The main objective of IFRS 8 "Accounting Policies, Changes in Accounting Policies and Errors" is to establish criteria according to which the methods for recording and reporting changes in the company's accounting policies, accounting estimates, and errors are determined. The new version of the standard was adopted on December 18, 2003 and is effective from January 2005. This means that all changes in the standard must be applied not only to the 2005 accounts, but also to the 2004 comparatives. Together with the revised IFRS 8, the use of SIC 2 Consistency Principle - Capitalization of Borrowing Costs and SIC 18 Consistency Principle - Alternative Methods are mandatory.

The new edition of the standard, in order to unify the principles of reporting errors, does not allow the use of an “alternative” method of recording errors in accounting previous periods, which assumed the adjustment of data on net profit or loss of the current period without correcting information for previous periods. The concept of "fundamental error" is also excluded.

ki” (in the previous version of the standard, errors identified in the current period were recognized as fundamental, as a result of which the financial statements for one or more previous periods could not be considered reliable at the time of issue).

Personal experience

Sergey Moderov,department head financial accounting according to international standards of the Institute of Entrepreneurship Problems (St. Petersburg) The reduction in the number of acceptable accounting methods, namely the exclusion of the “alternative” method of recording errors, is a consequence of the convergence of IFRS and US GAAP. Moreover, this will ensure greater degree comparability financial reporting for several periods.

Formation of accounting policy

In accordance with IFRS, an accounting policy is a document containing specific principles, methods, procedures, rules and practices for applying IFRS adopted by an enterprise for the preparation and presentation of financial statements.

In the absence of an appropriate international financial reporting standard that determines the accounting procedure for a particular financial transaction economic activity, the company should be guided by its own opinion in the formation of accounting principles, based on the provisions and concepts of IFRS.

IFRS 8 in such a situation prescribes the following actions (each subsequent is performed if the previous one does not produce results):

1. Review standards and existing interpretations of standards that are related to similar operations.
2. Use the principles and provisions for the reflection of assets, liabilities, income and expenses, which are defined in the introductory chapter of IFRS “Framework for the Preparation and Presentation of Financial Statements”.
3. Refer to recent statements by government national accounting and reporting authorities that use an approach similar to the framework principles. You can also use any literature that highlights accounting issues and established industry practices. However, this should not be inconsistent with IFRS and the framework principles.

Sergey Moderov In practice, I had to deal with situations where international financial reporting standards did not contain the necessary guidance on some accounting items. This concerned accounting in companies extracting minerals. IFRS does not have a specialized standard for the extractive industries, there is only IFRS (IFRS) 6 “Exploration and Evaluation mineral resources". However, this standard does not answer all questions regarding the accounting of licenses and other intangible assets in the extractive industry, as well as the issue of valuation of the assets of an extractive company. In practice, when developing accounting policies in accordance with IFRS 1 “Presentation of Financial Statements” and the principles international standards had to use the provisions of Russian standards accounting, as well as the relevant US GAAP standards, which was included in accounting policy.

Denis Davidko,deputy CEO for Corporate Investments and Capital Markets Open Investments OJSC (Moscow) In our practice, there were no such transactions for which accounting principles are not defined in international financial reporting standards. IFRS, unlike Russian standards, contain principles that cover the entire spectrum business transactions, assets and liabilities of the enterprise. And even if there is no specific mention of whether or not

other object of accounting, then, relying on the principles and approaches set forth in the standards, and interacting with the auditor, any professional accountant or the controller can always develop accounting rules. It seems to me that difficulties can arise only in the classification of accounting objects, but not in the development of accounting principles reflected in accounting policies.

Having chosen an appropriate accounting policy, an entity must apply it consistently across similar transactions and events. It is important for users of financial statements to be able to compare financial data across multiple reporting periods in order to determine trends and a company's financial position, as well as evaluate a company's performance and ability to generate cash flows.

Accounting policy changes

In accordance with IFRS, adjustments can be made to accounting policies in the following cases:

— the requirements of the standards or their interpretations have been changed;

- changes in accounting policies will reflect the financial position of the enterprise, the results of its activities and the movement Money more reliable.

Personal experience

Denis Davidko Companies due to changes in the business environment are forced to adjust their accounting policies quite often. But this situation is absolutely normal, and the quality of reporting will not suffer from this. It is important to justify the reasons for such changes and explain them to the end users of the financial statements.

Igor Dmitriev,Senior Specialist, International Projects Department, Baker Tilly Rusaudit (Moscow) As our experience shows, the application of IFRS 8 does not currently cause any particular difficulties. The standard itself is quite specific and not contradictory. In addition, the practice of applying IFRS 8 in our country is still limited. Most enterprises make their financial statements under IFRS for one to three years. The operating conditions of such enterprises have not yet had time to change so much that it was necessary to change the accounting policy or accounting estimates.

Extracts from the accounting policy of the Norilsk Nickel Mining and Metallurgical CompanyThe sections of the accounting policy are given, which give an idea of ​​what is included in the content of the accounting policy of the enterprise in accordance with the requirements of IFRS.

