pexels photo 2228561

IAS 8 revision question (NBAA C2 NOV 2018)



Due to the complexity of International Financial Reporting Standards (IFRSs), judgements used at the time of transition to IFRSs have often resulted in prior period adjustments and changes in estimates being disclosed in financial statements. The selection of accounting policies and estimation techniques are intended to aid comparability and consistency in financial statements.
However, IFRSs also place particular emphasis on the need to take into account qualitative characteristics and the use of professional judgement when preparing financial statements. Although IFRSs may appear prescriptive, the achievement of all the objectives for a set of financial statements will rely on the skills of the preparer. Entities should follow the requirements of IAS 8: Accounting Policies, Changes in Accounting Estimates and Errors when selecting or changing accounting policies, changing estimation techniques, and correcting errors. However, the application of IAS 8 is additionally dependent upon the application of materiality analysis to identify issues and guide reporting. In many cases, entities have to consider the acceptability of the use of hindsight in their reporting.



REQUIRED:

(i) Discuss how judgment and materiality play a significant part in the selection of an entity’s accounting policies.
(ii) Explain the circumstances under which an entity may change its accounting policies setting out how a change of accounting policy is applied and the difficulties faced by entities where a change in accounting policy is made.

5 thoughts on “IAS 8 revision question (NBAA C2 NOV 2018)”

Leave a Comment

Your email address will not be published. Required fields are marked *

%d bloggers like this: