International Accounting Standard 8 Accounting Policies, Changes in Accounting Estimates and Errors (IAS 8) is set out in paragraphs 1⁠–⁠56 and the Appendix. All the paragraphs have equal authority but retain the IASC format of the Standard when it was adopted by the IASB. IAS 8 should be read in the context of its objective and the Basis for Conclusions, the Preface to IFRS Standards and the Conceptual Framework for Financial Reporting.

International Accounting Standard 8Accounting Policies, Changes in Accounting Estimates and Errors

Objective

1

The objective of this Standard is to prescribe the criteria for selecting [Refer:paragraphs 7⁠–⁠13] and changing accounting policies, [Refer:paragraphs 14⁠–⁠18] together with the accounting treatment and disclosure of changes in accounting policies, [Refer:paragraphs 19⁠–⁠31] changes in accounting estimates [Refer:paragraphs 32⁠–⁠40] and corrections of errors. [Refer:paragraphs 41⁠–⁠49] The Standard is intended to enhance the relevance [Refer:Conceptual Framework paragraphs 2.6-2.11] and reliabilityE1 of an entity’s financial statements, and the comparability [Refer:Conceptual Framework paragraphs 2.24-2.29] of those financial statements over time and with the financial statements of other entities.

E1

[The term ‘faithful representation’, which was used in the Conceptual Framework issued in 2010 and is also used in the revised version of the Conceptual Framework issued in 2018, encompasses the main characteristics that the Framework called ‘reliability’ (refer Conceptual Framework paragraphs 2.12⁠–⁠2.19 and Basis for Conclusions paragraphs BC2.21⁠–⁠BC2.31).]

2

Disclosure requirements for accounting policies, except those for changes in accounting policies, [Refer:paragraphs 28⁠–⁠31] are set out in IAS 1 Presentation of Financial Statements.

[Refer also:IAS 1 paragraphs 117⁠–⁠124]

Scope

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 IAS 12 Income Taxes.

Definitions

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.

International Financial Reporting Standards (IFRSs) are Standards and Interpretations issued by the International Accounting Standards Board (IASB). They comprise:

(a)

International Financial Reporting Standards;

(b)

International Accounting Standards;

(c)

IFRIC Interpretations; and

(d)

SIC Interpretations.1

Material is defined in paragraph 7 of IAS 1 and is used in this Standard with the same meaning.

[Refer:

paragraph 54H

Basis for Conclusions paragraphs BC20⁠–⁠BC22

IAS 1 Basis for Conclusions paragraphs BC13A⁠–⁠BC13S]

[Note:IFRS Practice Statement 2 Making Materiality Judgements (Practice Statement) provides reporting entities with guidance on making materiality judgements when preparing general purpose financial statements in accordance with IFRS Standards. The Practice Statement is non-mandatory guidance developed by the International Accounting Standards Board (Board). It is not a Standard. Therefore, its application is not required to state compliance with IFRS Standards]

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 were authorised for issue; [Refer:IAS 10 paragraphs 3⁠–⁠7] 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 [Refer:paragraphs 50⁠–⁠53 and Basis for Conclusions paragraphs BC25⁠–⁠BC27] Applying a requirement is impracticable when the entity cannot apply it after making every reasonable 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 authorised for issue [Refer:IAS 10 paragraphs 3⁠–⁠7] 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.

Accounting policies

Disclosure of changes in accounting policies, accounting estimates and errors [text block] Disclosure text block 800500, 811000

Selection and application of accounting policies

7

When an IFRS specifically applies to a transaction, other event or condition, the accounting policy or policies applied to that item shall be determined by applying the IFRS.E2

[Refer:Basis for Conclusions paragraphs BC13⁠–⁠BC15]
E2

[IFRIC® Update, January 2018, Agenda Decision, ‘Contributing property, plant and equipment to an associate (IAS 28 Investments in Associates and Joint Ventures)’

The Committee received a request about how an entity accounts for a transaction in which it contributes property, plant and equipment (PPE) to a newly formed associate in exchange for shares in the associate…

The request asked… about the application of IFRS Standards to transactions involving entities under common control (common control transactions)—ie whether IFRS Standards provide a general exception or exemption from applying the requirements in a particular Standard to common control transactions (Question A)…

[In responding to Question A, the Committee stated that] Paragraph 7 of IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors requires an entity to apply an IFRS Standard to a transaction when that Standard applies specifically to the transaction. The Committee observed, therefore, that unless a Standard specifically excludes common control transactions from its scope, an entity applies the applicable requirements in the Standard to common control transactions…

[The full text of the agenda decision is reproduced after paragraph 30 of IAS 28.]]

