Question

briefly analyse the topic IAS 8 as used in general purpose Financial reporting

Answer 1

IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors is applied in selecting and applying accounting policies, accounting for changes in estimates and reflecting corrections of prior period errors.

The standard requires compliance with any specific IFRS applying to a transaction, event or condition, and provides guidance on developing accounting policies for other items that result in relevant and reliable information. Changes in accounting policies and corrections of errors are generally retrospectively accounted for, whereas changes in accounting estimates are generally accounted for on a prospective basis.

Understanding the term Accounting Policies, Changes in Accounting Estimates and Errors:-

Accounting Policies :- Accounting policies are the specific principles, bases, conventions, rules and practices applied by an entity in preparing and presenting financial information. Accounting policies should be applied consistently. An entity can change an accounting policy only if it is required by an IFRS or results in the financial statements providing reliable and more relevant information.

Changes in accounting estimates:- An adjustment of the carrying amount of an asset or liability, or related expense, resulting from reassessing the expected future benefits and obligations associated with that asset or liability. Changes in accounting estimates are reflected from the date of change including in the income statement.

Errors:- The general principle in IAS 8 is that an entity must correct all material prior period errors retrospectively in the first set of financial statements. and corrected by:-

• restating the comparative amounts for the prior period(s) presented in which the error occurred; or
• if the error occurred before the earliest prior period presented, restating the opening balances of assets, liabilities and equity for the earliest prior period presented.