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Thread: 04 - Indian Accounting Standard (Ind AS) 8 - Earlier Accounting standard (5) - Accounting Policies, Changes in Accounting Estimates and Errors

  1. #11
    IND-AS
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    Thumbs up Disclosure of Indian Accounting Standard (Ind AS) 8 - Earlier Accounting standard (5) -Accounting Policies, Changes in Accounting Estimates and Errors

    Disclosure of Indian Accounting Standard (Ind AS) 8 - Earlier Accounting standard (5)


    Accounting Policies, Changes in Accounting Estimates and Errors

    Accounting policies



    Disclosure

    28. When initial application of an Ind 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 effect on future periods, an entity shall disclose:

    (a) the title of the Ind 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 Ind AS 33 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 befo re 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 an 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 accounting 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 Ind AS 33 applies to the entity, for basic and diluted earnings per share;

    (d) the amount of the adjustment relating to periods before t hose 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 h ow 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 Ind 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 to assessing the possible impact that application of the new Ind AS will have on the entity’s financial statements in the period of initial applicatio n.

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

    (a) the title of the new Ind AS;
    (b) the nature of the impending change or changes in accounting policy;
    (c) the date by which application of the Ind AS is required;
    (d) the date as at which it plans to apply the Ind AS initially; and
    (e) either:

    (i) a discussion of the impact that initial application of the Ind 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.



  2. #12
    IND-AS
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    Thumbs up Changes in accounting estimates of Indian Accounting Standard (Ind AS) 8 - Earlier Accounting standard (5)

    Changes in accounting estimates of Indian Accounting Standard (Ind AS) 8 - Earlier Accounting standard (5)


    Accounting Policies, Changes in Accounting Estimates and Errors



    Changes in accounting estimates

    32. As a result of the uncertainties inherent in business activities, many items in financial statements cannot be measured with precision but can only be estimated.
    Estimation involves judgements based on the latest available, reliable information. For example, estimates may be required of:

    (a) bad debts;
    (b) inventory obsolescence;
    (c) the fair value of financial assets or financial liabilities;
    (d) the useful lives of, or expected pattern of consumption of the future economic benefits embodied in, depreciable assets; and
    (e) warranty obligations.

    33. The use of reasonable estimates is an essential part of the preparation of financial statements and does not undermine their reliability.

    34. An estimate may need revision if changes occur in the circumstances on which the estimate was based or as a result of new information or more experience. By its nature, the revision of an estimate does not relate to prior periods and is not the correction of an error.

    35. A change in the measurement basis applied is a change in an accounting policy, and is not a change in an accounting estimate. When it is difficult to distinguish a change in an accounting policy from a change in an accounting estimate , the change is treated as a change in an accounting estimate.

    36. The effect of change in an accounting estimate, other than a change to which paragraph 37 applies, shall be recognised prospectively by including it in profit or loss in:

    (a) the period of the change, if the change affects that period only; or
    (b) the period of the change and future periods, if the change affects both.

    37. To the extent that a change in an accounting estimate gives rise to changes in assets and liabilities, or relates t o an item of equity, it shall be recognised by adjusting the carrying amount of the related asset, liability or equity item in the period of the change.

    38. Prospective recognition of the effect of a change in an accounting estimate means that the change is applied to transactions, other events and conditions from the date of the change in estimate. A change in an accounting estimate may affect only the current period’s profit or loss, or the profit or loss of both the current period and future periods. For example, a change in the estimate of the amount of bad debts affects only the current period’s profit or loss and therefore is recognised in the current period. However, a change in the estimated useful life of, or the expected pattern of consumption of the future economic benefits embodied in, a depreciable asset affects depreciation expense for the current period and for each future period during the asset’s remaining useful life. In both cases, the effect of the change relating to the current period is recognised as income or expense in the current period. The effect, if any, on future periods is recognised as income or expense in those future periods.


