IAS 8 - Test 1

Prospective application of a change in accounting estimates means:

• applying the new estimates to transactions, other events and conditions occurring after reporting date
• applying the new estimates to transactions, other events and conditions occurring between the date of change and that financial year end
• applying the new estimates to transactions, other events and conditions occurring after the date of the change and the years that followsn 3
• applying a new estimates to transactions, other events and conditions as if that policy had always been applied.

Retrospective application of a change in accounting policy means:

• applying a new accounting policy to transactions, other events and conditions, identified before the date when the financial statements are authorised for issue, as if that policy had always been applied.
• applying the new accounting policy to transactions, other events and conditions occurring between the date as at which the policy is changed and the date when the financial statements are authorised for issue.
• applying the new accounting policy to transactions, other events and conditions occurring after the date as at which the policy is changed.
• applying a new accounting policy to transactions, other events and conditions as if that policy had always been applied.

Which of the following statements is true?

• The effect of a change in accounting estimate is recognised retrospectively.
• To the extent practicable, an entity must correct a prior period error prospectively in the first financial statements authorised for issue after its discovery.
• When an entity discovers an error in its financial statements of a prior period, it must immediately withdraw those financial statements and reissue them with the error corrected.
• To the extent practicable, an entity must correct a prior period error retrospectively in the first financial statements authorised for issue after its discovery.

Which of the following statements is true?

• Financial statements of subsequent periods need not repeat the disclosures required for a change in accounting policy and the correction of a prior period error.
• Financial statements of subsequent periods must repeat the disclosures required for a change in accounting policy and the correction of a prior period error.
• Financial statements of subsequent periods must repeat the disclosures required for a change in accounting policy and the correction of a prior period error unless it is impracticable to identify the period to which they relate.
• None of the above

Which of the following is not a change in accounting policy?

• In the current reporting period an entity changed the basis on which it measures a building that is an investment property from the fair value model to the cost model because fair value can no longer be measured reliably without undue cost or effort on an ongoing basis.
• An entity measures its only investment property at fair value. In the current reporting period, the entity acquired a subsidiary whom has an investment property, measures using the cost model. The subsidiary will revalue the investment property to be on fair value for his investment property , to be consistent with the parent company.
• In the current reporting period the entity changed the method on which it calculates depreciation of buildings, classified as property, plant and equipment, from the reducing balance method to the straight-line method.
• All of the above.