Pas 8 Accounting Policies, Changes, in Accounting Estimates and ErrorsIntroductionPAS 8 prescribes the criteria for selecting, applying, and changing accounting policies and theaccounting and disclosure of changes in accounting policies, changes in accounting estimatesand correction of prior period errors. These are intended to enhance the relevance, reliabilityand comparability of the entity's financial statements.Accounting policiesAccounting policies are "the specific principles, bases, conventions, rules and practices appliedby an entity in preparing and presenting financial statements." (PAS 8.5)When selecting and applying accounting policies, an entity shall refer to the hierarchy guidancesummarized below.The foregoing means that, to account for a transaction, an entity refers to the PFRSs first (whichconsist of the PFRSs, PASS and Interpretations); in the absence of a PFRS that specifically dealswith that transaction, management uses its judgment in developing and applying an accountingpolicy that results in information that is relevant and reliable, In making the judgment,management considers the applicability of the references listed above.PFRSs are accompanied by guidance to assist entities in applying their requirements. A guidancestates whether it is an integral part of the PFRSs. A guidance that is an integral part of the PFRSsis mandatory.Changes in Accounting PoliciesPAS 8 requires the consistent selection and application of accounting policies.PAS 8 permits a change in accounting policy only if the change:A.is required by a PFRS; orB.results in reliable and more relevant information
A change in accounting policy usually results from a change in measurement basis. Examples ofchanges in accounting policies:A. Change from FIFO to the Weighted Average cost formula for inventories.B. Change from the cost model to the fair value model of measuring investment property.C. Change from the cost model to the revaluation model of measuring property, plant, andequipment and intangible assets.D. Change in business model for classifying financial assets.E. Change in the method of recognizing revenue from long-term construction contracts.F. Change to a new policy resulting from the requirement of a new PFRS.G. Change in financial reporting framework, such as from for SMEs to full PFRSs. PFRsThe following are not changes in accounting policies:a. the application of an accounting policy for transactions events or conditions that differ insubstance from previously occurringb. the application of a new accounting policy for transactions other events or conditions thatdid not occur previously or immaterial (PAS 8.16)Accounting for Changes in Accounting PoliciesChanges in accounting policies are accounted for using the following order of priority:1.Transitional provision in a PFRS, if any.