Accounting Policies, Changes in Accounting Estimates and Errors (IAS 8)
Changes in accounting policies
Changes in accounting policies are rare. They are only allowed when there is a new accounting standard or if management considers that the new policy will mean there is a truer and fairer view. 14
To allow consistency, accounting policies should remain the same year on year. When there is a change in accounting policy, this must be dealt with retrospectively by making a prior period adjustment thus restating the opening retained earnings. 19, 22, 23
A change in accounting policy occurs only if there has been a change in
recognition e.g. an expense is now recognised as an asset
presentation e.g. depreciation now included in cost of sales rather than administration expenses
measurement basis e.g. stating assets at fair value rather than historical cost