Question Tag: IAS 8

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  • 6 Marks

FR – May 2016 – L2 – Q5a – Accounting Policies, Changes in Accounting Estimates, and Errors (IAS 8)

Explain the basis of selecting accounting policies and distinguish between changes in accounting policies and estimates with examples.

As one of the accountants of Oluwaseun Plc, a company that has migrated to IFRS, you are aware that IAS 8 “Accounting Policies, Changes in Accounting Estimates and Errors” contains guidance on the use of accounting policies and accounting estimates.

Required:

Explain the basis on which the management of an entity, such as Oluwaseun Plc, must select its accounting policies, and distinguish, with an example, between changes in accounting policies and changes in accounting estimates.

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  • 15 Marks

FR – May 2024 – L2 – SB – Q5 – Segment Reporting

Explanation of prior period errors, examples, and correction methods as per IAS 8, along with practical application to inventory errors in Lagos Company Nig. Limited.

a. Errors might happen when preparing financial statements. If such errors are discovered quickly, they are corrected before the finalised financial statements are published. When this happens, the correction of the error is of no significance for the purpose of financial reporting.

However, when an error is discovered that relates to a prior accounting period, a problem may arise.

Required:
Explain prior period errors, giving examples, and discuss how such errors are corrected in accordance with IAS 8 – Accounting Policies, Changes in Accounting Estimates, and Errors. (7 Marks)

b. During the year 2022, Lagos Company Nig. Limited discovered that certain items had been erroneously included in inventory at December 31, 2021. The amount was valued at ₦16.8 million, which had been sold before the year-end.

The following figures for the year 2021 (as reported) and 2022 (draft) are available as follows:

2022 (Draft) 2021 (Published)
Revenue ₦268,800,000 ₦189,600,000
Cost of sales (₦223,200,000) (₦138,280,000)
Profit before tax ₦45,600,000 ₦51,320,000
Income tax expense (₦13,600,000) (₦15,520,000)
Profit for the year ₦32,000,000 ₦35,800,000

The retained earnings at January 1, 2021, were ₦52 million. The cost of sales for the year 2022 includes a ₦16.8 million error in the opening inventories. The company income tax rate is 30%.

Required:
Prepare a statement of profit or loss and other comprehensive income for the year ended December 31, 2022, and retained earnings extracts showing comparative figures. (8 Marks)

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  • 12 Marks

FR – Nov 2019 – L2 – Q1c – Accounting Policies, Changes in Accounting Estimates, and Errors (IAS 8)

Explain the factors required for selecting and applying accounting policies per IAS 8, and identify alternative policies for inventory and depreciation.

c. State the main factors that IAS 8 requires management of a company to consider in selecting and applying accounting policies in the absence of any IFRS and identify the alternative accounting policies on the following items in the financial statements:

i. Inventories
ii. Depreciation

(12 Marks)

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  • 1 Marks

FA – May 2022 – L1 – SA – Q3 – Accounting Concepts

Identify the type of adjustment under IAS 8 described in a scenario of changing depreciation estimates.

An item of plant was purchased for ₦300,000 on January 1, 2017. Its expected useful life was estimated to be ten years with nil residual value. The asset was depreciated on a straight-line basis. However, a review on December 31, 2018, showed that, due to technological changes, the useful life of the plant is only five years in total. The plant has a remaining useful life of three years. The adjustment under IAS 8 is:

A. Change in accounting estimate
B. Change in accounting policy
C. Correction of error
D. Retrospective adjustment
E. Reclassification of non-current asset

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  • 1 Marks

FA – May 2021 – L1 – SA – Q15 – Regulatory Environment of Accounting

Identify changes that are considered accounting estimates under IAS 8.

In accordance with IAS 8 – Accounting Policies, Changes in Accounting Estimates and Errors, which of the following is considered a change in accounting estimates?

i. Changing the useful life of an asset
ii. Changing from cost model to revaluation model
iii. Change in the allowances for doubtful receivables
iv. Change from FIFO to weighted average for valuation of inventory

A. I and II
B. I and III
C. II and III
D. II and IV
E. III and IV

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  • 8 Marks

FA – Nov 2023 – L1 – SB – Q5B -Regulatory Environment of Accounting

Explain the distinction between accounting policies and accounting estimates as per IAS 8.

