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Thread: 05 Accounting Standard 5 - Net Profit or Loss for the period Prior Period Items and changes in accounting policies - AS 5

  1. #11
    Accounting Standards
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    Default Changes in Accounting Policies of Accounting Standard 5 - Net Profit or Loss for the period Prior Period Items - AS 5

    Changes in Accounting Policies of Accounting Standard 5 - Net Profit or Loss for the period Prior Period Items and changes in accounting policies - AS 5

    28. Users need to be able to compare the financial statements of an enterprise over a period of time in order to identify trends in its financial position, performance and cash flows. Therefore, the same accounting policies are normally adopted for similar events or transactions in each period.


    29. A change in an accounting policy should bemade only if the adoption of a different accounting policy is required by statute or for compliance with an accounting standard or if it is considered that the change would result in a more appropriate presentation of the financial statements of the enterprise.


    30. A more appropriate presentation of events or transactions in the financial statements occurs when the new accounting policy results in more relevant or reliable information about the financial position, performance or cash flows of the enterprise.


    31. The following are not changes in accounting policies :

    (a) the adoption of an accounting policy for events or transactions that differ in substance from previously occurring events or transactions, e.g., introduction of a formal retirement gratuity
    scheme by an employer in place of ad hoc ex-gratia payments to employees on retirement; and

    (b) the adoption of a new accounting policy for events or transactions which did not occur previously or that were immaterial.


    32. Any change in an accounting policy which has a material effect should be disclosed. The impact of, and the adjustments resulting from, such change, if material, should be shown in the financial statements of the period in which such change is made, to reflect the effect of such change. Where the effect of such change is not ascertainable, wholly or in part, the fact should be indicated. If a change ismade in the accounting policies which has no material effect on the financial statements for the current period but which is reasonably expected to have a material effect in later periods, the fact of such change should be appropriately disclosed in the period in which the change is adopted.

    33. A change in accounting policy consequent upon the adoption of an Accounting Standard should be accounted for in accordance with the specific transitional provisions, if any, contained in that Accounting Standard.However, disclosures required by paragraph 32 of this Statement should bemade unless the transitional provisions of any other Accounting Standard require alternative disclosures in this regard.

  2. #12
    Accounting Standards
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    Default Accounting treatment of surcharge in the nature of interest on overdue outstandings Accounting Standard 5 - AS 5

    Accounting treatment of surcharge in the nature of interest on overdue outstandings Accounting Standard 5 - AS 5


    A. Facts of the Case

    1. A central public sector company is engaged in construction and operation of hydroelectric power projects. The power generated by the company is supplied to various state electricity boards (beneficiaries), the rates for which are notified by the Government of India separately for each generating station.

    2. According to the querist, on the recommendations of the Public Accounts Committee, the Government of India had decided to charge surcharge in the nature of interest @ 2% p.m. in case of payments for sale of power getting delayed beyond one month of issue of the respective bill. This decision formed part of the notification issued by the Government of India notifying rates for sale of power for generating stations.

    3. The sales during 1996-97, 1997-98 and 1998-99 were Rs. 534 crore, Rs. 1,118 crore (estimated) and Rs. 1,277 crore (estimated) respectively. The profit for the respective years was Rs. 86 crore, Rs. 234 crore (provisional) and Rs. 198 crore (provisional).

    4. The company had been raising bills on account of surcharge but payments were not being received uptil financial year 1996-97. Such bills were not being accounted for in the books of account. The company was, however, disclosing the following accounting policy consistently:

    “Revenues and expenses are generally accounted for on accrual basis except in the case of surcharge recoverable from debtors, sale of scrap, income from consultancy charges and the expenditure on account of LTC encashment.”

