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.
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:IAS 1 paragraphs 117–124]
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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. |
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. Accounting estimates are monetary amounts in financial statements that are subject to measurement uncertainty. International Financial Reporting Standards (IFRSs) are Standards and Interpretations issued by the International Accounting Standards Board (IASB). They comprise:
Material is defined in paragraph 7 of IAS 1 and is used in this Standard with the same meaning. [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:
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:
Prospective application of a change in accounting policy and of recognising the effect of a change in an accounting estimate, respectively, are:
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6 | [Deleted] |
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 |
| 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:
[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…”]
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| 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
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| 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. |
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. |
14 | An entity shall change an accounting policy only if the change:
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| 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:
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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. |
19 | Subject to paragraph 23:
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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. |
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. |
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. |
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. |
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:
Financial statements of subsequent periods need not repeat these disclosures.
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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:
Financial statements of subsequent periods need not repeat these disclosures.
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| 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:
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31 | In complying with paragraph 30, an entity considers disclosing:
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32 | An accounting policy may require items in financial statements to be measured in a way that involves measurement uncertainty—that is, the accounting policy may require such items to be measured at monetary amounts that cannot be observed directly and must instead be estimated. In such a case, an entity develops an accounting estimate to achieve the objective set out by the accounting policy. Developing accounting estimates involves the use of judgements or assumptions based on the latest available, reliable information. Examples of accounting estimates include:
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32A | An entity uses measurement techniques and inputs to develop an accounting estimate. Measurement techniques include estimation techniques (for example, techniques used to measure a loss allowance for expected credit losses applying IFRS 9) and valuation techniques (for example, techniques used to measure the fair value of an asset or liability applying IFRS 13). |
32B | The term ‘estimate’ in IFRSs sometimes refers to an estimate that is not an accounting estimate as defined in this Standard. For example, it sometimes refers to an input used in developing accounting estimates. |
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 entity may need to change an accounting estimate if changes occur in the circumstances on which the accounting estimate was based or as a result of new information, new developments or more experience. By its nature, a change in an accounting estimate does not relate to prior periods and is not the correction of an error. |
34A | The effects on an accounting estimate of a change in an input or a change in a measurement technique are changes in accounting estimates unless they result from the correction of prior period errors. |
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:
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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. |
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 that change. 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 a loss allowance for expected credit losses 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. |
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.
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40 | If the amount of the effect in future periods is not disclosed because estimating it is impracticable, an entity shall disclose that fact.
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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:
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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 changing 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. |
49 | In applying paragraph 42, an entity shall disclose the following:
Financial statements of subsequent periods need not repeat these disclosures. |
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
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. |
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. |
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. |
54I | Definition of Accounting Estimates, issued in February 2021, amended paragraphs 5, 32, 34, 38 and 48 and added paragraphs 32A, 32B and 34A. An entity shall apply these amendments for annual reporting periods beginning on or after 1 January 2023. Earlier application is permitted. An entity shall apply the amendments to changes in accounting estimates and changes in accounting policies that occur on or after the beginning of the first annual reporting period in which it applies the amendments. |
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:
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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.
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The amendments contained in this appendix when this Standard was revised in 2003 have been incorporated into the relevant pronouncements published in this volume.
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 Tweedie | Chairman |
| Thomas E Jones | Vice‑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 |
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 Hoogervorst | Chairman |
| Suzanne Lloyd | Vice‑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 |
Definition of Accounting Estimates, which amended IAS 8, was approved for issue by 12 of 13 members of the International Accounting Standards Board. Mr Mackenzie abstained from voting in view of his recent appointment to the Board.
| Hans Hoogervorst | Chairman |
| Suzanne Lloyd | Vice-Chair |
| Nick Anderson | |
| Tadeu Cendon | |
| Martin Edelmann | |
| Françoise Flores | |
| Zach Gast | |
| Jianqiao Lu | |
| Bruce Mackenzie | |
| Thomas Scott | |
| Rika Suzuki | |
| Ann Tarca | |
| Mary Tokar |
| 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) |