Module 10 Version2010 1
Module 10 Version2010 1
Module 10
Accounting Policies,
Estimates and Errors
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Contents
INTRODUCTION __________________________________________________________
Learning objectives ________________________________________________________
IFRS for SMEs ____________________________________________________________
Introduction to the requirements_______________________________________________
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INTRODUCTION
This module focuses on the accounting and reporting of accounting policies, estimates and
errors in accordance with Section 10 Accounting Policies, Estimates and Errors of the IFRS for SMEs.
It introduces the learner to the subject, guides the learner through the official text, develops
the learners understanding of the requirements through the use of examples and indicates
significant judgements that are required in applying Section 10. Furthermore, the module
includes questions designed to test the learners knowledge of the requirements and case
studies to develop the learners ability to account for changes in accounting policies, changes
in accounting estimates and the correction of prior period errors in accordance with the
IFRS for SMEs.
Learning objectives
Upon successful completion of this module you should know the financial reporting
requirements for accounting policies, estimates and errors in accordance with the
IFRS for SMEs. Furthermore, through the completion of case studies that simulate aspects of
the real world application of that knowledge, you should have enhanced your ability to
account for accounting policies, estimates and errors in accordance with the IFRS for SMEs.
In particular you should, in the context of the IFRS for SMEs, be able:
to develop an accounting policy for a transaction, other event or condition not specifically
addressed in the IFRS for SMEs
to disclose accounting policies and account for and disclose a change in accounting policy
in financial statements (including demonstrating an understanding of the adjustments
required under retrospective application and prospective application of an accounting
policy)
to account for and disclose the correction of a prior period error in financial statements
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a preface, which provides a general introduction to the IFRS for SMEs and explains its
purpose, structure and authority.
the Basis for Conclusions, which summarises the IASBs main considerations in reaching
its conclusions in the IFRS for SMEs.
the dissenting opinion of an IASB member who did not agree with the publication of the
IFRS for SMEs.
In the IFRS for SMEs the Glossary is part of the mandatory requirements.
In the IFRS for SMEs there are appendices in Section 21 Provisions and Contingencies, Section 22
Liabilities and Equity and Section 23 Revenue. Those appendices are non-mandatory guidance.
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This section provides guidance for selecting and applying the accounting policies used
in preparing financial statements. It also covers changes in accounting estimates
and corrections of errors in prior period financial statements.
Accounting policies are the specific principles, bases, conventions, rules and practices
applied by an entity in preparing and presenting financial statements.
10.3
If this IFRS specifically addresses a transaction, other event or condition, an entity shall
apply this IFRS. However, the entity need not follow a requirement in this IFRS if the
effect of doing so would not be material.
Notes
Omissions or misstatements of items are material if they could, individually or
collectively, influence the economic decisions of users made on the basis of the financial
statements. Materiality depends on the size and nature of the omission or misstatement
judged in the surrounding circumstances. The size or nature of the item, or a
combination of both, is the determining factor (see paragraph 3.16).
Users are assumed to have a reasonable knowledge of business and economic activities
and accounting and a willingness to study the information with reasonable diligence
(see paragraph 2.4). The providers of risk capital (an important user group) are
concerned with the risk inherent in, and return provided by, their investments.
They need information to help them determine whether they should buy, hold or sell.
Shareholders are also interested in information that enables them to assess the entitys
ability to pay dividends. Omissions or misstatements of items are material if they could,
individually or collectively, influence the economic decisions of such users made on the
basis of the financial statements (see paragraph 2.6).
The definition of material implies that an entity need not provide a specific disclosure
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Ex 2
Contrary to the requirements of Section 20 Leases an executive jet operator does not
capitalise finance leases that it enters into as a lessee. The entity sole business is
operating two executive jet airplanes, both of which it leases under a finance lease.
The entity accounts for all leases (ie operating leases and finance leases) in
accordance with the requirements of paragraphs 20.15 and 20.16 (ie the
requirements for operating leases).
The effect of not capitalising finance leases could influence the economic decisions of
users made on the basis of the financial statements. Therefore, the entity must adopt an
accounting policy of capitalising finance leases in accordance with the requirements of
Section 20.
Ex 3
The facts are the same as in example 1. However, in this example, the entity also
enters into many other individually immaterial finance leases.
