Web Summaries IAS 8: Accounting Policies, Changes in Accounting ...

Web SummariesIAS 8: Accounting Policies, Changes in Accounting Estimates and ErrorsIntroductionIAS 8 Accounting Policies, Changes in Accounting Estimates and Errors was issuedin December 2003 and is applicable for annual periods beginning on or after 1January 2005.IAS 8 prescribes the criteria for selecting and applying accounting policies, andaccounting for changes in accounting policies, changes in accounting estimates andcorrections of prior period errors.Summary of IAS 8When a Standard or an Interpretation (hereafter “IFRS”) specifically applies to atransaction, event or condition, the accounting policy applied to that item isdetermined by applying the IFRS and considering any relevant ImplementationGuidance for the IFRS.Accounting policies need not be applied when the effect of applying them isimmaterial, as defined in IAS 1 Presentation of Financial Statement.In the absence of an IFRS that specifically applies to a transaction, event or condition,management uses its judgement in selecting and applying an accounting policy thatresults in relevant and reliable financial information. IAS 8 specifies the followinghierarchy of guidance which management uses when selecting accounting policies insuch circumstances:• requirements of Standards and Interpretations dealing with similar matters;• the definitions, recognition criteria and measurement concepts for assets,liabilities, income and expenses in the Framework for the Preparation andPresentation of Financial Statements;• the most recent pronouncements of other standard-setting bodies that use a similarconceptual framework, other accounting literature and accepted industry practices,to the extent that these do not conflict with IFRSs and the Framework. .An entity applies its accounting policies consistently for similar transactions, otherevents and conditions, unless an IFRS specifically requires or permits categorisationof items for which different policies may be appropriate.An entity changes an accounting policy only if the change is required by an IFRS, orresults in the financial statements providing more relevant and reliable informationabout the entity’s financial position, financial performance or cash flows. A changein accounting policy, resulting from the initial application of an IFRS, is accountedfor in accordance with any specific transitional provisions of that IFRS. Otherwise achange in accounting policy is applied retrospectively to all periods presented in thefinancial statements as if the new accounting policy has always been applied.The effect of a change in an accounting estimate is recognised prospectively in profitor loss in the period of the change, and also in profit or loss in future periods if thechange affects both periods. Any corresponding changes in assets and liabilities, or toan item of equity, are recognised by adjusting the carrying amount of the asset,liability or equity item in the period of the change.

Web SummariesIAS 8: Accounting Policies, Changes in Accounting Estimates and ErrorsA material prior period error is corrected retrospectively in the first set of financialstatements authorised for issue after its discovery. The comparative amounts for theprior period(s) presented in which the error occurred are restated; or if the erroroccurred before the earliest period presented, the opening balances of assets, liabilitiesand equity for the earliest prior period presented are restated.IAS 8 specifies the accounting treatment when it is impracticable to account for achange in accounting policy or a correction of a prior period error using retrospectiverestatement in accordance with the Standard.IAS 8 also specifies disclosures about accounting policies, changes in accountingestimates and errors.