PAS 8 Accounting Policies,

Changes in Accounting
Estimates and Errors
E DV E N L EO M . D E L A P E Ñ A BSA-1
Accounting Policies
“ The specific principles, bases, conventions, rules and practices
applied by an entity in preparing financial statements” (PAS 8.5)

◦ Selection and application of accounting policies

◦ Changes in Accounting Policies
◦ Accounting for Changes in Accounting Policies
 Selection and Application of Accounting Policies
Hierarchy of reporting standards
1. PFRSs
2. Judgment
When making the judgment:
 Management shall consider the following:
a. Requirements in other PFRSs dealing with similar transactions
b. Conceptual Framework
 Management may consider the following:
a. Pronouncements issued by other standard-setting bodies
b. Other accounting literature and industry practices
 Changes in Accounting Policies
PAS 8 requires the consistent selection and application of accounting policies.

PAS 8 permits a change in accounting policy only if the change:

a. is required by a PFRS; or
b. results in reliable and more relevant information
 Changes in Accounting Policies
A change in accounting policy usually results from a change in measurement
basis. Examples of changes in accounting policies:
a. Change from FIFO to the Weighted Average cost formula for inventories.
b. Change from the cost model to the fair value model of measuring investment property.
c. Change from the cost model to the revaluation model of measuring property, plant and
equipment and intangible assets.
d. Change in business model for classifying financial assets,
e. Change in the method of recognizing revenue from long-term construction contracts.
f. Change to a new policy resulting from the requirement of a new PFRS.
g. Change in financial reporting framework, such as from PFRS for SMEs to full PFRSs.
 Changes in Accounting Policies
The following are not changes in accounting policies:
a. The application of an accounting policy for transactions, other events or conditions that
differ in substance from those previously occurring.
b. The application new accounting policy for transactions, other events or conditions that
did not occur previously or were immaterial.
Accounting for Changes in Accounting Policies
Changes in accounting policies are accounted for using the following order of priority:
1. Transitional provision in a PFRS
2. Retrospective Application
3 Prospective Application