8

IFRSs set out accounting policies that the IASB has concluded result in financial statements containing relevant [Refer:Conceptual Framework paragraphs 2.6-2.11] and reliableE3 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. [Refer:Basis for Conclusions paragraphs BC20⁠–⁠BC22] However, it is inappropriate to make, or leave uncorrected, immaterial departures from IFRSs to achieve a particular presentation of an entity’s financial position, financial performance or cash flows.

E3

[The term ‘faithful representation’, which was used in the Conceptual Framework issued in 2010 and is also used in the revised version of the Conceptual Framework issued in 2018, encompasses the main characteristics that the Framework called ‘reliability’ (refer Conceptual Framework paragraphs 2.12⁠–⁠2.19 and Basis for Conclusions paragraphs BC2.21⁠–⁠BC2.31).]

9

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

10

In the absence of an IFRS 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 [Refer:Conceptual Framework paragraphs 2.6-2.11] to the economic decision‑making needs of users; [Refer:Conceptual Framework paragraphs 1.2-1.10 and 2.36] and

(b)

reliable,E4 in that the financial statements:

(i)

represent faithfully [Refer:Conceptual Framework paragraphs 2.12 and 2.13] the financial position, financial performance and cash flows of the entity;

(ii)

reflect the economic substance [Refer:Conceptual Framework Basis for Conclusions paragraphs BC2.32 and BC2.33] of transactions, other events and conditions, and not merely the legal form;

(iii)

are neutral, [Refer:Conceptual Framework paragraph 2.15] ie free from bias;

(iv)

are prudent; [Refer:Conceptual Framework Basis for Conclusions paragraphs BC2.34 and BC2.45]  and

(v)

are complete [Refer:Conceptual Framework paragraph 2.14] in all material respects.

[Note:The IFRS Interpretations Committee March 2017 Agenda Decision on Commodity Loans stated that “…The Committee also observed that the requirements in paragraph 112(c) of IAS 1  Presentation of Financial Statements are relevant if an entity develops an accounting policy applying paragraphs 10 and 11 of IAS 8 for a commodity loan transaction such as that described in the submission. In applying these requirements, an entity considers whether additional disclosures are needed to provide information relevant to an understanding of the accounting for, and risks associated with, such commodity loan transactions…”]
E4

[The term ‘faithful representation’, which was used in the Conceptual Framework issued in 2010 and is also used in the revised version of the Conceptual Framework issued in 2018, encompasses the main characteristics that the Framework called ‘reliability’ (refer Conceptual Framework paragraphs 2.12⁠–⁠2.19 and Basis for Conclusions paragraphs BC2.21⁠–⁠BC2.31).]

11

In making the judgement described in paragraph 10, management shall refer to, and consider the applicability of, the following sources in descending order:E5

(a)

the requirements in IFRSs dealing with similar and related issues; andE6

(b)

the definitions, [Refer:Conceptual Framework paragraphs 4.3⁠–⁠4.47 and 4.68⁠–⁠4.72] recognition criteria [Refer:Conceptual Framework paragraphs 5.6⁠–⁠5.25] and measurement concepts [Refer:Conceptual Framework Chapter 6 Measurement] for assets, liabilities, income and expenses in the Conceptual Framework for Financial Reporting (Conceptual Framework).2 [Refer:paragraph 54F]

E5

[IFRIC® Update, January 2019, Agenda Decision, ‘IAS 37 Provisions, Contingent Liabilities and Contingent Assets—Deposits relating to taxes other than income tax’

The Committee received a request about how to account for deposits relating to taxes that are outside the scope of IAS 12 Income Taxes (ie deposits relating to taxes other than income tax). In the fact pattern described in the request, an entity and a tax authority dispute whether the entity is required to pay the tax. The tax is not an income tax, so it is not within the scope of IAS 12. Any liability or contingent liability to pay the tax is instead within the scope of IAS 37. Taking account of all available evidence, the preparer of the entity’s financial statements judges it probable that the entity will not be required to pay the tax—it is more likely than not that the dispute will be resolved in the entity’s favour. Applying IAS 37, the entity discloses a contingent liability and does not recognise a liability. To avoid possible penalties, the entity has deposited the disputed amount with the tax authority. Upon resolution of the dispute, the tax authority will be required to either refund the tax deposit to the entity (if the dispute is resolved in the entity’s favour) or use the deposit to settle the entity’s liability (if the dispute is resolved in the tax authority’s favour).

