pas-8-19.pdf - Pas 8 Accounting Policies Changes in Accounting Estimates and Errors Introduction PAS 8 prescribes the criteria for selecting applying

pas-8-19.pdf - Pas 8 Accounting Policies Changes in...

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Pas 8 Accounting Policies, Changes, in Accounting Estimates and Errors Introduction PAS 8 prescribes the criteria for selecting, applying, and changing accounting policies and the accounting and disclosure of changes in accounting policies, changes in accounting estimates and correction of prior period errors. These are intended to enhance the relevance, reliability and comparability of the entity's financial statements. Accounting policies Accounting policies are "the specific principles, bases, conventions, rules and practices applied by an entity in preparing and presenting financial statements." (PAS 8.5) When selecting and applying accounting policies, an entity shall refer to the hierarchy guidance summarized below. The foregoing means that, to account for a transaction, an entity refers to the PFRSs first (which consist of the PFRSs, PASS and Interpretations); in the absence of a PFRS that specifically deals with that transaction, management uses its judgment in developing and applying an accounting policy 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 guidance states whether it is an integral part of the PFRSs. A guidance that is an integral part of the PFRSs is mandatory. Changes in Accounting Policies PAS 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; or B. results in reliable and more relevant information
A change in accounting policy usually results from a change in measurement basis. Examples of changes 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, and equipment 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. PFRs The following are not changes in accounting policies: a. the application of an accounting policy for transactions events or conditions that differ in substance from previously occurring b. the application of a new accounting policy for transactions other events or conditions that did not occur previously or immaterial (PAS 8.16) Accounting for Changes in Accounting Policies Changes in accounting policies are accounted for using the following order of priority: 1.Transitional provision in a PFRS, if any.

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