- 20 Marks
FRPA – APRIL 2024 – L3 – Q2 – IAS 8, ZBB Challenges, Budgetary Control Factors
Explain accounting policies and changes in estimates per IAS 8, four challenges of implementing ZBB, and three factors for effective budgetary control.
Question
a) IAS 8. Accounting Policies, Changes in Accounting Estimates and Errors is applied in selecting and applying Accounting Policies, Accounting for Changes in Estimates and reflecting Corrections of Prior Period Errors. The standard requires compliance with any specific IFRS applying to a transaction, event or condition, and provides guidance on developing Accounting Policies for other items that result in relevant and reliable information.
You are required to:
Explain the following in accordance with IAS 8. Accounting Policies, Changes in Accounting Estimates and Errors. i) Accounting Policies (3 marks) ii) A Change in Accounting Estimates (3 marks)
b) Zero Based Budgeting (ZBB) is a process of budgeting that allocates funding based on programme efficiency and necessity rather than budget history. ZBB aims to put the onus on managers to justify expenses and to drive value for an organisation by optimising cost and not just revenue. Adopting a ZBB Approach for a company may seem like an intending task but when weighed against the value derived, the effort is worth the result.
You are required to:
Explain four (4) challenges Management will face when implementing a Zero-Based Budgeting System (8 marks) c) Organisations invest time and resources in creating and controlling budgets to ensure stability and predictability of their operations.
You are required to:
Explain three (3) factors necessary for an effective Budgetary Control System (3 marks)
[Total: 20 marks]
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