PAS 8

• What does PAS 8 prescribe regarding accounting policies?

  PAS 8 prescribes the criteria for selecting, applying, and changing accounting policies.
• What is the purpose of the criteria set by PAS 8?

  To enhance the relevance, reliability, and comparability of the entity’s financial statements.
• What are accounting policies defined as?

  Specific principles, bases, conventions, rules, and practices applied by an entity in preparing and presenting financial statements.
• What hierarchy should an entity refer to when selecting and applying accounting policies?

  1. PFRSs
  2. Judgement
• What should management consider when making judgments regarding accounting policies?

  Requirements in other PFRSs dealing with similar transactions and the Conceptual Framework.
• What additional references may management consider when making judgments?

  Pronouncements issued by other standard-setting bodies, other accounting literature, and industry practices.
• What is the first step an entity should take to account for a transaction?

  Refer to the PFRSs first.
• What does it mean if a guidance is an integral part of the PFRSs?

  It is mandatory.
• Under what conditions can a change in accounting policy occur according to PAS 8?

  If required by a PFRS or results in reliable and more relevant information.
• What usually results from a change in accounting policy?

  A change in measurement basis.
• Provide examples of changes in accounting policies.

  • Change from FIFO to the Weighted Average cost formula for inventories.
  • Change from the cost model to the fair value model of measuring investment property.
  • Change from the cost model to the revaluation model of measuring property, plant, and equipment and intangible assets.
  • Change in business model for classifying financial assets.
  • Change in the method of recognizing revenue from long-term construction contracts.
  • Change to a new policy resulting from the requirement of a new PFRS.
  • Change in financial reporting framework, such as from PFRS for SMEs to full PFRS.
• What are not considered changes in accounting policies?

  The application of an accounting policy for transactions that differ in substance from previously occurring events.
• How are changes in accounting policies accounted for?

  Using the order of priority: transitional provision in a PFRS, retrospective application, and prospective application.
• What is a transitional provision?


  Specific guidelines that allow entities to adopt new accounting standards without applying them retrospectively.
• What does retrospective application mean?

  Adjusting the opening balance of each affected component of equity for the earliest prior period presented as if the new accounting policy had always been applied.
• What happens if retrospective application is impracticable?

  The entity shall apply the new accounting policy prospectively from the earliest date possible.
• What does "impracticable" mean in the context of accounting policy changes?


  It cannot be done after making every reasonable effort to do so.
• When is a retrospective treatment considered impracticable?


  If prior period effects cannot be determined or require significant estimates and assumptions that are impossible to determine.
• What are accounting estimates defined as?

  Monetary amounts in financial statements that are subject to measurement uncertainty.
• What are some examples of items that require estimation in financial statements?

  • Depreciation
  • Bad debts
  • Provisions
  • Net realizable values of inventories
  • Fair value of financial assets or financial liabilities
• When should estimates be revised?


  When there is a change in circumstances such that new information, new developments, or more experience is obtained.
• How does a change in accounting estimate differ from a correction of error?

  A change in accounting estimate does not relate to prior periods and is not a correction of error.
• What are the differences between a change in accounting policy and a change in accounting estimates?

  • Change in accounting policy normally results from a change in measurement basis.
  • Change in accounting estimates normally results from changes in expected inflows or outflows of economic benefits.
  • If a change is difficult to distinguish, it is treated as a change in an accounting estimate.
• Provide examples of changes in accounting estimates.

  • Change in the depreciation or amortization method, useful life, or residual value of an asset.
  • Change in the required balance of allowance for uncollectible accounts or impairment losses.
  • Change in estimated warranty obligations and other provisions.
  • Change in the net realizable value of inventory.
  • Change in the estimate of fair value.
• How are changes in accounting estimates accounted for?

  By prospective application, recognizing the effects of the change in profit or loss in the period of change or future periods.
• What do errors include in accounting?

  Misapplication of accounting policies, mathematical mistakes, misinterpretation of facts, and fraud.
• What happens if financial statements contain material errors?

  They do not comply with PFRSs.
• What are material errors?

  Errors that cause the financial statements to be misstated.
• What is the difference between an error of commission and an error of omission?

  An error of commission is doing something wrong, while an error of omission is not doing something that should have been done.
• What are the types of errors according to the period of occurrence?

  • Current period errors: Discovered during or after the current period but before financial statements are authorized for issue, corrected by correcting entries.
  • Prior period errors: Discovered during the current period or after, corrected by retrospective restatement.
• What does retrospective restatement mean?


  Restating the amounts for the prior period(s) presented in which the error occurred.
• How does retrospective restatement differ from retrospective application?

  Retrospective restatement corrects a prior period error as if it had never occurred, while retrospective application applies a new accounting policy as if it had always been applied.
• What should be done if it is impracticable to determine the cumulative effect of a prior period error?

  The entity is allowed to correct the error prospectively from the earliest date practicable.