8_ias 8 workshop revised

7/23/2019 8_IAS 8 Workshop Revised

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Jalis Ahmad & Co. CharteredAccountants

International AccountingInternational Accounting

Standard (IAS-8)Standard (IAS-8)

Accounting Policies, Changes in

Accounting Estimates and Errors


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Objective Of IAS 8Objective Of IAS 8

it prescribes the criteria for:

O selection of accounting policies;

O changes in accounting policies;

O accounting treatment;

O disclosure of changes in accounting policies;

O changes in accounting estimates; AndO correction of errors;


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The achievement of the objectiveThe achievement of the objective

would result in:would result in: enhancement of:

O relevance and reliability of financial

statements;

O comparability of financial statements

with the financial statements of other

entities;


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WHAT ARE AO!"TI"#WHAT ARE AO!"TI"#

$O%IIES&$O%IIES&These are:

Specific principles;

ases;

Conventions;

!ules;

Practices;These are applied in preparing and presenting

financial statements"


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RETROS$ETI'E A$$%IATIO"RETROS$ETI'E A$$%IATIO"

!etrospective application is applying a new

accounting policy to transactions, other events

and conditions as if that policy had always been

applied"


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RETROS$ETI'E RESTATE(E"TRETROS$ETI'E RESTATE(E"T

!etrospective restatement is correcting therecognition, measurement and disclosure of

amounts of elements of financial statementsas if a prior period error had neveroccurred"


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I($RATIA)%EI($RATIA)%E

Applying a re#uirement is impracticable

when the entity cannot apply it after ma$ingevery possible effort%%%%%%%%%"


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$ROS$ETI'E A$$%IATIO"$ROS$ETI'E A$$%IATIO"

Prospective application of a change in accounting

policy and of recogni&ing the effect of a change in

an accounting estimate, respectively, are:

Applying the new accounting policy totransactions, other events and conditions

occurring after the date as at which the policy is

changed; and"

!ecogni&ing the effect of the change in the

accounting estimate in the current and future

periods affected by the change"


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Who will identif* the chan+e inWho will identif* the chan+e in

financial statements is inevitablefinancial statements is inevitable


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USERS OF FINANCIALUSERS OF FINANCIAL

STATEMENTSSTATEMENTS'SE!S () )*+A+C*A STATE-E+TS A!E

ASS'-E. T( /A0E A !EAS(+AE

1+(2E.3E () 'S*+ESS A+. EC(+(-*CACT*0*T4 A+. ACC('+T*+3 A+. A

2**+3+ESS T( ST'.4 T/E *+)(!-AT*(+

2*T/ !EAS(+AE .**3E+CE"

5Para 67 of )ramewor$ for the preparation andpresentation of financial statements"8"


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CHARACTERISTICS OF ANCHARACTERISTICS OF AN

ACCOUNTING POLICYACCOUNTING POLICY*n devising an accounting policy, it should be:

relevant;

reliable; faithful;

havingeconomic substance;

neutral; prudent;

complete;


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HARATERISTIS O, A" AO!"TI"#HARATERISTIS O, A" AO!"TI"#

$O%I-. continued$O%I-. continued

!elevant to the economic decision ma$ing needs of user;

and

!eliable in that the financial statements:

!epresents faithfully the financial position, financialperformance and cash flows of the entity;

!eflect the economic substance of transactions, other

events and conditions, and not merely legal form;

Are prudent; and

Are complete in all material respects"


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CHARACTERISTICS OF AN ACCOUNTINGCHARACTERISTICS OF AN ACCOUNTING

POLICY continuedPOLICY continued

C(+S*STE+C4


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Jalis Ahmad & Co. Chartered

Accountants

What are not chane in accountinWhat are not chane in accountin

!o"icie#$!o"icie#$The following are not change in accounting

policies:

The application of an accounting policy fortransactions, 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"


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Accountants

Accountin treat%ent o& chane inAccountin treat%ent o& chane in

accountin !o"ic'accountin !o"ic'

2hen a change in accounting

policy is applied

retrospectively, the entity shall

ad9ust the opening balances of

each affected component ofe#uity for the earliest prior

period presented and the other

comparative amounts disclosed

for each prior period presented

as if the new accounting policyhad always been applied"

2hen it is impracticable to

determine the cumulative effect,

at the beginning of the current

period, of applying a new

accounting policy to all priorperiods, the entity shall ad9ust

the comparative information to

apply the new accounting

policy prospectively from the

earliest date practicable"


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Accountants

/IS%OS!RE RE0!IRE(E"TS/IS%OS!RE RE0!IRE(E"TSO,O,

HA"#E I" AO!"TI"# $O%I-HA"#E I" AO!"TI"# $O%I-

Title of the standard or interpretation

Transitional provision if applicable

+ature of change

.escription of transitional provision

)or the current period and each prior period

presented, to the etent practicable, the amount of

ad9ustment:

o)or each financial statement line item affected;

o Earnings per share revised


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Accountants

WHAT IS A HA"#E I" AO!"TI"#WHAT IS A HA"#E I" AO!"TI"#

ESTI(ATE&ESTI(ATE& An ad9ustment of carrying amount of an asset or liability; An ad9ustment of the amount of periodic consumption of an asset; that

results from:

