📖 Overview
This standard prescribes criteria for selecting and changing accounting policies, accounting treatment for changes in accounting estimates, and correction of errors. It requires retrospective application for accounting policy changes and error correction, while changes in estimates are applied prospectively.
🎯 Scope
This standard applies to:
- Selection and changes of accounting policies.
- Accounting treatment for changes in accounting estimates.
- Correction of errors in prior period financial statements.
Does not apply to changes in accounting policies resulting from adopting a new standard (the new standard's own requirements apply).
⚙️ Key Principles
1. **Accounting Policies**: The specific principles, bases, conventions, rules, and practices applied by an entity in preparing and presenting financial statements.
2. **Accounting Estimates**: Monetary amounts measured with uncertainty, such as allowance for doubtful accounts, asset useful lives, warranty obligations.
3. **Errors**: Omissions or misstatements in prior period financial statements resulting from failure to use reliable information that was available.
📏 Measurement
**Application of Accounting Policies:**
- Accounting policies are selected in accordance with IFRS.
- When no specific standard exists, management uses professional judgment.
**Changes in Estimates:**
- Applied prospectively from the date of change.
- Prior periods are not adjusted.
**Correction of Errors:**
- Corrected retrospectively.
- Comparative figures for prior periods are restated.
✅ Recognition
**Change in Accounting Policy:** Permitted only if:
- Required by a new standard.
- Or results in more relevant and reliable information.
**Change in Accounting Estimate:** Recognized in the period of change if affects only that period, or in the period of change and future periods if affects both.
**Correction of Error:** Recognized in the period the error is discovered, with restatement of prior periods.
📊 Presentation
**Disclosure for Accounting Policy Change:**
- Nature of the change.
- Reasons for the change.
- Effect on current and prior periods.
**Disclosure for Estimate Change:**
- Nature of the change.
- Effect on current and future periods.
**Disclosure for Error Correction:**
- Nature of the error.
- Correction amount for each financial statement line item.
- Correction amount at the beginning of the prior period.
📝 Disclosure Requirements
Disclosures required:
- Significant accounting policies used.
- Any changes in accounting policies and their impact.
- Nature and effect of changes in estimates.
- Nature and amount of errors corrected.
- Key judgments and estimates with significant uncertainty risk.
- Assumptions used in fair value measurement.
🔗 Related Standards
IAS 1 (Presentation of Financial Statements), IFRS 13 (Fair Value Measurement)