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FINANCIAL ACCOUNTING AND REPORTING
ACCOUNTING POLICIES,
CHANGES IN ACCOUNTING ESTIMATES AND ERRORS
1.Accounting Policies
Accounting policies are the specific principles, bases, conventions, rules and practices
applied by an entity in preparing and presenting financial statements.
An entity shall select and apply its accounting policies consistently for similar
transactions, other events and conditions, unless a Standard or an Interpretation
specifically requires or permits categorization of items for which different policies may
be appropriate.
If a Standard or an Interpretation requires or permits such categorization, an
appropriate accounting policy shall be selected and applied consistently to each
category.
.Change in Accounting Policy – A change from one acceptable accounting policy to another
acceptable accounting policy. If the change is from an unacceptable accounting policy it shall
be treated as a correction of an error.
Cases or circumstances to change accounting policy:
a.Is required by a standard or interpretation; 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.
c.Note that changes in accounting policies do not include applying an accounting
policy to a kind of transaction or event that did not exist in the past. Neither is a change
from a accounting principle that is not acceptable to one that is acceptable a change in
accounting policy.
Treatment of Changes in Accounting Policies
By applying the transitional provision if the change is either required by a standard
or interpretation or Retrospective Application
Retrospective application means adjusting the opening balance of each affected
component of equity for the earliest prior period presented and the other comparative
amounts disclosed for each prior period presented as if the new accounting policy had
always been applied.
However, if it is impracticable to determine either the period, specific effects or the
cumulative effect of the change 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.
Also, if it is impracticable to determine the cumulative effect, at the beginning 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.
10/16-8