Explain the distinction between accounting policies and accounting estimates in accordance with IAS 8 – Accounting Policies, Changes in Accounting Estimates and Errors.

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  • 1 Marks

BL – Nov 2019 – L1 – SA – Q4 – Sources of Nigerian Law

Identifying changes in accounting methods that do not give rise to changes in accounting policy

In accordance with the requirements of IAS-8 – Accounting Policies, Estimates and Errors, which of the following changes in method does not give rise to changes in accounting policy?
A. Measurement of PPE from cost to revaluation model
B. Presentation of depreciation from cost of sale to administrative expense
C. Calculation of depreciation from straight line to sum of digit method
D. Recognition of an expense from capitalisation to expensing
E. Reclassification of non-current asset to current asset

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  • 8 Marks

FA – May 2023 – L1 – SB – Q3b – Regulatory Environment of Accounting, IAS 8

Defining accounting policies and changes in accounting estimates with examples, and outlining the required accounting treatment.

IAS 8 deals with the measurement, recognition, and disclosure of accounting policies, changes in accounting estimates, and correction of prior period errors.

i. Define an accounting policy and change in accounting estimates, with TWO examples each. (6 Marks)

ii. Outline the accounting treatments required to record a change in accounting estimates. (2 Marks)

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  • 1 Marks

FA – Nov 2019 – L1 – SA – Q4 – Accounting Concepts

Identify which change does not affect accounting policy under IAS-8.

In accordance with the requirements of IAS-8 – Accounting Policies, Estimates, and Errors, which of the following changes in method does not give rise to changes in accounting policy?

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  • 4 Marks

FR – Nov 2021 – L2 – Q2d – Financial Reporting Standards and Their Applications

This question covers the procedures for selecting and applying accounting policies in accordance with IAS 8.

IAS 8: Accounting Policies, Changes in Accounting Estimates and Errors is applied in selecting and applying accounting policies, accounting for changes in estimates, and reflecting corrections of prior period errors.

Required:
Describe the procedures an entity shall apply in selecting an accounting policy.

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  • 6 Marks

FR – May 2016 – L2 – Q5a – Accounting Policies, Changes in Accounting Estimates, and Errors (IAS 8)

Explain the basis of selecting accounting policies and distinguish between changes in accounting policies and estimates with examples.

As one of the accountants of Oluwaseun Plc, a company that has migrated to IFRS, you are aware that IAS 8 “Accounting Policies, Changes in Accounting Estimates and Errors” contains guidance on the use of accounting policies and accounting estimates.

Required:

Explain the basis on which the management of an entity, such as Oluwaseun Plc, must select its accounting policies, and distinguish, with an example, between changes in accounting policies and changes in accounting estimates.

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  • 15 Marks

FR – May 2024 – L2 – SB – Q5 – Segment Reporting

Explanation of prior period errors, examples, and correction methods as per IAS 8, along with practical application to inventory errors in Lagos Company Nig. Limited.

a. Errors might happen when preparing financial statements. If such errors are discovered quickly, they are corrected before the finalised financial statements are published. When this happens, the correction of the error is of no significance for the purpose of financial reporting.

However, when an error is discovered that relates to a prior accounting period, a problem may arise.

Required:
Explain prior period errors, giving examples, and discuss how such errors are corrected in accordance with IAS 8 – Accounting Policies, Changes in Accounting Estimates, and Errors. (7 Marks)

b. During the year 2022, Lagos Company Nig. Limited discovered that certain items had been erroneously included in inventory at December 31, 2021. The amount was valued at ₦16.8 million, which had been sold before the year-end.

The following figures for the year 2021 (as reported) and 2022 (draft) are available as follows:

2022 (Draft) 2021 (Published)
Revenue ₦268,800,000 ₦189,600,000
Cost of sales (₦223,200,000) (₦138,280,000)
Profit before tax ₦45,600,000 ₦51,320,000
Income tax expense (₦13,600,000) (₦15,520,000)
Profit for the year ₦32,000,000 ₦35,800,000

The retained earnings at January 1, 2021, were ₦52 million. The cost of sales for the year 2022 includes a ₦16.8 million error in the opening inventories. The company income tax rate is 30%.

