IASB issued new standard IFRS 18
On 9 April 2024, the International Accounting Standards Board (IASB) published its new standard IFRS 18 Presentation and Disclosures in Financial Statements that will replace IAS 1 Presentation of Financial Sta…
On 12 February 2021, the International Accounting Standards Board (IASB) published Amendments to IAS 8 Definition of Accounting Estimates to help entities to distinguish between accounting policies and accounting estimates. The amendments are effective for annual periods beginning on or after 1 January 2023.
Background
The requirements in IFRSs, in particular in IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors, make a distinction between how an entity should present and disclose different types of accounting changes in its financial statements. Changes in accounting policies must be applied retrospectively while changes in accounting estimates are accounted for prospectively.
Companies sometimes struggle to distinguish between accounting policies and accounting estimates and enforcers have identified divergent practices and the Interpretations Committee received a request to clarify the distinction. The Interpretations Committee passed the request on to the IASB. An exposure draft of proposed amendments published in September 2017 has now been finalised.
Changes
The changes to IAS 8 focus entirely on accounting estimates and clarify the following:
The revised Standard lists the following items as examples of accounting estimates:
- A loss allowance for expected credit losses (IFRS 9 Financial Instruments)
- The net realisable value of an item of inventory (IAS 2 Inventories)
- The fair value of an asset or liability (IFRS 13 Fair Value Measurement)
- The depreciation expense for an item of property, plant and equipment (IAS 16 Property, Plant and Equipment)
- A provision for warranty obligations (IAS 37 Provisions, Contingent Liabilities and Contingent Assets).
In developing an accounting estimate, an entity uses estimation techniques (for example to estimate the loss allowance for expected credit losses) and/or valuation techniques (for example to measure the fair value of an asset or liability).
Effective date
The amendments are effective for annual periods beginning on or after 1 January 2023 and changes in accounting policies and changes in accounting estimates that occur on or after the start of that period. Earlier application is permitted.
Sources: www.iasplus.com, IFRS in Focus IFRS in Focus — IASB amends IAS 8
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