    5. The querist has stated that realisations from the debtors, viz., the state governments/state electricity boards on account of sale of power are not good. No debtor paid interest, which has accumulated for the last 10/12 years. The average debt collection period at present is around one and a half years. The company was financing its operational expenses till 1996-97 from the receipts from debtors. In 1997-98 it had to raise temporary loans to meet the shortfall in this regard. The interest payable on these loans will not be reimbursed out of tariff.

    6. As per the querist, the government decides from time to time to recover the outstandings from state governments through appropriation of Central Plan Assistance in various instalments during the next four years. Earlier, only principal was stipulated to be recovered, but in 1997-98 the government decided to also recover the interest accrued and billed upto 30.12.96/31.3.97. This recovery is to be made in suitable instalments as may be decided by the government and is likely to be spread over a period of about 4 years.

    7. As per the querist, in view of the uncertainty involved, the company had not accounted for surcharge. However, since the company has now received substantial amount of surcharge and is likely to get the balance amount of surcharge, review of the policy and its depiction in the balance sheet need consideration. The issues involved, as per the querist, are:

    (i) What will be the amount to be shown as income on account of surcharge, i.e.,

    (a) the actual surcharge recovered during the year, i.e., Rs. 63 crore; or

    (b) the amount of surcharge included for recovery in central appropriation, i.e., Rs. 301.19 crore; or

    (c) the total amount accrued as surcharge at the year-end which is around Rs. 1100 crore.

    (ii) The manner of disclosure of the amount so determined.

    (iii) Depending on (i) and (ii) above, the tax implications.

    8. The querist has stated that the company has examined these issues in the light of Accounting Standard (AS) 5, Net Profit or Loss for the Period, Prior Period Items and Changes in Accounting Policies’, Accounting Standard (AS) 9, ‘Revenue Recognition’, Guidance Note on ‘Disclosure of Items of Income and Expenditure of Previous Year’, section 209(3)(b) of the Companies Act, 1956, Part II of Schedule VI to the Companies Act, 1956, opinion of the Expert Advisory Committee of the Institute of Chartered Accountants of India published in Vol. XV (Query No. 1.2), and instructions issued by the Company Law Board from time to time.

    9. As per the querist, if the company is to account for the amounts as listed in paragraph 7(i)(b) or (c) above as revenue for the year, then other income as well as profit for the year will shoot up manifold and will drop substantially in the next year. The figure of the net profit will not be comparable and profit on account of surcharge may be more than the profit from operations. Similarly, the company in future may have to account for surcharge on accrual basis in terms of section 209(3)(b) along with Accounting Standard (AS) 9.

    10. Paragraph 4.1 of AS 9 defines revenue as the gross inflow of cash, receivables, or other consideration arising in the course of the ordinary activities and is measured by the charges made to the customers or clients for the goods supplied, the services rendered to them and by the charges and rewards arising from the use of resources by them.

    11. Further, paragraph 9.4 of AS 9 states as below:

    “An essential criterion for the recognition of revenue is that the consideration receivable for the sale of goods, the rendering of services or from the use by others of enterprise resources is reasonably determinable. When such consideration is not determinable within reasonable limits, the recognition of revenue is postponed.”

    12. According to the querist, in the case of the company, part recovery of surcharge has been made, the amount yet to be recovered can be reasonably determined as it is chargeable at a fixed rate of 2% per month on outstandings, part of the bills have been raised, and levy of surcharge is part of agreement/notification. However, the recovery of the full amount indicated earlier is quite difficult and uncertain particularly when full recovery of even the principal amount through normal channel is extremely difficult. Moreover, if the company notionally accounts for surcharge recoverable in the books of account, the company may have to pay income tax on the amount which is unlikely to be received in near future.

    B. Queries

    13. The querist has sought the opinion of the Expert Advisory Committee on the following issues:

    (a) (i) Whether the company will be complying with the requirements of section 209(3)(b) of the Companies Act, 1956 read with Accounting Standard (AS) 9, ‘Revenue Recognition’ if it recognises actual receipt on account of surcharge during the year as revenue, while continuing to disclose the accounting policy as given in paragraph 4 above with the additional words “which are accounted for on actual receipt basis”.