The effect of not capitalising finance leases must be assessed on a collective basisif
when considered collectively, they could influence the economic decisions of users made
on the basis of the financial statements, then the effect is material and the entity must
adopt an accounting policy of capitalising finance leases in accordance with the
requirements of Section 20.
However, if it is highly unlikely that the collective effect of not capitalising the finance
leases could influence the economic decisions of users made on the basis of the financial
statements, then the entity need not follow an accounting policy of capitalising finance
lease.
(1)
In this example, and in all other examples in this module, monetary amounts are denominated in currency units (CU).
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10.4
If this IFRS does not specifically address a transaction, other event or condition, an
entitys management shall use its judgement in developing and applying an accounting
policy that results in information that is:
(a) relevant to the economic decision-making needs of users, [Refer: paragraph 2.5] and
(b) reliable [Refer: paragraph 2.7], in that the financial statements:
(i) represent faithfully the financial position, financial performance and cash flows
of the entity;
(ii) reflect the economic substance of transactions, other events and conditions, and
not merely the legal form; [Refer: paragraph 2.8]
(iii) are neutral, ie free from bias;
(iv) are prudent; [Refer: paragraph 2.9] and
(v) are complete [Refer: paragraph 2.10] in all material [Refer: paragraph 2.3] respects.
10.5
In making the judgement described in paragraph 10.4, management shall refer to, and
consider the applicability of, the following sources in descending order:
(a) the requirements and guidance in this IFRS dealing with similar and related issues,
and
(b) the definitions, recognition criteria and measurement concepts for assets, liabilities,
income and expenses and the pervasive principles in Section 2 Concepts and
Pervasive Principles.
10.6
In making the judgement described in paragraph 10.4, management may also consider
the requirements and guidance in full IFRSs dealing with similar and related issues.
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Notes
When the IFRS for SMEs does not specifically address a transaction, other event or
condition, an entity must select an accounting policy that results in relevant and
reliable information. In making that judgement, an entity considers, first, the
requirements and guidance in the IFRS for SMEs dealing with similar and related issues
and, second, the definitions, recognition criteria and measurement concepts for assets,
liabilities, income and expenses and the pervasive principles in
Section 2 Concepts and Pervasive Principles. If that does not provide guidance, the entity
may look to the requirements and guidance in full IFRSs, including Interpretations of
IFRSs, dealing with similar and related issues (Refer: Basis for Conclusions
paragraph BC86).
On 1 January 20X7, as part of a scheme to provide support for projects to help rural
communities, a non-government development agency announced a plan whereby
during 20X720X9 entities can apply for a grant to set up farming operations in a
specified rural area. Qualifying entities will receive an upfront cash payment of
CU50,000 to set up farming operations in the specified area. Entities must
complete an application form, submit their proposal and provide specified
documents which the development agency will consider before issuing the grant.
The IFRS for SMEs does not specify how to account for a grant from a non-government
development agency. However, it does specify how to account for government grants
(see Section 24 Government Grants). By analogy, grants received from non-government
development agencies should be accounted for in accordance with the requirements of
Section 24 (ie the entity should determine its accounting policy for grants from
non-government development agencies in accordance with the requirements of
Section 24).
An entity shall select and apply its accounting policies consistently for similar
transactions, other events and conditions, unless this IFRS specifically requires or
permits categorisation of items for which different policies may be appropriate. If this
IFRS requires or permits such categorisation, an appropriate accounting policy shall be
selected and applied consistently to each category.
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Ex 8
Ex 9
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Notes
An entity can change its accounting policy voluntarily only if the change results in the
financial statements providing reliable and more relevant information about the effects
of transactions, other events or conditions on the entitys financial position, financial
performance or cash flows (see paragraph 10.8(b)).
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Retrospective application
10.12 When a change in accounting policy is applied retrospectively in accordance with
paragraph 10.11, the entity shall apply the new accounting policy to comparative
information for prior periods to the earliest date for which it is practicable, as if the new
accounting policy had always been applied. When it is impracticable to determine the
individual-period effects of a change in accounting policy on comparative information for
one or more prior periods presented, the entity shall apply the new accounting policy to
the carrying amounts of assets and liabilities as at the beginning of the earliest period for
which retrospective application is practicable, which may be the current period, and shall
make a corresponding adjustment to the opening balance of each affected component of
equity for that period.
Notes
It is impracticable to apply a requirement if the entity cannot apply it after making
every reasonable effort to do so.
