Question
Rockhaven Ltd reports under IFRS and pays income tax at 20% . Its 2024 financial statements have been issued and the books for 2024 are closed. The following three independent situations must be dealt with during 2025. Change in accounting policy. Ef
Scoring
- 40% Account naming / line matching
- 40% Amount correctness
- 20% Structure / section placement
IAS 8 — Accounting Policies, Changes in Accounting Estimates and Errors
Classify the change before accounting for it. A change of accounting policy is applied retrospectively with comparatives restated; a change in an accounting estimate is applied prospectively from the date of change, with nothing restated.
Common mistakes
- Restating comparatives for what is really a change in estimate, such as a revised useful life.
- Applying a policy change prospectively when retrospective application is required and practicable.
- Omitting the adjustment to the opening balance of retained earnings on a retrospective change.
Further readingIAS 8: policies vs estimates vs errors