The assessment of the present status of assets andliabilities

Epected future benefits of assets

(bligations associated with liabilities

Change in accounting estimates result from:

+ew information; or

+ew developments

Are +(T corrections of errors;


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Accountants

REASO" ,OR ESTI(ATIO"REASO" ,OR ESTI(ATIO"

2hen an item of financial statements

cannot be measured precisely, it can only be

estimated" This is because of: 'ncertainties inherent in the business;

2here 9udgments are involved;


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Accountants

Where estimation is re1uired&Where estimation is re1uired&

Estimates may be re#uired of:

ad debts;

*nventory obsolescence; )air value of financial assets or financial

liabilities;

The useful lives of, or epected pattern of

consumption of the future economic benefitsembodied in, depreciable assets; and

2arranty obligation etc


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Accountants

When chan+e in accountin+ estimateWhen chan+e in accountin+ estimate

becomes necessar*becomes necessar*

*f changes occur in the circumstances

on which the estimate was based; or As a result of a new information; or

-ore eperience


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Accountants

Reco+nition criteria of chan+e inReco+nition criteria of chan+e in

accountin+ estimateaccountin+ estimateAd9usting the carrying amount of the related asset, liability

or e#uity item in the period of change recogni&es a changein an accounting estimate"

Eample:-anagement estimates that provision for doubtful debts is

estimated up to 7 percent of the total population of tradedebts" /owever, upon identifying the age of the trade

debts, it revealed that bad debts are about


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Accountants

/IS%OS!RE RE0!IRE(E"TS O,/IS%OS!RE RE0!IRE(E"TS O,

HA"#E I" AO!"TI"# ESTI(ATEHA"#E I" AO!"TI"# ESTI(ATE

= +ature and amount of a change

in an accounting estimate for thecurrent year and future period if

practicable;

= *f estimation is impracticable,

disclosure of this fact;


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Accountants

ERRORSERRORS


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Accountants

WHAT ARE $RIOR $ERIO/ ERRORS&WHAT ARE $RIOR $ERIO/ ERRORS&

(missions from; or

-isstatements in

The financial statements for one or moreprior periods arising from:

Continued%%%%""


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Accountants

WHAT ARE $RIOR $ERIO/ ERRORS&WHAT ARE $RIOR $ERIO/ ERRORS&

ontinued....2ontinued....2

)ailure to use or misuse of reliable

information that was available when financial

statements for those periods were authori&ed forissue;

)ailure to use or misuse of reliable

information that could reasonably be epected to

have been obtained and ta$en into account in thepreparation and presentation of those financial

statements"


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Accountants

ExamplesExamplesof 3rior 3eriod errors are:of 3rior 3eriod errors are:

Effect of mathematical mista$es

-ista$es in applying accounting policies

(versight and misinterpretation of facts and

fraud"


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Accountants

Rectification CriteriaRectification Criteria

An entity shall correct material prior perioderrors retrospectively in the first set of financialstatements authori&ed for issue after theirdiscovery by:

!estating the comparative amounts for theprior period>s? presented in which the erroroccurred; or

*f the error occurred before the earliest prior

period presented, restating the opening balancesof assets, liabilities and e#uity for the earliestprior period presented"


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Accountants

%I(ITATIO" O" RETROS$ETI'E%I(ITATIO" O" RETROS$ETI'E

RESTATE(E"TRESTATE(E"T

Limitation on periodspecific effect

2hen it is impracticable todetermine the period specificeffects of an error on

comparative information forone or more prior periodspresented, the entity shallrestate the opening balances ofassets, liabilities and e#uity forthe earliest period for whichretrospective restatement ispracticable >which may be thecurrent period?"

Limitation oncumulative effect

2hen it is impracticable to

determine the cumulative effect,

at the beginning of the current

period, of an error on all prior

periods, the entity shall restate

the comparative information to

correct the error prospectively

form the earliest date

practicable"


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Accountants

DISCLOSURE REQUIREMENSDISCLOSURE REQUIREMENS

+ature of the prior period error

To the etent practicable, the amount of the

correction:

o )or each financial statement line item affected; and

o !evision in earnings per share >EPS?

The amount of the correction at the beginning of the

earliest prior period presented; and

*f retrospective restatement is impracticable for a

particular prior period, the circumstances that led to the

eistence of that condition and a description of how and

from when the error has been corrected"


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Accountants

Effecti!eEffecti!edate of IAS-8date of IAS-8

This standard is applicable from annual periods

beginning on or after @ anuary 6BB7"


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Accountants

End of slidesEnd of slides

Than$ you

8_ias 8 workshop revised

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