Whether the tax deposit gives rise to an asset, a contingent asset or neither

The Committee observed that if the tax deposit gives rise to an asset, that asset may not be clearly within the scope of any IFRS Standard. Furthermore, the Committee concluded that no IFRS Standard deals with issues similar or related to the issue that arises in assessing whether the right arising from the tax deposit meets the definition of an asset. Accordingly, applying paragraphs 10⁠–⁠11 of IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors, the Committee referred to the two definitions of an asset in IFRS literature—the definition in the Conceptual Framework for Financial Reporting issued in March 2018 and the definition in the previous Conceptual Framework that was in place when many existing IFRS Standards were developed. The Committee concluded that the right arising from the tax deposit meets either of those definitions. The tax deposit gives the entity a right to obtain future economic benefits, either by receiving a cash refund or by using the payment to settle the tax liability. The nature of the tax deposit—whether voluntary or required—does not affect this right and therefore does not affect the conclusion that there is an asset. The right is not a contingent asset as defined by IAS 37 because it is an asset, and not a possible asset, of the entity.

Consequently, the Committee concluded that in the fact pattern described in the request the entity has an asset when it makes the tax deposit to the tax authority.

Recognising, measuring, presenting and disclosing the tax deposit

In the absence of a Standard that specifically applies to the asset, an entity applies paragraphs 10⁠–⁠11 of IAS 8 in developing and applying an accounting policy for the asset. The entity’s management uses its judgement in developing and applying a policy that results in information that is relevant to the economic decision-making needs of users of financial statements and reliable. The Committee noted that the issues that need to be addressed in developing and applying an accounting policy for the tax deposit may be similar or related to those that arise for the recognition, measurement, presentation and disclosure of monetary assets. If this is the case, the entity’s management would refer to requirements in IFRS Standards dealing with those issues for monetary assets.

The Committee concluded that the requirements in IFRS Standards and concepts in the Conceptual Framework for Financial Reporting provide an adequate basis for an entity to account for deposits relating to taxes other than income tax. Consequently, the Committee decided not to add this matter to its standard-setting agenda.]

E6

[IFRIC® Update, March 2011, Agenda Decision, ‘IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors—application of the IAS 8 hierarchy’

IAS 8 requires management to use judgement in developing and applying an accounting policy that results in information that is relevant and reliable, in the absence of an IFRS that specifically applies to a transaction. IAS 8 specifies that management shall refer to and consider the applicability of requirements in IFRSs dealing with similar and related issues. The Interpretations Committee received a question as to whether it could be appropriate to consider only certain aspects of an IFRS being analogised to, or whether all aspects of the IFRS being analogised to would be required to be applied.

The Committee observed that when management develops an accounting policy through analogy to an IFRS dealing with similar and related matters, it needs to use its judgement in applying all aspects of the IFRS that are applicable to the particular issue. 

The Committee concluded that the process for developing accounting policies by analogy does not need to be clarified in paragraphs 10⁠–⁠12 of IAS 8 because the current guidance is sufficient. Consequently, the Committee decided that this issue should not be added to its agenda.]

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.

[Refer also:Basis for Conclusions paragraphs BC16⁠–⁠BC19]

Consistency of accounting policies

13

An entity shall select and apply its accounting policies consistently [Refer:Conceptual Framework paragraphs 2.24⁠–⁠2.29] for similar transactions, other events and conditions, unless an IFRS specifically requires or permits categorisation of items for which different policies may be appropriate. [Refer:for example, IAS 16 paragraph 29 for classes of property, plant and equipment and IAS 38 paragraph 72 for intangible assets] If an IFRS requires or permits such categorisation, an appropriate accounting policy shall be selected and applied consistently to each category.

Changes in accounting policies

14

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

(a)

is required by an IFRS; or

(b)

results in the financial statements providing reliableE7 and more relevant [Refer:Conceptual Framework paragraphs 2.6-2.11] information about the effects of transactions, other events or conditions on the entity’s financial position, financial performance or cash flows.

[Refer:for example, IAS 40 paragraph 31]
E7

[The term ‘faithful representation’, which was used in the Conceptual Framework issued in 2010 and is also used in the revised version of the Conceptual Framework issued in 2018, encompasses the main characteristics that the Framework called ‘reliability’ (refer Conceptual Framework paragraphs 2.12⁠–⁠2.19 and Basis for Conclusions paragraphs BC2.21⁠–⁠BC2.31).]