Impracticable is a high hurdle. For a particular prior period, it is impracticable to
apply a change in an accounting policy retrospectively if:
(a) the effects of the retrospective application are not determinable;
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20X2
20X1
Restated
CU
CU
200,000
160,000
(50,000)
(40,000)
150,000
120,000
320,000
200,000
- as previously stated
- effect of the change in accounting policy
12
420,000
280,000
(100,000)
(80,000)
470,000
320,000
SME A
Notes to the financial statements for the year ended 31 December 20X2
Note 12 Change in accounting policy
In 20X2 in accordance with an amendment to Section X of the IFRS for SMEs the entity
changed its accounting policy for . Previously, the entity had . The entity now . This
change in accounting policy has been accounted for retrospectively, and the comparative
information for 20X1 has been restated. The effect of the change is a reduction of
CU20,000 in profit for the year ended 31 December 20X1. Furthermore, opening retained
earnings for 20X1 have been reduced by CU80,000, which is the amount of the
adjustment relating to periods before 20X1.
Note: The effect of the restatement on the statement of financial position (and other
statements) must also be presented.
10.14 When a voluntary change in accounting policy has an effect on the current period or any
prior period, an entity shall disclose the following:
(a) the nature of the change in accounting policy.
(b) the reasons why applying the new accounting policy provides reliable and more
relevant information.
(c) to the extent practicable, the amount of the adjustment for each financial statement
line item affected, shown separately:
(i) for the current period;
(ii) for each prior period presented; and
(iii) in the aggregate for periods before those presented.
(d) an explanation if it is impracticable to determine the amounts to be disclosed in (c)
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Extract from statement of income and retained earnings for the year ended 31
December 20X2
Notes
20X2
20X1
Restated
CU
CU
200,000
160,000
(50,000)
(40,000)
150,000
120,000
320,000
200,000
- as previously stated
420,000
280,000
(100,000)
(80,000)
470,000
320,000
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SME A
Notes to the financial statements for the year ended 31 December 20X2
Note 12 Change in accounting policy
In 20X2, the entity voluntarily changed its accounting policy for . Previously, the entity
had . The entity now . Management judges that this policy provides reliable and
more relevant information because . This change in accounting policy has been
accounted for retrospectively, and the comparative information for 20X1 has been
restated. The effect of the change is a reduction of CU20,000 in profit for the year ended
31 December 20X1. Furthermore, opening retained earnings for 20X1 have been reduced
by CU80,000, which is the amount of the adjustment relating to periods before 20X1.
Note: The effect of the restatement on the statement of financial position (and other
statements) must also be presented.
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Inventory is measured at the lower of cost (ie CU 15,000) and fair value less costs to complete and sell (ie CU 13,000
CU18,000 originally estimated less CU5,000 costs to rectify latent defect) (see paragraph 13.4)..
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Notes
It is impracticable to apply a requirement if the entity cannot apply it after making
every reasonable effort to do so (see Glossary).
Impracticable is a high hurdle. For a particular prior period, it is impracticable to
determine the period-specific effects of an error on the comparative information of one
or more prior periods presented if:
(a) the effects of the retrospective restatement are not determinable;
(b) the retrospective restatement requires assumptions about what managements
intention would have been in that period; or
(c) the retrospective restatement requires significant estimates of amounts and it is
impossible to distinguish objectively information about those estimates that:
(i) provides evidence of circumstances that existed on the date(s) as at which those
amounts are to be recognised, measured or disclosed; and
(ii) would have been available when the financial statements for that prior period
were authorised for issue from other information.
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Notes
Disclosure of the correction of a prior period error must be made even when the
disclosure might result in legal action against the entity. For example, an entity that
discovers a prior period error must disclose the correction of that error even if it is
worried that disclosure could result in a lawsuit. Similarly, if the correction of a prior
period error would reveal that the entity violated its borrowing covenants, it must
nevertheless be disclosed.
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Extract from statement of income and retained earnings for the year ended
31 December 20X2
Notes
20X2
20X1
Restated
CU
CU
200,000
160,000
(50,000)
(40,000)
150,000
120,000
320,000
200,000
- as previously stated
- effect of the correction of a prior period error
12
420,000
280,000
(100,000)
(80,000)
470,000
320,000
SME A
Notes to the financial statements for the year ended 31 December 20X2
Note 12 Correction of prior period error
In 20X2, the entity corrected mathematical mistakes that had resulted in the
understatement of depreciation expense over the past [four] years. The correction of the
error is accounted for retrospectively, and the comparative information for 20X1 has
been restated. The effect of the change is a CU20,000 reduction in profit for the year
ended 31 December 20X1. Furthermore, opening retained earnings for 20X1 have been
reduced by CU80,000, which is the amount of the error relating to periods before 20X1.
