IAS8 Accounting Policies, Changes in Accounting Estimates and Errors Syllabus A2de1Accounting policy Accounting policies are the specific principles, bases, conventions, rules and practices applied by an entity in preparing and presenting financial statements. If a standard applies to a transaction, follow that IAS or IFRS. In the absence of a standard, select a policy that maximises the relevance and reliability of the information presented.2Continued Required by IAS1 It is helpful to make financial information possess the following characteristics: relevance to the decision making needs of users reliability faithful representation substance over form neutrality prudence completeness3Continued Changes in accounting policies only if (a) is required by an IFRS; or (b) results in the financial statements providing reliable and more relevant information about the effects of transactions, other events or conditions on the entitys financial position, financial performance or cash flows. They include the changes in recognition, measurement basis and presentation.4Continued *Two types of events which do not constitute changes in accounting policy the application of an accounting policy for transactions, other events or conditions that differ in substance from those previously occurring; and the application of a new accounting policy for transactions, other events or conditions that did not occur previously or were immaterial. Exception the initial application of the revaluation method for PPE and intangible asset is not treated as a change in accounting policy under IAS 8.5Continued Accounting treatment retrospective application to adjust against opening retained earnings in SOCIE, and to provide comparative information. prospective application if the cumulative effect of the change can not be determined. to recognise the effect of change in the current and future periods.6Continued If material, disclose the title of the standard, etc. changed the reason for the change the amounts of the adjustments relating to periods whether presented in the financial statements or not an explanation and description of not applying retrospective method7Exercises 4 Dec10 5b Dec06 3d Jun03(练习册3d) 5a Dec01 Jun98 oldExample 1, 2 p1798Changes in accounting estimates They are unavoidable, given the uncertainties inherent in business activities Prospective method the period of the change, if the change affects that period only; or the period of the change and subsequent periods , if the change affects both. If material, disclose its nature and amount of the change the fact that estimating the amount of effect is impracticable9Correction of prior period errors Prior period errors omissions from, and misstatements in, an entitys financial statements for one or more prior periods arising from a failure to use, or misuse of , reliable information that was available and could reasonably be expected to have been obtained and taken into account in preparing financial statements. e.g., mathematical mistakes, mistakes in applying accounting policy, oversights or misinterpretations of facts, and fraud.10Continued Material prior period errors should be corrected retrospectively by restating the opening balances of assets, liabilities and equity as if the error had never occurred. by restating the opening retained earnings in SOCIE restating the comparative information, as if the error had never occurred The nature and amount of the correction should be disclosed in a note.11Exercises 2 Jun02 note1-4, adjustments for retained earnings 3d Jun03 5 Dec07 2noteiv Jun08 4 Dec10Example3, p18112IAS10 Events after the reporting periodSyllabus C11h13Definition The events which occur between the reporting date and the date on which the financial statements are authorised for issue by the board of directors.14Adjusting events Those that provide additional evidence of conditions existing at the reporting date The amounts in the financial statements should be adjusted. Example The resolution of court case which existed at the reporting date The receipt of information indicating the impairment of assets which existed at the reporting date Allowance for inventories and bad debts (receipts of accounts receivable or sale of inventory) Bankruptcy of debtors15Adjusting events Amounts received or receivable in respect of insurance claims which were being negotiated at the reporting date. Discovery of fraud and error The determination of the cost of assets purchased, or the proceeds from assets sold, before the reporting date The determination of the amount of profit sharing or bonus payments, if the enterprise had a present legal or constructive obligation at the reporting date to make such payments16Non-adjusting events Those that are indicative of conditions tha