15

Users of financial statements [Refer:Conceptual Framework paragraphs 1.2-1.10 and 2.36] need to be able to compare [Refer:Conceptual Framework paragraphs 2.24-2.29] 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 revalue assets in accordance with IAS 16 Property, Plant and Equipment or IAS 38 Intangible Assets is a change in an accounting policy to be dealt with as a revaluation in accordance with IAS 16 [Refer:IAS 16 paragraphs 31⁠–⁠42] or IAS 38, [Refer:IAS 38 paragraphs 75⁠–⁠87] 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 IFRS in accordance with the specific transitional provisions, [Refer:for example, IFRS 2 paragraphs 53⁠–⁠59 (share‑based payment) and IAS 40 paragraph 80 (investment property)] if any, in that IFRS; and

(b)

when an entity changes an accounting policy upon initial application of an IFRS that does not include specific transitional provisions [Refer:for example, IAS 41 Agriculture] applying to that change, or changes an accounting policy voluntarily, [Refer:for example, IAS 40 Investment Property] it shall apply the change retrospectively.

20

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

21

In the absence of an IFRS 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 accounting 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 comparative amounts [Refer:IAS 1 paragraphs 38⁠–⁠44] 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 [Refer:paragraphs 5 (definition of impracticable) and 50⁠–⁠53)] to determine either the period‑specific effects or the cumulative effect of the change.

24

When it is impracticable [Refer:paragraphs 5 (definition of impracticable) and 50⁠–⁠53)] to determine the period‑specific effects of changing an accounting policy on comparative information [Refer:IAS 1 paragraphs 38⁠–⁠44] 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 [Refer:paragraphs 5 (definition of impracticable) and 50⁠–⁠53)] 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 [Refer:IAS 1 paragraphs 38⁠–⁠44] to apply the new accounting policy prospectively from the earliest date practicable.

[Refer:Implementation Guidance example 3]

26

When an entity applies a new accounting policy retrospectively, it applies the new accounting policy to comparative information [Refer:IAS 1 paragraphs 38⁠–⁠44] 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 statements of financial position 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 component 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 IFRS). Any other information about prior periods, such as historical summaries of financial data, is also adjusted as far back as is practicable.

27

When it is impracticable [Refer:paragraphs 5 (definition of impracticable) and 50⁠–⁠53)] 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 equity 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 IFRS has an effect on the current period or any prior period, would have such an effect except that it is impracticable [Refer:paragraphs 5 (definition of impracticable) and 50⁠–⁠53)] to determine the amount of the adjustment, or might have an effect on future periods, an entity shall disclose:

(a)

the title of the IFRS;

Title of initially applied IFRS Disclosure text 811000

(b)

when applicable, that the change in accounting policy is made in accordance with its transitional provisions;

Description whether change in accounting policy is made in accordance with transitional provisions of initially applied IFRS Disclosure text 811000

(c)

the nature of the change in accounting policy;

Description of nature of change in accounting policy Disclosure text 811000

(d)

when applicable, a description of the transitional provisions;

Description of transitional provisions of initially applied IFRS Disclosure text 811000

(e)

when applicable, the transitional provisions that might have an effect on future periods;

Description of transitional provisions of initially applied IFRS that might have effect on future periods Disclosure text 811000

(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

Creation date [axis] Disclosure axis IAS 8.29 c (i) Disclosure
IAS 8.49 b (i) Disclosure 		901500, 990000
Currently stated [member] Disclosure member IAS 1.106 b Disclosure
IAS 1.20 d Common practice
IAS 8.29 c (i) Disclosure
IAS 8.49 b (i) Disclosure
Effective 2023-01-01 IFRS 17.113 b Disclosure 		610000, 836600, 901000, 901100, 990000
Default financial statements date [member] Disclosure member IAS 8.29 c (i) Disclosure
IAS 8.49 b (i) Disclosure 		901500, 990000
Increase (decrease) due to changes in accounting policy [member] Disclosure member IAS 8.29 c (i) Disclosure 610000, 901000
Increase (decrease) due to changes in accounting policy and corrections of prior period errors [member] Disclosure member IAS 1.106 b Disclosure
IAS 8.29 c (i) Disclosure
IAS 8.49 b (i) Disclosure 		610000, 901000
Increase (decrease) due to changes in accounting policy required by IFRSs [member] Disclosure member IAS 8.28 g Disclosure 610000, 901000
Previously stated [member] Disclosure member IAS 1.106 b Disclosure
IAS 8.29 c (i) Disclosure
IAS 8.49 b (i) Disclosure 		610000, 901000
Retrospective application and retrospective restatement [axis] Disclosure axis IAS 1.106 b Disclosure
IAS 8.29 c (i) Disclosure
IAS 8.49 b (i) Disclosure 		610000, 901000, 990000