Note: The effect of the restatement on the statement of financial position (and other
statements) must also be presented.
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Accounting policies
Determining accounting policies
In many cases little difficulty is encountered in determining accounting policies. However, in
some cases significant judgement is required in determining an accounting policy.
In particular, where the IFRS for SMEs does not specifically address a transaction, other event or
condition, management must use its judgement in developing an accounting policy for that
transaction, other event or condition in accordance with paragraphs 10.4 and 10.5 of the
IFRS for SMEs. In making the judgement described in paragraph 10.4, management may
consider, but is not required to do so, the requirements and guidance in full IFRSs dealing
with similar and related issues.
Example
An entity has factored some of its accounts receivable with a bank. In purchasing the
receivables, the bank has assumed all credit risk up to 15 per cent of the amount of the
receivables. The selling entitys experience is that credit losses in its receivables have
historically been less than 10 per cent. In deciding whether to account for the factoring
as a sale of receivables or a collateralised borrowing, the selling entity must use its
judgement to determine whether it has transferred to the bank all of the significant
risks and rewards relating to the receivables (see paragraph 11.33(b)).
Applying accounting policies
In other cases management must make significant judgements in applying its accounting
policies. For example, in certain circumstances, management must make judgements in
determining:
the degree of influence the entity exerts over another, eg significant influence, control etc
whether certain properties are investment property, inventories or property, plant and
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whether, in substance, particular sales of goods are financing arrangements and therefore
do not give rise to revenue
whether the substance of the relationship between the entity and a special purpose entity
indicates that the special purpose entity is controlled by the entity.
The judgements made in applying accounting policies that have the most significant effect on
the amounts recognised in the financial statements must be disclosed (see paragraph 8.6).
Change of accounting policies
An entity can voluntarily change an accounting policy only if the change results in the
financial statements providing reliable and more relevant information about the effects of
transactions, other events or conditions on the entitys financial position, financial
performance or cash flows (see paragraph 10.8(b)). Judgements about the relevance and
reliability of information must be made before voluntarily changing an accounting policy.
When a change in accounting policy is applied retrospectively, an entity might need to judge
whether it is impracticable to determine the individual period effects of changing an
accounting policy for one or more prior periods presented (see paragraph 10.12). However, in
making that judgement, an entity must consider that retrospective application is
impracticable only when the entity cannot apply the requirement after making every
reasonable effort to do so (see the definition of impracticable in the glossary). In effect the
entity must assess what constitutes every reasonable effort.
Judgement might be required to distinguish a change in accounting estimate from a change in
accounting policy. When it is difficult to make that distinction, the change is treated as a
change in an accounting estimate (paragraph 10.15).
Accounting estimates
Accounting estimates
Determining the carrying amounts of some assets and liabilities requires estimation of the
effects of uncertain future events on those assets and liabilities at the end of the reporting
period. For example, in the absence of recently observed market prices, estimates are
necessary to measure the residual value of property, plant and equipment and, when
impairment is indicated, its recoverable amount. Other examples include the effect of
technological obsolescence on inventories and the effect of the future outcome of litigation in
progress on the amount of provisions. An entity must disclose in the notes information about
the key assumptions concerning the future, and other key sources of estimation uncertainty at
the end of the reporting period, that have a significant risk of causing a material adjustment
to the carrying amounts of assets and liabilities within the next financial year (see
paragraph 8.7).
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Question 1
Prospective application of a change in accounting policy means:
(a) applying the new accounting policy to transactions, other events and conditions
occurring after the date as at which the financial statements are authorised for issue.
(b) applying the new accounting policy to transactions, other events and conditions
occurring between the date as at which the policy is changed and the date when the
financial statements are authorised for issue.
(c) applying the new accounting policy to transactions, other events and conditions
occurring after the date as at which the policy is changed.
(d) applying a new accounting policy to transactions, other events and conditions as if
that policy had always been applied.
Question 2
Retrospective application of a change in accounting policy means:
(a) applying a new accounting policy to transactions, other events and conditions,
identified before the date when the financial statements are authorised for issue, as if
that policy had always been applied.
