Accounting Policies Changes in Accounting Estimates and Errors.ppt

1、IAS8 Accounting Policies, Changes in Accounting Estimates and Errors,Syllabus A2de,1,Accounting policy,Accounting policies are the specific principles, bases, conventions, rules and practices applied by an entity in preparing and presenting financial statements. If a standard applies to a transactio

2、n, follow that IAS or IFRS. In the absence of a standard, select a policy that maximises the relevance and reliability of the information presented.,2,Continued,Required by IAS1 It is helpful to make financial information possess the following characteristics: relevance to the decision making needs

3、of users reliability faithful representation substance over form neutrality prudence completeness,3,Continued,Changes in accounting policies only if (a) is required by an IFRS; or (b) results in the financial statements providing reliable and more relevant information about the effects of transactio

4、ns, other events or conditions on the entitys financial position, financial performance or cash flows. They include the changes in recognition, measurement basis and presentation.,4,Continued,*Two types of events which do not constitute changes in accounting policy the application of an accounting p

5、olicy for transactions, other events or conditions that differ in substance from those previously occurring; and the application of a new accounting policy for transactions, other events or conditions that did not occur previously or were immaterial. Exception the initial application of the revaluat

6、ion method for PPE and intangible asset is not treated as a change in accounting policy under IAS 8.,5,Continued,Accounting treatment retrospective application to adjust against opening retained earnings in SOCIE, and to provide comparative information. prospective application if the cumulative effe

7、ct of the change can not be determined. to recognise the effect of change in the current and future periods.,6,Continued,If material, disclose the title of the standard, etc. changed the reason for the change the amounts of the adjustments relating to periods whether presented in the financial state

8、ments or not an explanation and description of not applying retrospective method,7,Exercises,4 Dec10 5b Dec06 3d Jun03(练习册3d) 5a Dec01 Jun98 old,Example 1, 2 p179,8,Changes in accounting estimates,They are unavoidable, given the uncertainties inherent in business activities Prospective method the pe

9、riod of the change, if the change affects that period only; or the period of the change and subsequent periods , if the change affects both. If material, disclose its nature and amount of the change the fact that estimating the amount of effect is impracticable,9,Correction of prior period errors,Pr

10、ior period errors omissions from, and misstatements in, an entitys financial statements for one or more prior periods arising from a failure to use, or misuse of , reliable information that was available and could reasonably be expected to have been obtained and taken into account in preparing finan

11、cial statements. e.g., mathematical mistakes, mistakes in applying accounting policy, oversights or misinterpretations of facts, and fraud.,10,Continued,Material prior period errors should be corrected retrospectively by restating the opening balances of assets, liabilities and equity as if the erro

12、r had never occurred. by restating the opening retained earnings in SOCIE restating the comparative information, as if the error had never occurred The nature and amount of the correction should be disclosed in a note.,11,Exercises,2 Jun02 note1-4, adjustments for retained earnings 3d Jun03 5 Dec07

13、2noteiv Jun08 4 Dec10,Example3, p181,12,IAS10 Events after the reporting period,Syllabus C11h,13,Definition,The events which occur between the reporting date and the date on which the financial statements are authorised for issue by the board of directors.,14,Adjusting events,Those that provide addi

14、tional evidence of conditions existing at the reporting date The amounts in the financial statements should be adjusted. Example The resolution of court case which existed at the reporting date The receipt of information indicating the impairment of assets which existed at the reporting date Allowan

15、ce for inventories and bad debts (receipts of accounts receivable or sale of inventory) Bankruptcy of debtors,15,Adjusting events,Amounts received or receivable in respect of insurance claims which were being negotiated at the reporting date. Discovery of fraud and error The determination of the cos

16、t of assets purchased, or the proceeds from assets sold, before the reporting date The determination of the amount of profit sharing or bonus payments, if the enterprise had a present legal or constructive obligation at the reporting date to make such payments,16,Non-adjusting events,Those that are

17、indicative of conditions that arose after the reporting fate Have no effect on items in the financial statements, but should be disclosed by notes if material,17,Continued,Example A major business combination after the reporting date A sale of an investment (i.e., a subsidiary) after the reporting d

18、ate The destruction by a disaster (fire or flood ) after the reporting date Abnormally large changes after the reporting date in asset prices or foreign exchange rates,18,Continued,Example Announcing a plan to discontinue an operation, disposing of assets or settling liabilities or entering into bin

19、ding agreements to sell such assets or settle such liabilities Major purchases and disposals of assets, or expropriation of major assets by government Dividends declared after the reporting date Announcing, or commencing the implementation of, a major restructuring,19,Continued,Example Major ordinar

20、y share transactions and potential ordinary share transactions Changes in tax rates or tax laws enacted or announced that have a significant effect on current and deferred tax assets and liabilities Entering into significant commitments or contingent liabilities Commencing major litigation arising s

21、olely out of events that occurred after the reporting date,20,Disclosure requirements,Material non-adjusting events The nature of the event An estimate of financial effect A statement that the estimate can not made Equity dividends proposed before but declared after the reporting date must disclosed

22、 by notes If management decide after the reporting date to cease trading, the financial statements should not be prepared on the going concern bases.,21,Exercises,You are the financial accountant of StarHub Engineering . You are responsible for preparing the companys financial statements and are at

23、present finalizing those for the year ended 31 December 2004 for presentation to the board. The following items are material : Requirement : Explain how you will treat each items in the financial statements and give a brief explanation.,22,Continued,a) your have recently discovered that during September and October 2004, while you were away sick, the cashier took advantage of the weakened internal controls to de