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