Accounting policies are the specific principles, bases, conventions, rules and practices applied by an entity in preparing and presenting financial statements.
Selection and application of accounting policies:
- When IFRS specially applies to a transaction, other events or condition then accounting policies applied according to IFRS.
- In the absence of IFRS that applied to a transaction, other events or condition specifically then judgment should be applied subject to the following condition;
- Relevant to the economic decision making needs of users
- Represent faithfully the financial position, financial performance and cash flow of the entity
- Complete in all material respect
Consistency of accounting policies:
An entity shall select and apply its accounting policies consistently for similar transactions, other events and conditions, unless an IFRS specifically requires or permits categorization of items for which different policies may be appropriate.
Changes in accounting policies:
An entity shall change an accounting policy only if the change:
- is required by an IFRS; or
- results in the financial statements providing reliable and more relevant information about the effects of transactions, other events or conditions on the entity’s financial position, financial performance or cash flows
- If change is due to new standard or interpretation, apply transitional provisions.
- If no transitional provisions, apply retrospectively.
- If impractical to determine cumulative effects of the change, then retrospectively apply to the earliest period that is practicable.
Disclosure: Entity shall disclose;
- Nature of the change in accounting policy
- Description of the transactional provision
- Transactional provision that might have effect on future period
- Title of IFRS
- Amount of adjustments relating to prior periods not presented
- If retrospective application is impracticable, explain and describe how the change in policy was applied
Changes in accounting estimates:
A change in an accounting estimate is an adjustment of the carrying amount of an asset or liability, or related expense, resulting from reassessing the expected future benefits and obligations associated with the asset or liability.
Recognize the change prospectively in profit or loss in:
- Period of change, if it only affects that period; or
- Period of change and future periods (if applicable)
- Nature and amount of change that has an effect in the current period
- Fact that the effect of future periods is not disclosed because of impracticality
Prior period errors are omissions from, and misstatements in, an entity’s financial statements for one or more prior periods arising from failure to use/misuse of reliable information that:
- was available when the financial statements for that period were issued
- Could have been reasonably expected to be taken into account in those financial statements.
- Mathematical mistakes
- Mistakes in applying accounting policies
- Oversights and misinterpretation of facts
- Correct all errors retrospectively
- Restate the comparative amounts for prior periods in which error occurred or if the error occurred before that date then restate opening balance of assets, liabilities and equity for earliest period presented.
- If impractical to determine period specific effects of the error then restate opening balances for earliest period practicable
- Nature of the prior period error
- Amount of the correction at the beginning of earliest period presented
- If retrospective application is impracticable, explain and describe how the error was corrected
Subsequent periods need not to repeat these disclosures.