1. Method of consolidation.

2. Measurement currency and presentation currency.

3. Indicators of the balance sheet and income statement, expressed in foreign currency.

4. Fixed assets.

5. Capital construction in progress.

6. Cost reduction.

7. Expenses for research and exploration work.

8. Inventory.

9. Financial instruments.

10. Leasing of metals and repurchase agreements.

11. The cost of attracting borrowed funds.

12. Reserves.

13. Employee benefits.

14. Own shares redeemed from shareholders.

15. Taxation.

16. Revenue recognition.

17. Contracts for the sale of goods.

18. Operating lease.

19. Dividends declared.

20. Information on segments.

21. State grants.

22. Expenses for the decommissioning of fixed assets.

23. Current costs of environmental restoration.

If the accounting policy adjustment is caused by new requirements of the standards, then the changes in the financial statements should be reflected in accordance with the provisions on transition period contained in new version IFRS 8. Otherwise, changes in accounting policies are reflected in the financial statements of previous periods as if the new accounting policy had always been applied (retrospective approach). At the same time, the opening balance of retained earnings is corrected and the comparative indicators given in the financial statements are recalculated. If a retrospective recalculation of indicators for the previous period seems unjustified (significant adjustment costs), then it is allowed to make changes only to the reporting of the current period and provide the necessary clarifications in the appendix to the financial statements.

Example 1

Company A began development of the new production line on 1 January 2001 and all costs associated with the launch of the line are in accordance with IAS 16 Property, Plant and Equipment and IAS 38 Intangible Assets (it was assumed that the introduction of the new line would result in increase in the value of the company's goodwill) was treated as an investment in property, plant and equipment and intangible assets. In 2004, the directors of the company decided that this year and in the future, the costs of developing production should be recognized as operating expenses in the profit and loss account. This change was due to the fact that the future economic efficiency investment has been called into question. Financial information before making changes to the accounting policy is given in table. one.

The statement of changes in equity for 2003 included the following information (in thousands of US dollars): — retained earnings previous years - 3040;

- profit of the reporting period - 2150;

- retained earnings at the end of the reporting period - 5190.

Due to a change in the accounting policy of the enterprise, it is required to make adjustments to the reporting of past periods, which are subject to this change, as if the new accounting policy had been applied in previous periods (writing off all development costs as current expenses in the profit and loss account). Therefore, it is necessary to adjust (increase) the costs for current expenses of past periods:

$400,000 for 2001;

340 thousand US dollars for 2002;

350 thousand US dollars for 2003. Thus, the company's retained earnings at the end of 2004 should be $1,090,000 less than previously reported earnings of $5,190,000 (see Table 2).

When making changes to the company's accounting policy, it is necessary to disclose the following data on the changes that have occurred in the financial statements:

- the name of the standard or PKI that led to changes in accounting policies;

— the nature of the changes in accounting policies;

— description of the principles for the implementation of the transition to a new accounting policy;

- the amount of adjustment for the current and previous periods;

- a description and explanation of how changes in accounting policies will be made to the statements in cases where an adjustment to previous periods is unjustified.

Table 1 Costs for the development of a new production line, thousand US dollars

Due to the uncertainty that is always present in the course of the financial and economic activities of an enterprise, there are many items in the financial statements that cannot be accurately estimated. In valuing such items, the latest and best information available at the valuation date is used. Examples of such articles might be:

Provisions for doubtful and overdue receivables;

Term beneficial use fixed assets;

Market value of investments.

According to IFRS 8, the revision of accounting estimates is not considered as an error; accordingly, the statements of past periods will not be subject to adjustments. The profit (loss) of the company must be adjusted for the effect (increase or decrease in the value of assets, expenses and income) from the revision of accounting estimates. Changes in accounting estimates are reflected in the current and future reporting periods if the change affects more than one period. For example, changes in the estimate of the allowance for doubtful and uncollectible debts will only apply to the current reporting period. Changes in duration useful life services

fixed assets will be reflected by adjusting the depreciation rates in the current and subsequent periods until the end of the life of the fixed asset. Character and financial influence changes in accounting estimates should be disclosed in the financial statements.

Recognition and reflection of mistakes

Errors in accordance with IFRS are mathematical miscalculations identified in the current period, incorrect or inconsistent application of the company's accounting policies, as well as deliberate deception.

In practice, it is difficult to distinguish between errors and changes in accounting estimates. For this

Table 3 Profit and loss statement of company "B", thousand US dollars

it is required to determine what the cause of the alleged errors is: a misinterpretation of the available information or a changed view of the event (for example, a new specialist is reporting). Although the solution to this issue cannot be unambiguous, in most borderline cases it is more reasonable to reflect adjustments as changes in accounting estimates.