(ii)

if IAS 33 Earnings per Share applies to the entity, for basic [Refer:IAS 33 paragraph 10] and diluted earnings per share; [Refer:IAS 33 paragraph 31]

(g)

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

Increase (decrease) due to changes in accounting policy required by IFRSs [member] Disclosure member IAS 8.28 f (i) Disclosure 610000, 901000

(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.

Explanation of reason why it is impracticable to determine amounts of adjustments related to change in accounting policy Disclosure text IAS 8.29 e Disclosure 811000

Financial statements of subsequent periods need not repeat these disclosures.

Disclosure of initial application of standards or interpretations [table] Disclosure table 811000
Disclosure of initial application of standards or interpretations [text block] Disclosure text block 811000
Initially applied IFRSs [axis] Disclosure axis 610000, 811000, 990000
Initially applied IFRSs [member] Disclosure member 610000, 811000, 990000

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 [Refer:paragraphs 5 (definition of impracticable) and 50⁠–⁠53)] to determine the amount of the adjustment, or might have an effect on future periods, an entity shall disclose: 

[Refer:Implementation Guidance example 3]

(a)

the nature of the change in accounting policy;

Description of nature of voluntary change in accounting policy Disclosure text 811000

(b)

the reasons why applying the new accounting policy provides reliableE8 and more relevant [Refer:Conceptual Framework paragraphs 2.6-2.11] information;

Description of reasons why applying new accounting policy provides reliable and more relevant information Disclosure text 811000

(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

Creation date [axis] Disclosure axis IAS 8.28 f (i) Disclosure
IAS 8.49 b (i) Disclosure 		901500, 990000
Currently stated [member] Disclosure member IAS 1.106 b Disclosure
IAS 1.20 d Common practice
IAS 8.28 f (i) Disclosure
IAS 8.49 b (i) Disclosure
Effective 2023-01-01 IFRS 17.113 b Disclosure 		610000, 836600, 901000, 901100, 990000
Default financial statements date [member] Disclosure member IAS 8.28 f (i) Disclosure
IAS 8.49 b (i) Disclosure 		901500, 990000
Increase (decrease) due to changes in accounting policy [member] Disclosure member IAS 8.28 f (i) Disclosure 610000, 901000
Increase (decrease) due to changes in accounting policy and corrections of prior period errors [member] Disclosure member IAS 1.106 b Disclosure
IAS 8.28 f (i) Disclosure
IAS 8.49 b (i) Disclosure 		610000, 901000
Increase (decrease) due to voluntary changes in accounting policy [member] Disclosure member IAS 8.29 d Disclosure 610000, 901000
Previously stated [member] Disclosure member IAS 1.106 b Disclosure
IAS 8.28 f (i) Disclosure
IAS 8.49 b (i) Disclosure 		610000, 901000
Retrospective application and retrospective restatement [axis] Disclosure axis IAS 1.106 b Disclosure
IAS 8.28 f (i) Disclosure
IAS 8.49 b (i) Disclosure 		610000, 901000, 990000

(ii)

if IAS 33 applies to the entity, for basic [Refer:IAS 33 paragraph 10] and diluted earnings per share; [Refer:IAS 33 paragraph 31]

(d)

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

Increase (decrease) due to voluntary changes in accounting policy [member] Disclosure member IAS 8.29 c (i) Disclosure 610000, 901000

(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.

Explanation of reason why it is impracticable to determine amounts of adjustments related to change in accounting policy Disclosure text IAS 8.28 h Disclosure 811000

Financial statements of subsequent periods need not repeat these disclosures.

Disclosure of voluntary change in accounting policy [table] Disclosure table 811000
Disclosure of voluntary change in accounting policy [text block] Disclosure text block 811000
Voluntary changes in accounting policy [axis] Disclosure axis 811000, 990000
Voluntary changes in accounting policy [member] Disclosure member 811000, 990000
E8

[The term ‘faithful representation’, which was used in the Conceptual Framework issued in 2010 and is also used in the revised version of the Conceptual Framework issued in 2018, encompasses the main characteristics that the Framework called ‘reliability’ (refer Conceptual Framework paragraphs 2.12⁠–⁠2.19 and Basis for Conclusions paragraphs BC2.21⁠–⁠BC2.31).]