  3. #13
    IND-AS
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    Thumbs up Disclosure of Indian Accounting Standard (Ind AS) 8 - Earlier Accounting standard (5) - Accounting Policies,Changes in Accounting Estimates and Errors

    Disclosure of Indian Accounting Standard (Ind AS) 8 - Earlier Accounting standard (5)


    Accounting Policies, Changes in Accounting Estimates and Errors


    Changes in accounting estimates


    Disclosure


    39. An entity shall disclose the nature and amount of a change in an accounting estimate that has an effect in the current period or is expected to have an effect in future periods, except for the disclosure of the effect on future periods when it is impracticable to estimate that effect.

    40. If the amount of the effect in future periods is not disclosed because estimating it is impracticable, an entity shall disclose that fact.



  4. #14
    IND-AS
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    Thumbs up Errors of Indian Accounting Standard (Ind AS) 8 - Earlier Accounting standard (5) - Accounting Policies, Changes in Accounting Estimates and Errors

    Errors of Indian Accounting Standard (Ind AS) 8 - Earlier Accounting standard (5)


    Accounting Policies, Changes in Accounting Estimates and Errors



    Errors


    41. Errors can arise in respect of the recognition, measurement, presentation or disclosure of elements of financial statements. Financial statements do no t comply with Ind ASs if they contain either material errors or immaterial errors made intentionally to achieve a particular presentation of an entity’s financial position, financial performance or cash flows. Potential current period errors discovered in that period are corrected before the financial statements are approved for issue.
    However, material errors are sometimes not discovered until a subsequent period, and these prior period errors are corrected in the comparative information presented in the financial statements for that subsequent period (see paragraphs 42–47).

    42. Subject to paragraph 43, an entity shall correct material prior period errors retrospectively in the first set of financial statements approved for issue after their discovery by:

    (a) restating the comparative amounts for the prior period(s) presented in which the error occurred; or
    (b) if the error occurred before the earliest prior period presented, restating the opening balances of assets, liabilities and equity for the earliest prior period presented.



  5. #15
    IND-AS
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    Thumbs up Limitations on retrospective restatement of Indian Accounting Standard (Ind AS) 8 - Earlier Accounting standard (5)

    Limitations on retrospective restatement of Indian Accounting Standard (Ind AS) 8 - Earlier Accounting standard (5)


    Accounting Policies, Changes in Accounting Estimates and Errors



    Limitations on retrospective restatement


    43. A prior period error shall be corrected by retrospective restatement except to the extent that it is impracticable to determine either the period-specific effects or the cumulative effect of the error.'

    44. When it is impracticable to determine the period-specific effects of an error on comparative information for one or more prior periods presented, the entity shall restate the opening balances of assets, liabilities and equity for the earliest period for which retrospective restatement is practicable (which may be the current period).

    45. When it is impracticable to determine the cumulative effect, at the beginning of the current period, of an error on all prior periods, the entity shall restate the comparative information to correct the error prospectively from the earliest date practicable.

    46. The correction of a prior period error is excluded from profit or loss for the period in which the error is discovered. Any information presented about prior periods, including any historical summaries of financial data, is restated as far back as is practicable.

    47. When it is impracticable to determine the amount of an error (eg a mistake in applying an accounting policy) for all prior periods, the en tity, in accordance with paragraph 45, restates the comparative information prospectively from the earliest date practicable. It therefore disregards the portion of the cumulative restatement of assets, liabilities and equity arising before that date. Para graphs 50–53 provide guidance on when it is impracticable to correct an error for one or more prior
    periods.

    48. Corrections of errors are distinguished from changes in accounting estimates .
    Accounting estimates by their nature are approximations that may need revision as additional information becomes known. For example, the gain or loss recognised on the outcome of a contingency is not the correction of an error.


  6. #16
    IND-AS
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    Thumbs up Disclosure of prior period errors of Indian Accounting Standard (Ind AS) 8 - Earlier Accounting standard (5)

    Disclosure of prior period errors of Indian Accounting Standard (Ind AS) 8 - Earlier Accounting standard (5)


    Accounting Policies, Changes in Accounting Estimates and Errors



    Disclosure of prior period errors

    49. In applying paragraph 42, an entity shall disclose the following:


    (a) the nature of the prior period error;
    (b) for each prior period presented, to the extent practicable, the amount of the correction:
    (i) for each financial statement line item affected; and
    (ii) if Ind AS 33 applies to the entity, for basic and diluted earnings per share;
    (c) the amount of the correction at the beginning of the earliest prior period presented; and

    (d) if retrospective restatement is impracticable for a particular prior period, the circumstances that led to the existence of t hat condition and a description of how and from when the error has been corrected.

