PAS 8 o It is required by a PFRSs

ACCOUTNING POLICIES, CHANGES IN ACCOUTNING o It results to more reliable and relevant

ESTIMATES, AND ERRORS
information
 Prescribes the criteria for selecting, applying,  Change in accounting policy usually results from
and changing accounting policies and the a change in measurement basis
accounting and disclosure of changes in o FIFO to weighted average
accounting policies, changes in accounting o Cost model to fair value model
estimates, and correction of prior period errors o Cost model to revaluation model of
 Accounting policies – are the specific principles,
measuring PPE and intangible assets
bases, conventions, rules and practices applied
o Change in business model for classifying
by an entity in preparing and presenting financial
financial assets
statements
o Change of method of recognizing
 Hierarchy guidance
revenue from long-term construction
o PFRSs
contracts
o Judgment o Change to a new policy resulting from
 Shall consider: the requirement of a new PFRS
 Requirements from o NOT CHANGES IN ACCOUTNING POLICY
other PFRSs  The application of an accounting
 Conceptual framework policy for transactions, other
 May consider: events or conditions that differ
 Pronouncements in substance from those
 Other accounting previously occurring
literature  The application of an
 PFRSs are accompanied by guidance to assist accounting policy for
entities in applying their requirements transactions, other events or
o A guidance states whether it is an conditions that did not occur
integral part of the PFRSs previously or were immaterial
o A guidance that Is an integral part of a
ACCOUNTING FOR CHANGES IN POLICY
PFRSs is mandatory
 Transitional provision in a PFRS
CHANGES IN ACCOUNTING POLICY
 Restrospective application
 PAS 8 requires a consistent selection and o Adjusts the opening or beginning
application of accounting policies balance of each affected component of
o Those adopted by an entity in preparing equity (retained earnings)
and presenting its financial statements  Prospective application
 PAS 8 permits a change in accounting policy if
 o Apply this if retrospective application is  Accounted for PROSPECTIVELY
impracticable o Means recognizing the effects in profit
 Means it cannot be done after or loss either in:
making every reasonable to do  The period of change
so  The period of change and future
 Voluntary change in accounting policy is periods, if both are affected
accounted for retrospective application o The beginning balance if the retained
 An early application of a PFRS is NOT a change in earnings is not restated
accounting policy
ERRORS
CHANGE IN ACCOUNTING ESTIMATE
 Misapplication of accounting policies,
 The use of accounting estimates is necessary in mathematical mistakes, oversights or
order to provide relevant information misinterpretations of facts and fraud
 The use of estimates DO NOT undermine the  Financial statements do not comply with the
reliability of financial reports PFRSs if they contain either material errors or
 Examples: immaterial errors made intentionally
o Net realizable value o Material errors
o Depreciation  Those that cause the financial
o Bad debts of financial assets or financial statements to be misstated
liabilities o Intentional errors
o Provisions  Fraud
 Involve judgements based on latest available  In the case of fraud it does not
information matter if the case is material or
 Estimates need to be revised when there is new immaterial
information or more experience is obtained  Fraudulent financial reporting

 Change in the carrying amount of an asset or does not comply with the PFRSs

liability  Errors of commission

 Result from new information or new o Doing something wrong

developments  Errors of omission
 NOT correction of errors o Not doing something that has to be
done
If a change is difficult to distinguish between the two,
 Current period errors
the change is treated as a change in accounting
o Errors in the current period that were
estimate
discovered either during the current
ACCOUNTING FOR CHANGES IN ACCOUNTING period or after the current period but
ESTIMATE
 before the financial statements were Accounting Effect of
Scope of PAS 8 Description
Treatment adjustment
authorized for issue a. Transitional
on the beginning
provision
balance of retained
o Corrected by simply correcting entries Change in change in b. Retrospective
earnings if
Accounting Policy measurement basis application
 Prior period errors c. Prospective
accounted for
retrospectively
application
o Are errors in one or more period that changes in the
realization of
have been discovered either during the Change in expected inflow or
in profit or loss of
Prospective current period; or
current period or after the current Accoutning outflow of
application current period and
Estimate economic benefits
future period
period but before the financial from assets or
liabilities
statements were authorized for issue misapplication of
on the beginning
principles, oversight a. Retrospective
o Corrected by RETROSPECTIVE Correction of Prior or misinterpretation restatement
balance of retained
earnings if
Period Error of facts and b. Prospective
RESTATEMENT accounted for
mathematical application
retrospectively
mistakes
RETROSPECTIVE RESTATEMENT

 Restating the comparative amounts for the

prior periods presented in which the error
occurred
 If the error occurred BEFORE the earliest period
prior presented, restating the opening balances
of assets, liabilities, and equity for the earliest
period

Retrospective Retrospective
restatement application
Correcting a prior period Applying a new
error as if the error had accounting policy as if the
never occurred policy had always been
applied

 Shall be made as far back as practicable

 If impracticable, the entity is allowed to correct
the prior period error prospectively