30

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

(a)

this fact; and

Explanation of new standards or interpretations not applied Disclosure text 811000

(b)

known or reasonably estimable information relevant to assessing the possible impact that application of the new IFRS will have on the entity’s financial statements in the period of initial application.

Disclosure of expected impact of initial application of new standards or interpretations [table] Disclosure table 811000
Disclosure of expected impact of initial application of new standards or interpretations [text block] Disclosure text block 811000
New IFRSs [axis] Disclosure axis 811000, 990000
New IFRSs [member] Disclosure member 811000, 990000
[Refer:Basis for Conclusions paragraphs BC30 and BC31]

31

In complying with paragraph 30, an entity considers disclosing:

(a)

the title of the new IFRS;

Title of new IFRS Example text 811000

(b)

the nature of the impending change or changes in accounting policy;

Description of nature of impending change in accounting policy Example text 811000

(c)

the date by which application of the IFRS is required;

Date by which application of new IFRS is required Example yyyy-mm-dd 811000

(d)

the date as at which it plans to apply the IFRS initially; and

Date as at which entity plans to apply new IFRS initially Example yyyy-mm-dd 811000

(e)

either:

(i)

a discussion of the impact that initial application of the IFRS is expected to have on the entity’s financial statements; or

Discussion of impact that initial application of new IFRS is expected to have on financial statements Example text 811000

(ii)

if that impact is not known or reasonably estimable, a statement to that effect.

Description of fact that impact of initial application of new IFRS is not known or reasonably estimable Example text 811000

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.E9

E9

[The term ‘faithful representation’, which was used in the Conceptual Framework issued in 2010 and is also used in the revised version of the Conceptual Framework issued in 2018, encompasses the main characteristics that the Framework called ‘reliability’ (refer Conceptual Framework paragraphs 2.12⁠–⁠2.19 and Basis for Conclusions paragraphs BC2.21⁠–⁠BC2.31).]

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 a 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 to 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.

[Refer:Basis for Conclusions paragraphs BC32 and BC33]

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.

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.

Accounting estimates [axis] Disclosure axis 811000, 990000
Accounting estimates [member] Disclosure member 811000, 990000
Description of nature of change in accounting estimate [text block] Disclosure text block 811000
Disclosure of changes in accounting estimates [table] Disclosure table 811000
Disclosure of changes in accounting estimates [text block] Disclosure text block 811000
Increase (decrease) in accounting estimate Disclosure Xduration 811000

40

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

Description of fact that estimating amount of change in accounting estimate is impracticable [text block] Disclosure text block 811000

Errors

41

Errors can arise in respect of the recognition, measurement, presentation or disclosure of elements of financial statements. Financial statements do not comply with IFRSs 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 authorised for issue. However, material errors are sometimes not discovered until a subsequent period, and these prior period errors are corrected in the comparative information [Refer:IAS 1 paragraphs 38⁠–⁠44] 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 authorised for issue after their discovery by:

(a)

restating the comparative amounts for the prior period(s) presented in which the error occurred; or

[Refer:Implementation Guidance example 1]

(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.

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 [Refer:IAS 1 paragraphs 38⁠–⁠44] 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 [Refer:paragraphs 5 (definition of impracticable) and 50⁠–⁠53] 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 [Refer:IAS 1 paragraphs 38⁠–⁠44] 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 [Refer:paragraphs 5 (definition of impracticable) and 50⁠–⁠53] to determine the amount of an error (eg a mistake in applying an accounting policy) for all prior periods, the entity, in accordance with paragraph 45, restates the comparative information [Refer:IAS 1 paragraphs 38⁠–⁠44] prospectively from the earliest date practicable. It therefore disregards the portion of the cumulative restatement of assets, liabilities and equity arising before that date. Paragraphs 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.

