International Financial Reporting Standards_guide.pdf

50 Chapter 5 Accounting Policies, Changes in Accounting Estimates, and Errors (IAS 8)
Such errors include the effects of:
■ mathematical mistakes;
■ mistakes in applying accounting policies;
■ oversights or misinterpretations of facts; or
■ fraud.
5.3.4 Omissions or misstatements are material if they could, individually or collectively,
influence users’ economic decisions that are made on the basis of the financial statements.
5.3.5 Impracticable changes are requirements that an entity cannot apply after making
every reasonable effort to do so. The application of a change in accounting policy or retrospective
correction of an error becomes impracticable when:
■ effects are not determinable;
■ assumptions about management intent in a prior period are required;
■ it requires significant estimates of amounts; or
■ it is impossible to distinguish between information that provides evidence of circumstances
at the prior-period date (and that would have been available at the prior-period
date) from other information; in other words, hindsight should not be used.
5.4 ACCOUNTING TREATMENT
5.4.1 When a standard or an interpretation specifically applies to a transaction, other
event, or condition, the accounting policy or policies applied to that item should be determined
(chosen) by applying the standard or interpretation, considering any implementation
guidance issued by the IASB for that standard or interpretation.
5.4.2 In the absence of specific guidance on accounting policies (that is, a standard or an
interpretation that specifically applies to a transaction, other event, or condition), management
should use its judgment in developing and applying an accounting policy that results
in relevant and reliable information. In making the judgment, management should consider
the applicability of the following factors in the following descending order:
■ the requirements and guidance in standards and interpretations dealing with similar
and related issues; and
■ the definitions, recognition criteria, and measurement concepts for assets, liabilities,
income, and expenses in the framework.
To the extent that there is no conflict with the above, in making the judgment, management
may also consider the following:
■ the most recent pronouncements of other standard-setting bodies that use a similar
conceptual framework; or
■ other accounting literature and accepted industry practices.
5.4.3 Accounting policies should be applied consistently for similar transactions, other
events, and conditions (unless a standard or interpretation requires or permits categorization,
for which different policies may be appropriate).
5.4.4 A change in accounting policy is allowed only under one of the following conditions:
■ the change is required by a standard or interpretation; or
■ the change will result in the financial statements providing reliable and more relevant
information about the effects of transactions, other events, and conditions.