Accounting Policies, Changes in Accounting Estimates and Errors

1. Accounting Policies,
Changes in Accounting
Estimates and Errors
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2. Accounting policies
Accounting policies are the specific principles, bases,
conventions, rules and practices applied by an entity in
preparing and presenting financial statements.
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3. Selection of Accounting Policies
Accounting policies should be selected using the following
methods.
(1)Use of Accounting standard
(2)Based on management Judgment
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4. Changes in Accounting Policies
An entity shall change an accounting policy only if the change:
(a) is required by a Standard; or
(b) results in the financial statements providing reliable and more
relevant information about the effects of transactions, other events or
conditions on the entity's financial position, financial performance or
cash flows.
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5. Accounting for Changes in
Accounting Policies
Change in accounting policies should be accounted
retrospectively, except when the accounting policy was changed
as required by a particular accounting standard and specific
transitional provisions are available in such standard.
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6. Accounting for Changes in
Accounting Policies
Retrospective application is applying a new accounting policy
to transactions, other events and conditions as if that policy had
always been applied.
 This retrospective application is subject to the limitation of
impracticability.
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7. Changes in Accounting Estimates
Accounting Estimates
Examples
(1) useful assets of an asset
(2) Residual value of an asset
(3) Depreciation method
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8. Accounting for changes in
Accounting Estimates
The effect of a change in an accounting estimate shall be
recognized prospectively by including it in profit or loss in:
(a) the period of the change, if the change affects that
period only; or
(b) the period of the change and future periods, if the
change affects both.
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9. Errors
Prior period errors are omissions from, and misstatements in,
the entity's financial statements for one or more prior periods
arising from a failure to use, or misuse of, reliable information
that:
(a) was available when financial statements for those periods
were authorized for issue; and
(b) could reasonably be expected to have been obtained and
taken into account in the preparation and presentation of those
financial statements.
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10. Accounting for rectification of prior
period errors
Prior period errors should be rectified retrospectively
by adjusting the past.
This is named as ‘retrospective restatement’.
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11. Accounting for rectification of prior
period errors
Retrospective restatement is correcting the
recognition, measurement and disclosure of the amounts
of the elements of financial statements as if a prior period
error has never occurred.
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