    Financial statements of subsequent periods need not repeat these disclosures.



  7. #17
    IND-AS
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    Thumbs up Impracticability in respect of retrospective application and retrospective restatement of Indian Accounting Standard (Ind AS) 8 - Earlier AS (5)

    Impracticability in respect of retrospective application and retrospective restatement of Indian Accounting Standard (Ind AS) 8 - Earlier Accounting standard (5)


    Accounting Policies, Changes in Accounting Estimates and Errors


    Impracticability in respect of retrospective application and retrospective restatement

    50. In some circumstances, it is impracticable to adjust comparative information for one or more prior periods to achieve comparability with the current period. For example, data may not have been collected in the prior period(s) in a way that allows either retrospective application of a new accounting policy (including, for the purpose of paragraphs 51–53, its prospective application to prior periods) or retrospective restatement to correct a prior period error, and it may be impracticable to recreate the information.

    51. It is frequently necessary to make estimates in applying an accounting policy to elements of financial statements recognised or disclosed in respect of transactions, other events or conditions. Estimation is inherently subjective, and estimat es may be developed after the reporting period. Developing estimates is potentially more difficult when retrospectively applying an accounting policy or making a retrospective restatement to correct a prior period error, because of the longer period of time that might have passed since the affected transaction, other event or condition occurred. However, the objective of estimates related to prior periods remains the same as for estimates made in the current period, namely, for the estimate to reflect the circumstances that existed when the transaction, other event or condition occurred.

    52. Therefore, retrospectively applying a new accounting policy or correcting a prior period error requires distinguishing information that

    (a) provides evidence of circumstances that existed on the date(s) as at which the transaction, other event or condition occurred, and
    (b) would have been available when the financial statements for that prior period were approved for issue

    from other information. For some types of estimate s (eg an estimate of fair value not based on an observable price or observable inputs), it is impracticable to distinguish these types of information. When retrospective application or retrospective restatement would require making a significant estimate f or which it is impossible to distinguish these two types of information, it is impracticable to apply the new accounting policy or correct the prior period error retrospectively.

    53. Hindsight should not be used when applying a new accounting policy to, or correcting amounts for, a prior period, either in making assumptions about what management’s intentions would have been in a prior period or estimating the amounts recognised, measured or disclosed in a prior period. For example, when an entity corrects a prior period error in measuring financial assets previously classified as held-to-maturity investments in accordance with Ind AS 39 Financial Instruments: Recognition and Measurement, it does not change their basis of measurement for that period if management decided later not to hold them to maturity. In addition, when an entity corrects a prior period error in calculating its liability for employees’ accumulated sick leave in accordance with Ind AS 19 Employee Benefits, it disregards information about an unusually severe influenza season during the next period that became available after the financial statements for the prior period were approved for issue. The fact that significant estimates are frequently required when amending comparative information presented for prior periods does not prevent reliable adjustment or correction of the comparative information.



  8. #18
    IND-AS
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    Thumbs up Appendix - A of Indian Accounting Standard (Ind AS) 8 -Earlier Accounting standard (5) -Accounting Policies,Changes in Accounting Estimates and Errors

    Appendix - A of Indian Accounting Standard (Ind AS) 8 - Earlier Accounting standard (5)


    Accounting Policies, Changes in Accounting Estimates and Errors


    Appendix - A


    References to matters contained in other Indian Accounting Standards

    This Appendix is an integral part of Indian Accounting Standard (Ind AS) 8.

    This appendix lists the different appendices which are the part of other Indian Accounting Standards and make reference to (Ind AS) 8

    1. Appendix A, Service Concession Arrangements contained in Ind AS 11, Construction Contracts .

    2. Appendix A, Income Taxes–––Recovery of Revalued Non-Depreciable Assets contained in Ind AS 12 Income Taxes

    3. Appendix B, Income Taxes—Changes in the Tax Status of an Entity or its Shareholders contained in Ind AS 12 Income Taxes

    4. Appendix A, Changes in Existing Decommissioning, Restoration and Similar Liabilities contained in Ind AS 16, Property, Plant and Equipment .