Disclosure of prior period errors

[Refer:Implementation Guidance example 1]

49

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

(a)

the nature of the prior period error;

Description of nature of accounting errors in prior periods [text block] Disclosure text block 811000

(b)

for each prior period presented, to the extent practicable, the amount of the correction:

(i)

for each financial statement line item affected; and

Creation date [axis] Disclosure axis IAS 8.28 f (i) Disclosure
IAS 8.29 c (i) Disclosure 		901500, 990000
Currently stated [member] Disclosure member IAS 1.106 b Disclosure
IAS 1.20 d Common practice
IAS 8.28 f (i) Disclosure
IAS 8.29 c (i) Disclosure
Effective 2023-01-01 IFRS 17.113 b Disclosure 		610000, 836600, 901000, 901100, 990000
Default financial statements date [member] Disclosure member IAS 8.28 f (i) Disclosure
IAS 8.29 c (i) Disclosure 		901500, 990000
Increase (decrease) due to changes in accounting policy and corrections of prior period errors [member] Disclosure member IAS 1.106 b Disclosure
IAS 8.28 f (i) Disclosure
IAS 8.29 c (i) Disclosure 		610000, 901000
Increase (decrease) due to corrections of prior period errors [member] Disclosure member IAS 8.49 c Disclosure 610000, 901000
Previously stated [member] Disclosure member IAS 1.106 b Disclosure
IAS 8.28 f (i) Disclosure
IAS 8.29 c (i) Disclosure 		610000, 901000
Retrospective application and retrospective restatement [axis] Disclosure axis IAS 1.106 b Disclosure
IAS 8.28 f (i) Disclosure
IAS 8.29 c (i) Disclosure 		610000, 901000, 990000

(ii)

if IAS 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

Increase (decrease) due to corrections of prior period errors [member] Disclosure member IAS 8.49 b (i) Disclosure 610000, 901000

(d)

if retrospective restatement is impracticable [Refer:paragraphs 5 (definition of impracticable) and 50⁠–⁠53] for a particular prior period, the circumstances that led to the existence of that condition and a description of how and from when the error has been corrected.

Explanation of reason why it is impracticable to determine amounts for correction related to prior period errors Disclosure text 811000

Financial statements of subsequent periods need not repeat these disclosures.

Impracticability in respect of retrospective application and retrospective restatement

50

In some circumstances, it is impracticable to adjust comparative information [Refer:IAS 1 paragraphs 38⁠–⁠44 and IFRS 1 paragraph 7] for one or more prior periods to achieve comparability [Refer:Conceptual Framework paragraphs 2.24-2.29] 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.E10

E10

[IFRIC® Update, October 2004, Agenda Decision, ‘Transition issues under IFRS 1’

The IFRIC considered two issues regarding first-time adoption of IFRSs. The first issue was whether the ‘impracticability’ exception under IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors should also apply to first time adopters. The IFRIC agreed that there were potential issues, especially with respect to ‘old’ items, such as property, plant and equipment. However, those issues could usually be resolved by using one of the transition options available in IFRS 1.

The second issue was ...]

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 estimates 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 authorised for issue

from other information. For some types of estimates (eg a fair value measurement that uses significant unobservable inputs), it is impracticable to distinguish these types of information. When retrospective application or retrospective restatement would require making a significant estimate for 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 calculating its liability for employees’ accumulated sick leave in accordance with IAS 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 authorised for issue. [Refer:IAS 10 paragraphs 3−7] The fact that significant estimates are frequently required when amending comparative information [Refer:IAS 1 paragraphs 38−44] presented for prior periods does not prevent reliable adjustment or correction of the comparative information.

Effective date and transition

54

An entity shall apply this Standard for annual periods beginning on or after 1 January 2005. Earlier application is encouraged. If an entity applies this Standard for a period beginning before 1 January 2005, it shall disclose that fact.

54A

[Deleted]

54B

[Deleted]

54C

IFRS 13 Fair Value Measurement, issued in May 2011, amended paragraph 52. An entity shall apply that amendment when it applies IFRS 13.

54D

[Deleted]

54E

IFRS 9 Financial Instruments, as issued in July 2014, amended paragraph 53 and deleted paragraphs 54A, 54B and 54D. An entity shall apply those amendments when it applies IFRS 9.

54F

Amendments to References to the Conceptual Framework in IFRS Standards, issued in 2018, amended paragraphs 6 and 11(b). An entity shall apply those amendments for annual periods beginning on or after 1 January 2020. Earlier application is permitted if at the same time an entity also applies all other amendments made by Amendments to References to the Conceptual Framework in IFRS Standards. An entity shall apply the amendments to paragraphs 6 and 11(b) retrospectively in accordance with this Standard. However, if an entity determines that retrospective application would be impracticable or would involve undue cost or effort, it shall apply the amendments to paragraphs 6 and 11(b) by reference to paragraphs 23⁠–⁠28 of this Standard. If retrospective application of any amendment in Amendments to References to the Conceptual Framework in IFRS Standards would involve undue cost or effort, an entity shall, in applying paragraphs 23⁠–⁠28 of this Standard, read any reference except in the last sentence of paragraph 27 to ‘is impracticable’ as ‘involves undue cost or effort’ and any reference to ‘practicable’ as ‘possible without undue cost or effort’.

