Question

Question 5 : In accordance with HKAS 8 Accounting Policies, Changes in Accounting Estimates and Errors, discuss the procedures in selecting, applying and changing the accounting policies for the listed companies in Hong Kong.

Question 6: In accordance with HKAS 10 Events after the Reporting Period, what is the core principle? What are adjusting events and non-adjusting events? Discuss with examples.

Question 7 : In accordance with HKAS 23 Borrowing Costs, what is the core principle? What are the accounting treatments of borrowing costs eligible for capitalisation? What are the criteria to start measuring for capitalisation?

Question 8 : In accordance with HKAS 38 Intangible Assets, discuss the criteria for development costs to qualify for recognition as intangible assets.

Question 9 : Most preparers and users of financial statements recognize that there is a need for a formal conceptual framework in financial reporting. Therefore, there is a formal conceptual framework for accounting, accounting practice and accounting standards are based on this framework can benefit different stakeholders.

REQUIRED:

Discuss the purposes of the IASB/HKICPA Conceptual Framework for Financial Reporting 2018.

Answer 1

Question 5

Solution-

HKAS 8 provides for various principles and guidance in selecting, applying and changing the accounting policies for the listed companies in Hong Kong.

Management of an entity prefers select an accounting policy that is in accordance with:

• the accounting standard and which deals with similar events or conditions

• the recognition and measurement criteria for assets, liabilities, income and expenses as per the financial reporting framework.

In the absence of a standard w.r.t the above conditions then accounting policies are selected based on -

1. it's relevance in making economic decisions
2. it's reliability in presenting information about the transactions and the financial statements:

- Neutral( Free from any bias)

- Prudent

- Complete in all material respects

- Fair w.r.t the financial position, performance and cash flows of an entity

- Reflect the economic substance of transactions

Normally, accounting policies are followed on a consistent basis to facilitate comparibility of the financial statements with that of the earlier periods. However accounting policies can be changed only if-

1. is required by a HKFRS; or
2. results in more relevant and reliable presentation of the transactions, financial position, financial performance and cash flows of an entity.