    5. Appendix A, Operating Leases—Incentives contained in Ind AS 17 Leases

    6. Appendix B, Evaluating the Substance of Transactions Invo lving the Legal Form of a Lease contained in Ind AS 17 Leases .

    7. Appendix C, Determining whether an Arrangement contains a Lease contained in Ind AS 17 Leases .

    8. Appendix A, Revenue—Barter Transactions Involving Advertising Services contained in Ind AS 18 Revenue .

    9. Appendix B, Customer Loyalty Programmes contained in Ind AS 18 Revenue .

    10. Appendix A, Ind AS 19—The Limit on a Defined Benefit Asset, Minimum Funding Requirements and their Interaction contained in Ind AS 19 Employee Benefits .

    11. Appendix A, Government Assistance—No Specific Relation to Operating Activities contained in Ind AS 20 Accounting for Government Grants and Disclosure of Government Assistance

    12. Appendix A, Consolidation—Special Purpose Entities contained in Ind AS 27, Consolidated and Separate Financial Statements ,

    13. Appendix A, Jointly Controlled Entities— Non-Monetary Contributions by Venturers contained in Ind AS 31 Interests in Joint Ventures

    14. Appendix A, Rights to Interests arising from Decommissioning, Restoration and Environmental Rehabilitation Funds contained in Ind AS 37 Provisions, Contingent Liabilities and Contingent Assets .

    15. Appendix B, Liabilities arising from Participating in a Specific Market— Waste Electrical and Electronic Equipment contained in Ind AS 37 Provisions, Contingent Liabilities and Contingent Assets .

    16. Appendix D, Hedges of a Net Investment in a Foreign Operation contained in Ind AS 39, Financial Instruments: Recognition and Measurement.


  9. #19
    IND-AS
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    Thumbs up Appendix - B of Indian Accounting Standard (Ind AS) 8 -Earlier Accounting standard (5) -Accounting Policies,Changes in Accounting Estimates and Errors

    Appendix - B of Indian Accounting Standard (Ind AS) 8 - Earlier Accounting standard (5)


    Accounting Policies, Changes in Accounting Estimates and Errors

    Appendix - B


    Guidance on implementing
    Ind AS 8 Accounting Policies, Changes in Accounting Estimates and Errors


    (This guidance accompanies, but is not part of, Ind AS 8.)

    Example 1
    – Retrospective restatement of errors
    or
    Example 2
    – Prospective application of a change in accounting policy when retrospective application is not practicable.


    For Full Detail You can download this from PDF Format



    Attached Files Attached Files
    Last edited by IND-AS; 31-01-2011 at 02:55 PM.

  10. #20
    IND-AS
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    Thumbs up Appendix -1 of Indian Accounting Standard (Ind AS) 8 -Earlier Accounting standard (5) - Accounting Policies,Changes in Accounting Estimates and Errors

    Appendix -1 of Indian Accounting Standard (Ind AS) 8 - Earlier Accounting standard (5)


    Accounting Policies, Changes in Accounting Estimates and Errors

    Appendix -1

    Note: This Appendix is not a part of the Indian Accounting Standard. The purpose of this Appendix is only to bring out the differences, if any, between Indian Accounting Standard (Ind AS) 8 and the corresponding International Accoun ting Standard (IAS) 8, Accounting Policies, Changes in Accounting Estimates and Errors.


    Comparison with IAS 8, Accounting Policies, Changes in Accounting Estimates and Errors


    1. Different terminology is used in this standard, e.g., the term ‘balance sheet’ is used instead of ‘Statement of financial position’ and ‘Statement of profit and loss’ is used instead of ‘Statement of comprehensive income’. The words ‘approval of the financial statements for issue have been used instead of ‘authorisation of the financial statements for issue ’ in the context of financial statements considered for the purpose of events after the reporting period .


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