(b) applying the new accounting policy to transactions, other events and conditions
occurring between the date as at which the policy is changed and the date when the
financial statements are authorised for issue.
(c) applying the new accounting policy to transactions, other events and conditions
occurring after the date as at which the policy is changed.
(d) applying a new accounting policy to transactions, other events and conditions as if
that policy had always been applied.
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Question 4
On 25 March 20X4 the entity discovered that, as a result of a computational error, depreciation
expense for 20X3 is overstated by CU29,000. The entitys 31 December 20X3 financial
statements were authorised for issue on 1 March 20X4. The entity must:
(a) reissue its 31 December 20X3 financial statements with the correct depreciation
expense.
(b) reduce depreciation for the year ended 31 December 20X4 by CU29,000 (ie prospective
allocationa change in accounting estimate).
(c) restate (correct) the depreciation expense reported for the year ended 31 December
20X3 in the comparative figures of its 20X4 financial statements (ie retrospective
restatement of a prior period error).
Question 5
The facts are the same as in Question 4. However, the entitys 31 December 20X3 financial
statements were authorised for issue on 1 April 20X4. The entity must:
(a) correct its 31 December 20X3 financial statements before issuing them.
(b) reduce depreciation for the year ended 31 December 20X4 by CU29,000 (ie prospective
allocationa change in accounting estimate).
(c) restate (correct) the depreciation expense reported for the year ended 31 December
20X3 in the comparative figures of its 20X4 financial statements (ie retrospective
restatement of a prior period error).
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Question 7
On 20 February 20X5, before an entitys 31 December 20X4 financial statements were
authorised for issue, a court ordered the entity to pay CU120,000 damages in full and final
settlement of a patent infringement lawsuit brought against the entity by one of its
competitors. The patent infringement occurred in 20X3. The amount of damages awarded to
the competitor was consistent with similar cases settled in that jurisdiction since 20X2.
In its 31 December 20X3 annual financial statements the entity reported its liability for the
lawsuit at CU20,000. The entity deliberately understated the amount presented, because it did
not want to make public its true estimate, believing that this would be detrimental to its
defence.
In its 31 December 20X4 financial statements the entity must:
(a) restate the comparative information at 31 December 20X3 (ie retrospective
restatement of a prior period error).
(b) measure the provision at 31 December 20X4 at CU120,000 (comparative information
20X3: CU20,000), ie account prospectively for the change in accounting estimate in its
20X4 financial statements.
(c) measure the provision at 31 December 20X4 at CU20,000 (comparative information
20X3: CU20,000) and record the effect of the higher than expected settlement in profit
or loss for the year ended 31 December 20X5 (ie account prospectively for the change
in accounting estimate in the period that the final settlement amount was
determined).
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Question 9
Which of the following statements is true?
(a) Financial statements of subsequent periods need not repeat the disclosures required
for a change in accounting policy and the correction of a prior period error.
(b) Financial statements of subsequent periods must repeat the disclosures required for a
change in accounting policy and the correction of a prior period error.
(c) Financial statements of subsequent periods must repeat the disclosures required for a
change in accounting policy and the correction of a prior period error unless it is
impracticable to identify the period to which they relate.
Question 10
Which of the following is not a change in accounting policy?
(a) In the current reporting period an entity changed the basis on which it measures a
building that is an investment property from the fair value model to the cost model
because fair value can no longer be measured reliably without undue cost or effort on
an ongoing basis.
(b) An entity measures its only investment property at fair value. In the current reporting
period, the entity acquired a second investment property which it measures using the
cost model because the fair value of the second investment property cannot be
measured reliably without undue cost or effort on an ongoing basis. It continues to
account for the first investment property using the fair value model.
(c) In the current reporting period the entity changed the method on which it calculates
depreciation of buildings, classified as property, plant and equipment, from the
reducing balance method to the straight-line method.
(d) All of (a)(c) above.
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Answers
Q1
Q2
Q3
Q4
Q5
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Case study 1
On 1 January 20X1 SME Z paid CU600,000 to acquire a new barge. In the belief that it was
entitled to a refund of purchase taxes on the acquisition of the barge, SME Z claimed, and was
refunded, CU60,000 by the local government. However, in late 20X7 SME Z repaid the refund
when it became apparent that it had made an error in making the claim to the local
government as it had not been entitled to the refund of purchase taxes on acquisition of the
barge.
