FR – Nov 2016 – L2 – Q2b – Financial Reporting Standards and Their Applications

Identify the conditions under which it may be appropriate to change accounting policy in accordance with IAS 8.

Question

According to IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors, an entity must select and apply its accounting policies consistently from one period to the next and among various items in the financial statements. However, an entity may change its accounting policies under certain conditions.

Required:
Identify the circumstances under which it may be appropriate to change accounting policy in accordance with the guidance given in IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors.

Answer

Under IAS 8, it is appropriate to change accounting policy in the following situations:

If a new standard or interpretation requires a change from an existing policy:
When a new or revised accounting standard or interpretation issued by the IASB requires an entity to adopt a new policy.
If a different policy would produce financial statements that are more relevant and reliable:
When the new policy results in information that provides more relevant and reliable information about the entity’s financial position, performance, or cash flows.

Tags: Accounting Policies, Change in Accounting Policies, Financial Reporting Standards, IAS 8
Level: Level 2

Topic: Financial Reporting Standards and Their Applications
Series: NOV 2016

Uploader: Theophilus