    (ii) Whether the amount to be recognised would be shown as a ‘prior period item’ or would it be recognised as an ordinary activity for the year.

    (b) If answer to (a)(i) is in the negative, which of the amounts, i.e., amount as per paragraph 7(i)(b) or as per paragraph 7(i)(c), is to be considered as revenue for the year.


    D. Opinion

    22. On the basis of the above, the Committee is of the following opinion on the issues raised in paragraph 13:

    (a)(i)According to the facts of the query, there does not seem to be any significant uncertainty regarding the recovery of the amount of surcharge included for recovery in central appropriation, i.e., the amount as given in paragraph 7(i)(b) above. Accordingly, recognition of surcharge on actual receipt basis will not be in accordance with the requirements of the Accounting Standard (AS) 9 on ‘Revenue Recognition’ and section 209(3)(b) of the Companies Act, 1956, even with the extended note as suggested by the querist.

    (ii) The amount of surcharge recognised should not be shown as a prior period item. It should be recognised as an item of income from ordinary activities of the company. However, disclosure in accordance with paragraph 12 of AS 5 reproduced above, would be required to be made.

    (b) In view of (a)(i) above, the amount given in paragraph 7(i)(b) above, should be recognised in the year 1997-98 when the government included it in central appropriation. As regards the remaining amount of surcharge accrued as at the end of the year, an assessment needs to be made as to whether there is any significant uncertainty as to its collectability. If there is no such significant uncertainty, it should be recognised. In case of significant uncertainty, the revenue recognition should be postponed and disclosures should be made in accordance with paragraph 14 of AS 9 reproduced above.

    Opinion finalised by the Committee on 23.6.1998.

  3. #13
    Accounting Standards
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    Default Accounting treatment of penalty and interest payable under the Income-tax Act, 1961 of Accounting Standard 5 - AS 5

    Query

    1. A government company, registered under the Companies Act, 1956, had estimated its income at Rs. 14 lakhs for the financial year 1985-86, relevant to the assessment year 1986-1987. It had accordingly paid advance tax. The company's audit for the financial year 1985-1986 was completed in February 1990. The audited accounts showed a profit of Rs. 70 lakhs instead of Rs. 14 lakhs as estimated originally. The provision for income-tax was made in accounts for the income of Rs. 70 lakhs. The income-tax assessment of the company for the assessment year 1986-1987 was completed in March 1990, in which the assessing officer had levied interest under sections 139(8) and 215 of the Income-tax Act, 1961, to the tune of Rs. 44 lakhs, for which no provision was made in accounts.



    2. The querist has sought the opinion of the Expert Advisory Committee as to whether the interest and penalty paid under the Income-tax Act, 1961, should be treated, in accounts, as part of income-tax, or should be shown separately.




    Opinion February 3, 1994



    1. The Committee notes that clause 3(vi) of Part II of Schedule VI to the Companies Act, 1956, requires that the profit and loss account of a company shall, in particular, disclose "the amount of charge for Indian income-tax and other Indian taxation on profits, including, where practicable, with Indian income-tax any taxation imposed elsewhere to the extent of the relief, if any, from Indian income-tax and distinguishing, where practicable, income-tax and other taxation."



    2. The Committee is of the view that income-tax is a tax on annual earnings and profits. However, interest and penalties under section 139(8) and 215 of the Income-tax Act, are levied by the tax authorities for default/delay in the payment of tax. In the view of the Committee, such interest and penalties do not form part of the income-tax charge and hence should not be clubbed with the income-tax.



    3. The Committee also notes paras 3.2 and 10 of Accounting Standard (AS) 5 on ‘Prior Period and Extraordinary Items and Changes in Accounting Policies’, issued by the Institute of Chartered Accountants of India, which read as follows:



    “3.2 ‘Extraordinary items’ are gains or losses which arise form events or transactions that are distinct from the ordinary activities of the business and which are both material and expected not to recur frequently or regularly. These would also include material adjustments necessitated by circumstances, which though related to previous periods are determined in the current period.”


