Indian Accounting Standard (Ind AS) 8 Summary
Indian Accounting Standard (Ind AS) 8 Accounting Policies, Changes in Accounting Estimates and Errors prescribes the criteria for selecting and changing accounting policies, accounting treatment and disclosure of changes in accounting policies, estimates and correction of errors.
Accounting policies are the specific principles, bases, conventions, rules and practices that an entity applies in preparing and presenting financial statements.
If Ind AS does not cover a particular issue, then the entity uses its judgement based on a hierarchy of accounting literature.
The entity shall select and apply its accounting policies consistently for similar transactions, other events and conditions, unless an Ind AS specifically requires or permits categorisation of items for which different policies may be appropriate. If an Ind AS requires or permits such categorisation, an appropriate accounting policy shall be selected and applied consistently to each category.
The entity shall change an accounting policy only if the change is required by an Ind AS or results in the financial statements providing reliable and more relevant information.
When initial application of an Ind AS has an effect on the current period or any prior period, the entity shall disclose the title of the Ind AS, the nature of change in accounting policy and that it is based on transitional provisions, a description of the transitional provisions including those that might have an effect on future periods and the amount of adjustment for the current and each prior period presented to the extent applicable. When an entity has not applied a new Ind AS that has been issued but is not yet effective, the entity shall disclose this along with known or reasonably estimable information to assess the possible impact that its initial application will have on the entity’s financial statements.
The 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.
If it is impracticable to disclose the amount of effect in future periods, this fact would be disclosed by the entity.
Errors can arise in respect of the recognition, measurement, presentation or disclosure of elements of financial statements. Generally, accounting policy changes and correction for errors are made retrospectively by adjusting opening equity and restating comparatives unless impracticable.
The entity should account for change in accounting estimate prospectively and where it is difficult to determine whether a change is change in accounting policy or a change in estimate, then it is treated as change in estimate.
If the classification and presentation of items in the financial statements is changed, then the entity should restate the comparatives unless this is impracticable.
Disclosure is required for judgements that have a significant impact on the financial statements and for key sources of estimation uncertainty.