From the date of acquisition to 31 December 20X6, SME Z had the following assessments:
The useful life of the barge is 15 years from the date of acquisition
The entity will consume the barges future economic benefits evenly over 15 years from
the date of acquisition.
In 20X7, in the light of the development of new barge preservation treatments, the period over
which the barge is expected to be economically usable by one or more users increased from
15 years to 26 years. SME Z now expects to dispose of its barge after using it for 20 years from
the date of acquisition (ie a further 14 years). At 31 December 20X7, SME Z assessed the
residual value of the barge at CU70,000.
Prepare accounting entries to record the barge in the accounting records of SME Z for the
year ended 31 December 20X7.
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Dr
Cr Cash
CU60,000
CU60,000
Dr
(a)
CU24,000
Cr Accumulated depreciationPPE
CU24,000
To correct recorded depreciation of the barge from 20X1 to 20X6 for the correction of the purchase taxes claimed
in error.
Dr
(c)
CU20,714
Cr Accumulated depreciationPPE
CU20,714
To recognize depreciation of the barge for the year ended 31 December 20X7
The calculations and explanatory notes below do not form part of the answer to this case study:
(a)
(b)
(c)
(d)
(e)
(b)
CU4,000
CU60,000 increase in the cost 15 years = CU4,000 additional depreciation per year (20X1 to 20X6).
(d)
[CU360,000 less CU70,000 residual value] 14 years remaining useful life = CU20,714 depreciation for the
year ended 31 December 20X7.
(e)
CU600,000 cost less (CU40,000 depreciation 6 years) accumulated depreciation = CU360,000 corrected
carrying amount at 31 December 20X6.
CU600,000 carrying amount 15 year useful life = CU40,000 corrected depreciation per year (20X1 to 20X6).
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20X2
20X1
Restated
CU
Revenue
Cost of goods sold (20X1 as previously stated
CU53,500)
Gross profit
Other incomechange in the fair value of investment
in associate (20X1 as previously stated CU0)
Profit before tax
CU
104,000
(79,100)
73,500
(a)
(60,000)
24,900
5,000
13,500
(b)
29,900
2,000
(8,970)
20,930
10,850
41,350
30,500
34,000
(4,550)
11,900
62,280
(e)
15,500
(c)
- as previously stated
(d)
(4,650)
(f)
20,000
(g)
(m)
10,500
(l)
41,350
SME Y
Notes to the financial statements for the year ended 31 December 20X2
38
(b)
(c)
(d)
(e)
(f)
(g)
(h)
(i)
(j)
(k)
(l)
(m)
(i)
CU86,500 given less CU6,500 correction of error (now recognised as an expense in 20X1) less CU900
effect of the change in accounting estimate.
CU25,000 fair value (20X2) less CU20,000 fair value (20X1) = CU5,000 (ie effect of applying the new
accounting policy (fair value model) in 20X2).
(h)
CU5,250 + CU1,950 + 30% (CU900(i) reduction in depreciation resulting from the change in accounting
estimate) + 30% (CU5,000 increase in the fair value of investment propertychange in accounting policy) =
CU8,970.
CU53,500 as previously stated + CU6,500 (products sold and incorrectly included in closing inventory in
20X1) = CU60,000 (ie the prior period error is corrected retrospectively by restating the comparatives
amounts, in accordance with paragraph 10.20(a)).
CU20,000 fair value (20X1) less CU18,000 fair value (20X0) = CU2,000 (ie effect in 20X1 of the change in
accounting policy for investments in associates from the cost model to the fair value model).
(h)
CU6,500 (products sold and incorrectly included in inventory in 20X1) 30% (income tax rate) = CU1,950
(j)
CU1,500 depreciation (using old estimate, ie CU6,000 cost 4 years) less CU600 using new estimate of
useful life = CU900
(k)
CU3,000
carrying amount 5 years remaining useful life = CU600 depreciation per year
[CU6,000 cost less (CU1,500 depreciation 2 years)] = CU3,000 carrying amount at 31 December 20X1
(CU 18,000 fair value of investment in associates at 31 December 20X0 less CU3,000 carrying amount based
on the cost model at the same date) (1 less 30% income tax rate) = CU10,500 effect of a change in
accounting policy (from cost model to fair value model)
(l)
(e)
CU10,500 + [CU2,000
IASC Foundation: Training Material for the IFRS for SMEs (version 2010-1)
39