    “10. Extraordinary items of the enterprise during the period should be disclosed in the statement of profit and loss as part of net income. The nature and amount of each such item should be separately disclosed in a manner that their relative significance and effect on the current operating results of the period can be perceived.”

    4. The Committee is of the opinion, on the basis of the above and the facts of the query, that the interest in the nature of penalty, and penalties levied under sections 139 (8) and 215 of the Income-tax Act, 1961, are extraordinary items. Such interest and penalties, if material, should be separately disclosed in the statement of profit and loss, as part of the net income of the period during which these are determined, as required in AS 5.

  4. #14
    Accounting Standards
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    Default Accounting Policies, changes in accounting estimates and errors of accounting standard 5 - AS 5

    Exposure Draft
    Accounting Standard (AS) 5 (Revised 20XX)
    (Corresponding to IAS 8)
    Accounting Policies, Changes in Accounting
    Estimates and Errors


    Following is the Exposure Draft of the Accounting Standard (AS) 5 (Revised 20XX), Accounting Policies, Changes in Accounting Estimates and Errors , issued by the Accounting Standards Board of the Institute of Chartered Accountants of India, for comments. The Board invites comments on any aspect of this Exposure Draft. Comments are most helpful if they indicate the specific paragraph or group of paragraphs to which they relate, contain a clear rationale and, where applicable, provide
    a suggestion for alternative wording. Comments should be submitted in writing to the Secretary, Accounting Standards Board. The Institute of Chartered Accountants of India, ICAI Bhawan, Post Box No. 7100, Indraprastha Marg, New Delhi – 110 002, so as to be received not later than April 07,
    2010. Comments can also be sent by e -mail at edcommentsasb@icai.org or asb@icai.org.
    (This Exposure Draft of the revised Accounting Standard includes paragraphs set in bold type and plain type, which have equal authority. Paragraphs in bold type indicate the main principles. This Exposure Draft of the revised Accounting Standard should be read in the context of its objective and the Preface to the Statements of Accounting Standards)

  5. #15
    Accounting Standards
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    Default Objective of Accounting Standard 5 - Net Profit or loss for the prior period items and changes in accounting policies - AS 5

    Objective of Accounting Standard 5 - AS 5


    1 The objective of this Standard is to prescribe the criteria for selecting and changing accounting policies, together with the accounting treatment and disclosure of changes in accounting policies, changes in accounting estimates and corrections of errors. The Standard is intended to enhance the relevance and reliability of an entity’s financial statements, and the comparability of those financial statements over time and with the financial statements of other entities.


    2 Disclosure requirements for accounting policies, except those for changes in accounting policies, are set out in AS 1 (Revised 20XX)
    Presentation of Financial Statements.

    Last edited by Accounting Standards; 17-08-2010 at 05:38 PM.

  6. #16
    Accounting Standards
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    Default Scope of Accounting Standard 5 - Net Profit or Loss for the period Prior Period Items and changes in accounting policies - AS 5

    Scope of Accounting Standard 5 - Net Profit or Loss for the period Prior Period Items and changes in accounting policies - AS 5


    3 This Standard shall be applied in selecting and applying accounting policies, and accounting for changes in accounting policies, changes in accounting estimates and corrections of prior period errors.


    4 The tax effects of corrections of prior period errors and of retrospective adjustments made to apply changes in accounting policies are accounted for and disclosed in accordance with AS 22 (Revised 20XX) Income Taxes.

