Accounting Estimates
and Errors
Difference between change in Policy and change in Estimates

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IAS-8 Accounting Policies, Changes in Accounting Estimates
and Errors
Error
Entity shall correct material prior
period errors retrospectively in the
first set of financial statements
authorized for issue after their
discovery
Correction of error shall be
considered in the same way as
change in accounting policy is
considered.
Disclosures
(a) the nature of the prior period error;
(b) for each prior period presented, to the extent
practicable, the amount of the correction:
for each financial statement line item affected;
and
if IAS 33 applies to the entity, for basic and
diluted earnings per share;
(c) the amount of the correction at the beginning
of the earliest prior period presented
if retrospective restatement is impracticable for a
particular prior period, the circumstances that led
to the existence of that condition and a description
of how and from when the error has been
corrected.
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IAS-8 Accounting Policies, Changes in Accounting Estimates and
Errors
Disclosures in Financial
Statement

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IAS-8 Accounting Policies, Changes in Accounting Estimates and
Errors
Transaction 1
A During 2019, expenditure to the value of PKR 500,000 on improvements was
incorrectly debited to profit and loss, within repairs and maintenance of
manufacturing equipment.
Transaction 2
B An entity has in previous years created a provision for warranties on sales
based on the following formula: - 5% of the total sales per annum. During the
current year management realized that the actual expense had been higher
than the provision in the past 3 years, therefore the entity reevaluated the
provision policy to 7.5% of total sales value per annum.

C Transaction 3
An entity has previously valued its investment properties at cost less
accumulated depreciation and accumulated impairment. During the current
financial year management has decided to change the method of valuation of
all its investment properties to fair value.

D Transaction 4
An entity decides in the current year to present government grants as
deferred income, instead of as a deduction of the carrying amount of the
related asset, as permitted by IAS 20 Accounting for Government Grants and
Disclosure of Government Assistance.

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IAS-8 Accounting Policies, Changes in Accounting Estimates and
Errors

Answers

A Prior year error P

B Change in accounting estimate P
C Change in accounting policy P
D Change in accounting policy P

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IAS-8 Accounting Policies, Changes in Accounting Estimates
and Errors

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IAS-8 Accounting Policies, Changes in Accounting
Estimates and Errors

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IAS-8 Accounting Policies, Changes in Accounting Estimates and
Errors

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IAS-8 Accounting Policies, Changes in Accounting Estimates and
Errors

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Summing up your learning points – IAS 08

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 ?
THANK YOU!

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