54G

If an entity does not apply IFRS 14 Regulatory Deferral Accounts, the entity shall, in applying paragraph 11(b) to regulatory account balances, continue to refer to, and consider the applicability of, the definitions, recognition criteria, and measurement concepts in the Framework for the Preparation and Presentation of Financial Statements3 instead of those in the Conceptual Framework. A regulatory account balance is the balance of any expense (or income) account that is not recognised as an asset or a liability in accordance with other applicable IFRS Standards but is included, or is expected to be included, by the rate regulator in establishing the rate(s) that can be charged to customers. A rate regulator is an authorised body that is empowered by statute or regulation to establish the rate or a range of rates that bind an entity. The rate regulator may be a third-party body or a related party of the entity, including the entity’s own governing board, if that body is required by statute or regulation to set rates both in the interest of the customers and to ensure the overall financial viability of the entity.

[Refer:Basis for Conclusions paragraphs BC38—BC41]

54H

Definition of Material (Amendments to IAS 1 and IAS 8), issued in October 2018, amended paragraph 7 of IAS 1 and paragraph 5 of IAS 8, and deleted paragraph 6 of IAS 8. An entity shall apply those amendments prospectively for annual periods beginning on or after 1 January 2020. Earlier application is permitted. If an entity applies those amendments for an earlier period, it shall disclose that fact.

[Refer:

Basis for Conclusions paragraph BC21A

IAS 1 Basis for Conclusions paragraph BC13T]

Withdrawal of other pronouncements

55

This Standard supersedes IAS 8 Net Profit or Loss for the Period, Fundamental Errors and Changes in Accounting Policies, revised in 1993.

56

This Standard supersedes the following Interpretations:

(a)

SIC‑2 Consistency—Capitalisation of Borrowing Costs; and

(b)

SIC‑18 Consistency—Alternative Methods.

Appendices

AppendixAmendments to other pronouncements

The amendments in this appendix shall be applied for annual periods beginning on or after 1 January 2005. If an entity applies this Standard for an earlier period, these amendments shall be applied for that earlier period.

* * * * *

The amendments contained in this appendix when this Standard was revised in 2003 have been incorporated into the relevant pronouncements published in this volume.

Board Approvals

Approval by the Board of IAS 8 issued in December 2003

International Accounting Standard 8 Accounting Policies, Changes in Accounting Estimates and Errors (as revised in 2003) was approved for issue by the fourteen members of the International Accounting Standards Board.

Sir David TweedieChairman
Thomas E JonesVice‑Chairman
Mary E Barth
Hans‑Georg Bruns
Anthony T Cope
Robert P Garnett
Gilbert Gélard
James J Leisenring
Warren J McGregor
Patricia L O’Malley
Harry K Schmid
John T Smith
Geoffrey Whittington
Tatsumi Yamada

Approval by the Board of Definition of Material (Amendments to IAS 1 and IAS 8) issued in October 2018

Definition of Material (Amendments to IAS 1 and IAS 8) was approved for issue by the fourteen members of the International Accounting Standards Board.

Hans HoogervorstChairman
Suzanne LloydVice‑Chair
Nick Anderson
Martin Edelmann
Françoise Flores
Amaro Luiz de Oliveira Gomes
Gary Kabureck
Jianqiao Lu
Takatsugu Ochi
Darrel Scott
Thomas Scott
Chungwoo Suh
Ann Tarca
Mary Tokar

Footnotes

1

Definition of IFRSs amended after the name changes introduced by the revised Constitution of the IFRS Foundation in 2010. (back)

2

Paragraph 54G explains how this requirement is amended for regulatory account balances. (back)

3

The reference is to the IASC’s Framework for the Preparation and Presentation of Financial Statements adopted by the Board in 2001.

[Editor’s note: An extract from the IASC’s Framework for the Preparation and Presentation of Financial Statements, adopted by the Board in 2001, is available on the IAS 8 page of the ‘Supporting Implementation’ area of the Foundation’s website, under ‘Supporting Implementation by IFRS Standard’.] (back)