IAS 8_ Accounting Policies Explained Simply
Transcript
00:00The objective of IS-8 is to prescribe the criteria for selecting and changing accounting policies
00:06and for accounting for changes in accounting policies, changes in accounting estimates,
00:11and corrections of errors. The standard enhances the relevance, reliability, and comparability of
00:18an entity's financial statements over time and across entities. IS-8 applies to selection and
00:24application of accounting policies, accounting for changes in accounting policies,
00:29accounting for changes in accounting estimates, and corrections of prior period errors.
00:35Accounting policies are specific principles, bases, conventions, rules, and practices applied
00:41in preparing and presenting financial statements. Change in accounting estimate is an adjustment of
00:48the carrying amount of an asset or a liability resulting from the assessment of the present
00:53status and expected future benefits. Prior period errors are omissions from and misstatements in
01:00the financial statements for one or more prior periods. Retrospective application involves
01:06applying a new accounting policy to transactions as if that policy had always been applied.
01:12Impracticable occurs when an entity cannot apply a requirement after making every reasonable effort
01:18to do so. Specific IFRS application dictates that when an IFRS specifically applies to a transaction,
01:26the accounting policy applied must be determined by the IFRS. In the absence of an IFRS, management
01:33must use judgment to develop and apply an accounting policy that provides relevant and
01:39reliable information. Changes in accounting policies should be applied retrospectively,
01:44adjusting the opening balance of each affected component of equity for the earliest prior
01:50period presented. Changes in accounting estimates should be recognized prospectively by including
01:56them in profit or loss in the period of the change. Errors can arise in respect of the recognition,
02:03measurement, presentation, or disclosure of elements of financial statements. Material prior
02:10period errors should be corrected retrospectively by restating
02:14comparative amounts for the prior periods in which the error occurred.