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 2015-16)/
(Final Se
...
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 2015-16)/
(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)
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