IAS 8, ACCOUNTING POLICIES, • PROSPECTIVE RECOGNITION

ESTIMATES AND ERROS

ACCOUNTING POLCIES
• The specific principles, bases, conventions, rules,
and practices applied by an entity in preparing
and presenting financial statements.
• Arises when an entity adopts a GAAP which is
different from the one previously used.
• A change in accounting policy shall be applied
retrospectively or retroactively.
PRIOR PERIOD ERROS
• Change in Accounting Policy
§ Shall be made only when:
1. Required by an accounting standard
2. The change will result in a more relevant
and faithfully represented information
about the financial statements.
• RETROSPECTIVE APPLICATION
§ The effect of a change in estimate means that
the change is applied to transactions, other
events, and conditions from the date of
change in estimate
§ It will be included in the income or loss of:
1. The period of change if the change
affects that period only.
2. The period of change and future periods
if the change affects both.
• The omissions and misstatements in the financial
statements for one or more periods arising from a
failure to use or misuse of reliable information
• RETROSPECTIVE ADJUSTMENT
• Prior period errors shall be corrected
retrospectively by ADJUSTING THE OENING
BALANCE OF RETAINED EARNIINGS AND
AFFECTED ASSETS AND LIABILITIES.

§ It means that any adjustment from the change

of accounting policy shall be reported as an
adjustment to the opening balance of the
retained earnings.

CHANGE IN ACCOUNTING ESTIMATES

• It is a normal recurring correction or adjustment

of an asset or liability which is the natural result
of the use of an estimate.

• By nature, revision of an estimate does not relate

to prior periods and is not a correction of an error.

• Estimation involves judgement based on the

latest available and reliable information.

• A change in accounting estimate shall be applied

currently and prospectively.