2. Introduction
This standard shall be applied in selecting and
applying accounting policies and accounting for
changes in accounting policies , changes in accounting
estimates and corrections of prior period.
Tax effects of correction of prior period error and of
retrospective adjustment shall be accounted for in
accordance with IAS 12.
3. The Scope of IAS 08
Accounting Policies:
are the specific principles, rules applied
by the entity in preparing and presenting financial
statements.
When an IFRS specifically applies to an event,
transaction the accounting policy shall be determined
by applying the IFRS.
In the absence of IFRS, management shall use its
judgment in developing and applying an accounting
policy that results in information that is:
4. Management judgment
Relevant to economic decision making of users.
Reliable in that financial statements.
Free from bias
Are prudent
Are complete in all material respects.
Represent faithfully the financial position of the entity
can refer to the pronouncements of other standard
setting bodies using same conceptual framework.
5. Consistency
Shall apply its accounting policies consistently over
time ( so that users can compare its financial
statements over time and with other entities to
identify trends in its financial position and
performance.)
6. Change in Accounting Policy
Only if change is:
Required by an IFRS
Results in financial statements providing reliable and
more relevant information about transactions, events
and conditions
Following are not changes in accounting policies:
Event that did not occur previously
7. Change in accounting policy is applied retrospectively,
the entity shall adjust the opening balances of each
affected component of equity for the earliest period
presented and other comparative amounts disclosed
for each prior period presented.
8. Accounting Estimates
Many items in the financial statements cannot be
measured with precision but can only be estimated.
Examples are bad debts, warranty provisions, fair value
An estimate may need revision if new circumstances
arise or there is a change in information on which
estimate was based.
A change in accounting estimate shall be recognised
prospectively by including it in the profit or loss of the
current period and in the future periods.
9. Disclosure
An entity shall disclose the nature and amount of a
change in an accounting estimate that has an effect in
the current period or is expected to have an effect in
the future periods.
10. Errors
Omission or misuse of material information in the
financial statements .
Errors can arise in respect of presentation,
measurement or disclosure of financial statements.
Entity shall correct the material errors retrospectively
in the first set of financial statements after their
discovery by:
restating the comparative amounts of prior period in
which error occurred.
If error occurred before the earliest prior period
presented, by adjusting the opening amounts of assets,
liabilities and equity.
11. Disclosure
An entity shall disclose the following:
The nature of prior period error
The amount of correction of each financial statement
line item presented
The amount of correction at the beginning of the
earliest period presented.
12. Impracticability of retrospective
application
When retrospective application requires making a
significant estimate (e.g. fair value of an item) at a date
in a previous period , which cannot be made with
precision or data / information is not available for that
estimate it is impractical to apply the new accounting
policy or correct the prior period error retrospectively.
13. General Information.
Change in the method of depreciation is a change in
accounting estimate and it shall be adjusted
retrospectively.
Changing from cost model to revaluation is a change
in accounting policy.
When it is difficult to distinguish between change in
accounting estimate and change in accounting policy,
it shall be treated as a change in estimate according to
standard.
