PAS 8

Change in Accounting Estimate Accounting Policies Prior Period Errors

Definition Definition Definition Treatment

An adjustment of the CA of an asset or a Specific principles, bases, conventions, Omissions and misstatements in the 1. corrected retrospectively, by adjusting
liability, or the amount of the periodic rules and practices applied by an entity in financial statements for one or more the opening balances of RE and affected
consumption of an asset that results from preparing and presenting financial periods arising from a failure to use or assets and liabilities
the assessment of the present status and statements. misuse of reliable information that: 2. if impracticable to determine the
expected future benefit and obligation Entities shall select and apply the same 1. was available when FS for those cumulative effect at the beginning of the
associated with the asset and liability. accounting policies each period to periods were authorized for issue. current period of an error on all prior
achieve comparability. 2. could reasonably be expected to have periods, entity shall restate comparative
been obtained and taken into account in info to correct error prospectively from the
the preparation and presentation of those earliest date practicable
Occurs when: Change made only when: FS
1. changes occur regarding the 1. required by a standard or an
circumstances on which the estimate was interpretation thereof
based 2. change will result to more relevant and Occurs as a result of: Disclosure
2. changes occur as a result of new faithfully represented info about the 1. mathematical mistakes 1. Nature of prior period error
information, more experience or financial position, performance and cash 2. mistakes in applying accounting 2. amount of correction for each prior
subsequent development flows of the entity. policies period presented, to the extent
3. misinterpretation of facts practicable:
4. fraud a. for each FS line item affected
5. oversight b. for basic and diluted EPS
Application: Selection & Application of
3. amount of correction at the beginning
Currently and prospectively by including it Accounting Policy:
of the earliest prior period presented
in income or loss of: 1. use accounting standard that
4. if retrospective restatement is
1. the period of change if the affects that specifically applies to a transaction or
impracticable:
period only event, if such is present
a. circumstances that led to the
2. the period of change and future periods 2. is such is absent, apply judgment.
existence of that condition
if the change affects both Hierarchy of guidance:
Application of change: b. description of how and from
a. requirements of current
1. if change is required by when the error has been corrected
standards dealing with similar matters
standard/interpretation, apply transitional
b. definition, recognition criteria
Difficulty to distinguish change in provisions
and measurement concepts for assets,
accounting estimate and a change in 2. if standard/interpretation has no
liability, income and expenses in
accounting policy transitional provisions or if policy is
Conceptual Framework
Treat as change in accounting estimate changed voluntarily, apply retrospectively
c. most recent pronouncements
with appropriate disclosure 3. impracticable to apply retrospectively,
of other standard-setting bodies
apply prospectively from earliest period
practicable

Bravo, Levi Emmanuel V. Group 5 MW 10:30 – 12:00

MCQ Questions:
1. If there is difficulty to distinguish a change in accounting estimate and change Which statement/s is/are not true?
in accounting policy, the change shall be accounted as
a. I, IV
a. Change in accounting estimate
b. II, IV
b. Change in accounting policy
c. I, III
c. Whichever the entity deems expedient and will result to a more relevant and
d. II, III
faithfully represented FS
d. Either a or b, with appropriate disclosure in either case
4. The following are the necessary disclosures of prior period errors, except
a. Amount of correction at the beginning of the earliest prior period presented
2. The following are all examples of changes in accounting estimates, except
b. Circumstances that led to the existence of the impracticability of
a. Change in doubtful accounts estimation
retrospective restatement
b. Change in accounting entity
c. Description on how and from when the error has been corrected if
c. Change in depreciation method retrospective restatement is impracticable
d. Both b and c d. The number of times the error has occurred before

3. I. The selection and application of the same accounting policies is necessary 5. A change in reporting entity
to make financial information for each period consistent and verifiable.
a. Is change in accounting estimate
II. A change in accounting policy may not be due to a requirement of a
b. Does not require retrospective restatements, but rather, prospective
standard.
restatements with appropriate disclosures
III. Changing the measurement of investment property from revaluation
c. May be a result of changing the specific subsidiaries comprising the group of
model to cost model is not an example of a change in accounting policy.
entities for which consolidated FS are presented
IV. A change in accounting policy does not absolutely result to a
d. None of the above
retrospective application of the change

Bravo, Levi Emmanuel V. Group 5 MW 10:30 – 12:00