Question

3. IAS8 Accounting Policies, Changes in Accounting Estimates and Errors guides the process of selecting and applying accounting policies, accounting for changes in estimates and reflecting corrections of prior period errors. a) Distinguish between the terms “accounting policy” and “accounting standard” and give an example of how some of the firms accounting policies can be dictated by an international accounting standard. b) Discuss the disclosure requirements regarding a change in an accounting policy.

Answer 1

a) Distinguish Between Accounting Policy & Accounting Standard

Accounting Policy	Accounting Standard
1. Accounting policy is the method which is used for any item of Profit & loss account or Balance sheet like revenue recognition policies, inventory accounting policies.	1. Accounting standard is the whole set of accounts which is followed by person for doing the accounting in the books like IAS1, IAS2, IAS8.
2. Accounting policy is the part of one accounting standard which is IAS Accounting Policies, Changes in Accounting Estimates and Errors.	2. Accounting standard contains different standards for different items of Profit & Loss a/c & Balance sheet like IAS8, IAS 18 for revenue recognition, IAS2 for Inventory, etc.
3. These are followed consistently in preparing the financial statements unless the company’s management wants to change its accounting policies.	3. The Company may follow some of the accounting standards or all which depends upon the business of company.

              Example of Firms Accounting Policies.

1. Valuation of Inventory using FIFO, Weighted Average Method as per IAS 2.

2. Classification, Presentation & Measurement of Financial Assets & Liabilities as per IAS32 & IAS39.

3. Accrual Basis of preparation of financial statements.

b) Disclosure Regarding change in Accounting Policy As Per IAS8

· Title of IFRS.

· Name of Change in Accounting Policy.

· Reasons for Change.

· Amount of adjustments in current period & prior period.