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Change in Accounting Policy shall be made

ONLY when:
a. Required by an accounting standard.
b. The change will result in more relevant and
faithfully represented information about the
financial position, financial performance and
cash flows of the entity.

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Change in Accounting Policy Examples of change in accounting policy are:

A change in accounting policy arises when
• Change in the method of inventory pricing
an entity adopts a generally accepted from the FIFO to weighted average method.
accounting principles which is different from • Change from cost model to revaluation
the one previously used by the entity. model in measuring property, plant and
equipment.
• Change from cost model to revaluation
model in measuring investment property.
• Change to a new policy resulting from the
requirement of a new PFRS.

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How to report a change in Accounting Policy? Change in Accounting Estimates

• An estimate may need revision if
• A change in accounting policy required by a changes occur regarding the
standard or an interpretation shall be applied circumstances on which the
in accordance with the transitional provision. estimate was based or as a result
of new information, more
• If a standard or interpretation contains no experience or subsequent
transitional provisions or if an accounting development.
policy is changed voluntarily, the change
shall be applied retrospectively or • By very nature, the revision of the
retroactively.
estimate does not relate to prior
periods and is not a correction of
an error.
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Change in Accounting Estimates How to report a change in Accounting Estimate?

Retrospective Application
• The effect of a change on accounting estimate shall be
occur regarding the circumstances on which recognized currently and prospectively by including it in
theapplication
estimate was based or as a result of new •A change in accounting income or loss of:
• Retrospective means
information, more experience or subsequent
that any resulting adjustments estimates is a normal recurring
a) The period of change if the change affects that
from the change in accounting correction or adjustment of an period only.
policy shall be reported as an asset or liability which is the
adjustment to the opening natural result of the use of an
balance of retained earnings. estimate. b) The period of change and future periods if the
change affects both

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How to report a change in Accounting Estimate? How to report a change in Accounting Estimate?
• Prior period errors are omissions and
• Change in an accounting estimate shall • Change in an accounting estimate shall not be accounted for by
restating amounts reported in financial statements of prior
misstatements in financial statements for one
not be accounted for by restating periods. or more periods arising from a failure to use
amounts reported in financial statements • Change in accounting estimates are to be handled currently and or misuse of reliable information.
prospectively, if necessary.
of prior periods. • Errors may occur as a result of
• Change in accounting estimates are to be handled currently and prospectively, if necessary.
• Prospective recognition of the effect of a change in mathematical mistakes, mistake in applying
• Prospective recognition of the effect of a change in accounting estimate means that the change is applied to transactions and other events from the date accounting estimate means that the change is
of the change in estimates.

applied to transactions and other events from the accounting policies, misinterpretations of
date of the change in estimates. facts, fraud or oversight.

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How to report a change in Accounting Estimate? How to treat prior period errors
• Change in an accounting estimate shall not be accounted for by
restating amounts reported in financial statements of prior • Prior period errors shall be corrected
periods. retrospectively by adjusting the opening balances
• Change in accounting estimates are to be of retained earnings and affected assets and
liabilities.
handled currently and prospectively, if
necessary. • If comparative statements are presented, the
• Prospective recognition of the effect of a change in accounting estimate means that the change is applied to transactions and other events from the date
of the change in estimates.
financial statements of the prior period shall be
restated so as to reflect the retroactive application
of the prior period errors as a retrospective
restatement.
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