Required:
Prepare a statement of profit or loss and other comprehensive income for the year ended December 31, 2022, and retained earnings extracts showing comparative figures. (8 Marks)

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  • 12 Marks

FR – Nov 2019 – L2 – Q1c – Accounting Policies, Changes in Accounting Estimates, and Errors (IAS 8)

Explain the factors required for selecting and applying accounting policies per IAS 8, and identify alternative policies for inventory and depreciation.

c. State the main factors that IAS 8 requires management of a company to consider in selecting and applying accounting policies in the absence of any IFRS and identify the alternative accounting policies on the following items in the financial statements:

i. Inventories
ii. Depreciation

(12 Marks)

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  • 1 Marks

FA – May 2022 – L1 – SA – Q3 – Accounting Concepts

Identify the type of adjustment under IAS 8 described in a scenario of changing depreciation estimates.

An item of plant was purchased for ₦300,000 on January 1, 2017. Its expected useful life was estimated to be ten years with nil residual value. The asset was depreciated on a straight-line basis. However, a review on December 31, 2018, showed that, due to technological changes, the useful life of the plant is only five years in total. The plant has a remaining useful life of three years. The adjustment under IAS 8 is:

A. Change in accounting estimate
B. Change in accounting policy
C. Correction of error
D. Retrospective adjustment
E. Reclassification of non-current asset

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  • 1 Marks

FA – May 2021 – L1 – SA – Q15 – Regulatory Environment of Accounting

Identify changes that are considered accounting estimates under IAS 8.

In accordance with IAS 8 – Accounting Policies, Changes in Accounting Estimates and Errors, which of the following is considered a change in accounting estimates?

i. Changing the useful life of an asset
ii. Changing from cost model to revaluation model
iii. Change in the allowances for doubtful receivables
iv. Change from FIFO to weighted average for valuation of inventory

A. I and II
B. I and III
C. II and III
D. II and IV
E. III and IV

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  • 8 Marks

FA – Nov 2023 – L1 – SB – Q5B -Regulatory Environment of Accounting

Explain the distinction between accounting policies and accounting estimates as per IAS 8.

Explain the distinction between accounting policies and accounting estimates in accordance with IAS 8 – Accounting Policies, Changes in Accounting Estimates and Errors.

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  • 1 Marks

BL – Nov 2019 – L1 – SA – Q4 – Sources of Nigerian Law

Identifying changes in accounting methods that do not give rise to changes in accounting policy

In accordance with the requirements of IAS-8 – Accounting Policies, Estimates and Errors, which of the following changes in method does not give rise to changes in accounting policy?
A. Measurement of PPE from cost to revaluation model
B. Presentation of depreciation from cost of sale to administrative expense
C. Calculation of depreciation from straight line to sum of digit method
D. Recognition of an expense from capitalisation to expensing
E. Reclassification of non-current asset to current asset

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  • 8 Marks

FA – May 2023 – L1 – SB – Q3b – Regulatory Environment of Accounting, IAS 8

Defining accounting policies and changes in accounting estimates with examples, and outlining the required accounting treatment.

IAS 8 deals with the measurement, recognition, and disclosure of accounting policies, changes in accounting estimates, and correction of prior period errors.

i. Define an accounting policy and change in accounting estimates, with TWO examples each. (6 Marks)

ii. Outline the accounting treatments required to record a change in accounting estimates. (2 Marks)

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  • 1 Marks

FA – Nov 2019 – L1 – SA – Q4 – Accounting Concepts

Identify which change does not affect accounting policy under IAS-8.

In accordance with the requirements of IAS-8 – Accounting Policies, Estimates, and Errors, which of the following changes in method does not give rise to changes in accounting policy?

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  • 4 Marks

FR – Nov 2021 – L2 – Q2d – Financial Reporting Standards and Their Applications

This question covers the procedures for selecting and applying accounting policies in accordance with IAS 8.

IAS 8: Accounting Policies, Changes in Accounting Estimates and Errors is applied in selecting and applying accounting policies, accounting for changes in estimates, and reflecting corrections of prior period errors.

Required:
Describe the procedures an entity shall apply in selecting an accounting policy.

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