  7. #17
    Accounting Standards
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    Default Definitions of Accounting Standard 5 - Net Profit or Loss for the period Prior Period Items and changes in accounting policies - AS 5

    Definitions of Accounting Standard 5 - Net Profit or Loss for the period Prior Period Items and changes in accounting policies - AS 5


    5 The following terms are used in this Standard with the meanings specified: Accounting policies are the specific principles, bases, conventions, rules and practices applied by an entity in preparing and presenting financial statements.


    A change in accounting estimate is an adjustment of the carrying amount of an asset or a liability, or the amount of the periodic consumption of an asset, that results from the assessment of the present status of, and expected future benefits and obligations associated with, assets and liabilities. Changes in accounting estimates result from new information or new developments and, accordingly, are not corrections of errors. Accounting Standards (ASs) are Standards issued by the Institute of Chartered Accountants of India (ICAI) .


    Material Omissions or misstatements of items are material if they could, individually or collectively, influence the economic decisions that users make 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, could be the determining factor. Prior period errors are omissions from, and misstatements in, the entity’s financial statements for one or more prior periods arising from a failure to use, or misuse of, reliable information that:

    (a) was available when financial statements for those periods w ere approved for issue; and

    (b) could reasonably be expected to have been obtained and taken into account in the preparation and presentation of those financial statements. Such errors include the effects of mathematical mistakes, mistakes in applying accounting policies, oversights or misinterpretations of facts, and
    fraud. Retrospective application is applying a new accounting policy to transactions, other events and conditions as if that policy had always been applied.


    Retrospective restatement is correcting the recognition, measurement and disclosure of amounts of elements of financial statements as if a prior period error had never occurred.


    Impracticable Applying a requirement is impracticable when the entity cannot apply it after making every reasona ble effort to do so. For a particular prior period, it is impracticable to apply a change in an accounting policy retrospectively or to make a retrospective restatement to correct an error if:

    (a) the effects of the retrospective application or retrospective restatement are not determinable;

    (b) the retrospective application or retrospective restatement requires assumptions about what management’s intent would have been in that period; or

    (c) the retrospective application or 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 approved for issue from other information.


    Prospective application of a change in accounting policy and of recognising the effect of a change in an accounting estimate, respectively, are:


    (a) applying the new accounting policy to transactions, other events and conditions occurring after the date as at which the policy is changed; and


    (b) recognising the effect of the change in the accounting estimate in the current and future periods affected by the change.



    6 Assessing whether an omission or misstatement could influence economic decisions of users, and so be material, requires consideration of the characteristics of those users. The Framework for the Preparation and Presentation of Financial Statements issued by the Institute of Chartered Accountants of India states in paragraph 26 that ‘It is assumed that users have a reasonable knowledge of business and economic activities and accounting and study the information with reasonable dil igence.’ Therefore, the assessment needs to take into account how users with such attributes could reasonably be expected to be influenced in making economic decisions.

  8. #18
    Accounting Standards
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    Default Selection and application of accounting policies of Accounting Standard 5 - Net Profit or Loss for prior period item - AS 5

    Selection and application of accounting policies of AS 5


    7 When an AS specifically applies to a transaction, other event or condition, the accounting policy or policies applied to that item shall be determined by applying the AS.


    8 ASs set out accounting policies that result in financial statements containing relevant and reliable information about the transactions, other events and conditions to which they apply. Those policies need not be applied when the effect of applying them is immaterial. However, it is inappropriate to make, or leave uncorrected, immaterial departures from ASs to achieve a particular presentation of an entity’s financial position, financial performance or cash flows.


    9 ASs are accompanied by guidance to assist entities in applying their requirements. All such guidance states whether it is an integral part of ASs. Guidance that is an integral part of the ASs is mandatory. Guidance that is not an integral part of the ASs does not contain requirements for financial statements.

    10 In the absence of an AS that specifically applies to a transaction, other event or condition, 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; and

    (b) reliable, 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;

    (iii) are neutral, ie free from bias;

    (iv) are prudent; and

    (v) are complete in all material respects.

