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Past_Exam_QA-Accounting_Policies_Estimates.docx

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EBA2013 Financial Accounting & Reporting 2 Past Exam Questions Accounting Policies, Changes in Accounting Estimates and Errors QUESTION 1 (Mid- Sem 1, 2014-15) / (Final Sem 1, 2014-15) /(Mid Sem 1 2... 015-16)/ (Final Sem 1 2015-16) The objective of MFRS 108 Accounting Policies, Changes in Accounting Estimates and Errors is to prescribe the criteria for selecting and changing accounting policies and the accounting treatment of changes in accounting policies, accounting estimates and errors. Required: a. Explain why this standard is important. (3 marks) To enhance comparability over time (historical trends) and with other entities (benchmarking) b. Explain what are accounting policies. (3 marks)  Accounting policies - “specific principles, bases, conventions, rules and practices applied by an entity in preparing and presenting financial statements” c. Explain the accounting treatment for an initial application of a new MFRS. (3 marks)  Initial application of an MFRS  if transitional accounting method provided – follow it  if no transitional method – retrospective application d. Explain, in detail, the accounting treatment for a voluntary change in accounting policy. (8 marks)  Voluntary change in policy  retrospective application  Retrospective application  means apply new policy as if it had always been applied  change past amounts  for the earliest prior period presented  adjust opening balance of equity affected  adjust opening balance of other comparative amounts disclosed  Unless impracticable to determine effects on specific prior periods or cumulative effect of change  If impracticable to apply full retrospective treatment, then  apply the change to assets, liabilities, and equity accounts at beginning of earliest possible period for which effects are known  If impracticable to determine cumulative effect even on current period opening balances, then  apply new policy prospectively (in the future) [Show More]

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