    11 In making the judgement described in paragraph 10, management shall refer to, and consider the applicability of, the following sources in descending order:


    (a) the requirements in ASs dealing with similar and related issues; and

    (b) the definitions, recognition criteria and measurement concepts for assets, liabilities, income and expenses in the Framework.

    12 In making the judgement described in paragraph 10, management may also consider the most recent pronouncements of other standard-setting bodies that use a similar conceptual framework to develop accounting standards, other accounting literature and accepted industry practices, to the extent that these do not conflict with the sources in paragraph 11.

  9. #19
    Accounting Standards
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    Default Consistency of accounting policies of Accounting Standard 5 - Net Profit or Loss for the period Prior Period Items - AS 5

    Consistency of accounting policies of Accounting Standard 5 - Net Profit or Loss for the period Prior Period Items and changes in accounting policies - AS 5


    13 An entity shall select and apply its accounting policies consistently for similar transactions, other events and conditions, unless an AS specifically requires or permits categorisation of items for which different policies may be appropriate. If an AS requires or permits such categorisation, an appropriate accounting policy shall be selected and applied consistently to each category.

  10. #20
    Accounting Standards
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    Default Changes in accounting policies of Accounting Standard 5 - Net Profit or loss for the prior period item - AS 5

    Changes in accounting policies


    14 An entity shall change an accounting policy only if the change:

    (a) is required by an AS; or

    (b) 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.


    15 Users of financial statements need to be able to compare the financial statements of an entity over time to identify trends in its financial position, financial performance and cash flows. Therefore, the same accounting policies are applied within each period and from one period to the next unless a change in accounting policy meets one of the criteria in paragraph 14.


    16 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; and

    (b) the application of a new accounting policy for transactions, other events or conditions that did not occur previously or were immaterial.

    17 The initial application of a policy to reval ue assets in accordance with AS 10 (Revised 20XX) Property, Plant and Equipment or AS 26 (Revised 20XX) Intangible Assets is a change in an accounting policy to be dealt with as a revaluation in accordance with AS 10 or AS 26, rather than in accordance with this Standard.


    18 Paragraphs 19–31 do not apply to the change in accounting policy described in paragraph 17.
    Applying changes in accounting policies


    19 Subject to paragraph 23:

    (a) an entity shall account for a change in accounting policy resulting from the initial application of an AS in accordance with the specific transitional provisions, if any, in that AS; and

    (b)when an entity changes an accounting policy upon initial application of an AS that does not include specific transitional provisions applyin g to that change, or changes an accounting policy voluntarily, it shall apply the change retrospectively.


    20 For the purpose of this Standard, early application of an AS is not a voluntary change in accounting policy.

    21 In the absence of an AS that specifically applies to a transaction, other event or condition, management may, in accordance with paragraph 12, apply an accounting policy from the most recent pronouncements of other standard -setting bodies that use a similar conceptual framework to develop a ccounting standards.

    If, following an amendment of such a pronouncement, the entity chooses to change an accounting policy, that change is accounted for and disclosed as a voluntary change in accounting policy.
    Retrospective application

    22 Subject to paragraph 23, when a change in accounting policy is applied retrospectively in accordance with paragraph 19(a) or (b), the entity shall adjust the opening balance of each affected component of equity for the earliest prior period presented and the other comp arative amounts disclosed for each prior period presented as if the new accounting policy had always
    been applied.

    Limitations on retrospective application

    23 When retrospective application is required by paragraph 19(a) or (b), a change in accounting policy shall be applied retrospectively except to the extent that it is impracticable to determine either the period-specific effects or the cumulative effect of the change.


    24 When it is impracticable to determine the period-specific effects of changing an 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.

    25 When it is impracticable to determine the cumulative effect, at the beginn ing of the current period, of applying a new accounting policy to all prior periods, the entity shall adjust the comparative information to apply the new accounting policy prospectively from the earliest date practicable.

    26 When an entity applies a new accounting policy retrospectively, it applies the new accounting policy to comparative information for prior periods as far back as is practicable. Retrospective application to a prior period is not practicable unless it is practicable to determine the cumulative effect on the amounts in both the opening and closing balance sheets for that period. The amount of the resulting adjustment relating to periods before those presented in the financial statements is made to the opening balance of each affected compo nent of equity of the earliest prior period presented. Usually the adjustment is made to retained earnings. However, the adjustment may be made to another component of equity (for example, to comply with an AS). Any other information about prior periods, s uch as historical summaries of financial data, is also adjusted as far back as is practicable.

    27 When it is impracticable for an entity to apply a new accounting policy retrospectively, because it cannot determine the cumulative effect of applying the policy to all prior periods, the entity, in accordance with paragraph 25, applies the new policy prospectively from the start of the earliest period practicable. It therefore disregards the portion of the cumulative adjustment to assets, liabilities and equi ty arising before that date. Changing an accounting policy is permitted even if it is
    impracticable to apply the policy prospectively for any prior period. Paragraphs 50 – 53 provide guidance on when it is impracticable to apply a new accounting policy to one or more prior periods.
    Disclosure


    28 When initial application of an AS has an effect on the current period or any prior period, would have such an effect except that it is impracticable to determine the amount of the adjustment, or might have an effe ct on future periods, an entity shall disclose:

    (a) the title of the AS;
    (b) when applicable, that the change in accounting policy is made in accordance with its transitional provisions;
    (c) the nature of the change in accounting policy;
    (d) when applicable, a description of the transitional provisions;
    (e) when applicable, the transitional provisions that might have an effect on future periods;
    (f) for the current period and each prior period presented, to the extent practicable, the amount of the adjustment:
    (i) for each financial statement line item affected; and
    (ii) if AS 20 (Revised 20XX) Earnings per Share applies to the entity, for basic and diluted earnings per share;



    (g) the amount of the adjustment r elating to periods before those presented, to the extent
    practicable; and


    (h) if retrospective application required by paragraph 19(a) or (b) is impracticable for a particular prior period, or for periods before those presented, the circumstances that led to the existence of that condition and a description of how and from when the change in accounting policy has been applied.

    Financial statements of subsequent periods need not repeat these disclosures.


    29 When a voluntary change in accounting policy has an effect on the current period or any prior period, would have a n effect on that period except that it is impracticable to determine the amount of the adjustment, or might have an effect on future periods, an entity shall disclose:

    (a) the nature of the change in accounting policy;

    (b) the reasons why applying the new accou nting policy provides reliable and more relevant information;

    (c) for the current period and each prior period presented, to the extent practicable, the amount of the adjustment:

    (i) for each financial statement line item affected; and

    (ii) if AS 20 (Revised 20XX) applies to the entity, for basic and diluted earnings per share;

    (d) the amount of the adjustment relating to periods before those presented, to the extent practicable; and

    (e) if retrospective application is impracticable for a particular prior period, or for periods before those presented, the circumstances that led to the existence of that condition and a description of how and from when the change in accounting policy has been applied.


    Financial statements of subsequent periods need not repeat these disclosures.


    30 When an entity has not applied a new AS that has been issued but is not yet effective, the entity shall disclose:

    (a) this fact; and
    (b) known or reasonably estimable information relevant t o assessing the possible impact that application of the new AS will have on the entity’s financial statements in the period of initial application.

    31 In complying with paragraph 30, an entity considers disclosing:

    (a) the title of the new AS;
    (b) the nature of the impending change or changes in accounting policy;
    (c) the date by which application of the AS is required;
    (d) the date as at which it plans to apply the AS initially; and
    (e) either:
    (i) a discussion of the impact that init ial application of the AS is expected to have on the entity’s financial statements; or
    (ii) if that impact is not known or reasonably estimable, a statement to that effect.

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