An error in the reporting of the previous period must be corrected as soon as possible. new reporting companies. However, comparative data current reporting also need to be adjusted. If the error was discovered prior to the very first reporting, adjustments are made to the opening balances of assets, liabilities and equity. Correction of errors of previous years in the current financial statements is not carried out, since the error should already be corrected in the statements of previous periods. For identified errors, the entity is required to disclose the nature of the error and the amount of the adjustment for each of the periods.

Example 2

In preparing the preliminary version of the financial statements for 2004, company "B" discovered an error in estimating the balance of inventories at the end of the previous period. This led to a decrease in cost of goods sold and, as a result, to an increase in profit before tax. Accordingly, in order to fairly reflect the company's financial position, cost of goods sold was increased by $5 million in 2003 and decreased by that amount in 2004. With this in mind, the financial results and the amount of income tax (rate 24%) (see Table 3).

Differences between IFRS and RAS

A significant difference between IFRS 8 and Russian accounting standards is that RAS does not imply adjustments to statements for previous periods in the event of a change in accounting policy or the discovery of errors.

Personal experience

Evgeny Samoilov,CEO of Baker Tilly Rusaudit (Moscow) Various RAS and orders of the Ministry of Finance of Russia mention the issues considered in IFRS 8, but there is no document summarizing all the issues. In addition, there are significant differences between IFRS and Russian system accounting in terms of reflecting errors. In Russian practice, all errors of past years, regardless of their materiality, are reflected in the statements of the period in which they were discovered. In accordance with PBU 9/99 "Income of the organization" and RAS 10/99 "Expenses of the organization" profits and losses of previous years, identified in the reporting year, are recognized, respectively, as non-operating income and non-operating expenses. Practice shows that for some enterprises the profit of the reporting year, received in accordance with Russian standards accounting, may consist of more than half of the profits of previous years, identified in the reporting year (or vice versa - most of the losses were formed in previous years). V IFRS principle temporal certainty of the facts of economic activity is one of the fundamental. IFRS 8 requires retrospective reflection of reporting data in case of revealing fundamental (material) errors.

Sergey Moderov

In Russian accounting, the analogue of IFRS 8 “Accounting Policies, Changes in Accounting Estimates and Errors”, as well as IFRS 1 “Presentation of Financial Statements” is PBU 1/98 “Accounting Policies of an Organization”. The main difference between RAS and IFRS lies in different approaches to accounting policies.

In Russian accounting, accounting policies are often referred to as a "necessary evil", still drawing it up according to a common template. The formation of an accounting policy in accordance with IFRS is a laborious process that requires the active participation of top management, since it is important to take into account the strategic goals of the company. IFRS are the rules of reporting, not accounting, so the accountant forms the accounting himself, creating rules, the implementation of which will allow you to “collect information” for financial reporting.

Financial reporting, along with other areas of the life of the enterprise, is not a static phenomenon. It is clear that the data in the reports is a reflection of the exact metrics of the business in accordance with accounting rules, but accounting policies and accounting data may be subject to changes and adjustments due to errors. In order for these actions to be carried out in accordance with established rules, the standard IFRS IAS 8 was developed and implemented, which will be discussed in this article.

General information

IAS 8 was developed by the IASB to provide market-wide criteria and rules for making changes to accounting policies, accounting estimates and other financial information. main goal of this applied standard is to establish identical criteria for enterprises, according to which they will be able to:

• Define and change your account financial policy depending on external factors;
• Revise accounting estimates;
• Correct errors made in the preparation of reports in order to ensure the reliability of financial data.

Thanks to the introduction of IAS 8, it is planned to improve the quality of financial reporting of enterprises everywhere and ensure the comparability of data obtained from different enterprises.

Application features

According to the principles of international financial reporting, enterprises have the right to independently determine for themselves the mechanisms, rules, principles and practical solutions, which are used for the preparation and presentation of financial statements, which together are accounting policy enterprises. Accounting policy is maintained at the enterprise continuously and affects all financial aspects business. Based on the data obtained as a result of management, as well as analytical actions, and in accordance with the accounting policy, the enterprise forms its financial statements.

Reporting contains correct and reliable information about all characteristics economic activity enterprise, including the accounting valuation of the company's assets and liabilities. The original information may be revised by the company as a process of change in accounting estimate initiated as a result of an error or information that seriously changes the composition of the data in the reporting. First of all, IAS 8 requires preparers to review and adjust such indicators that could mislead users of financial statements and seriously change the decisions made on the basis of these reports.

The IFRS 8 standard requires strict adherence to the data reliability rule and determines the need to make changes to the statements based on any errors in previous reporting periods. Such errors may include any errors made as a result of mathematical miscalculations, errors in the application of accounting policy methodology, errors based on "human factors", erroneous interpretation of data, as well as intentional misstatement. Any information in any reporting, as noted earlier, must be unequivocally rechecked and revised in the event that there is reason to believe that they do not meet the criterion for the reliability of financial information.

Companies are allowed to apply changes in accounting policies or accounting estimates retrospectively, regardless of the length of the period. Recalculation of information retrospectively may relate to any financial data, recognition of information, disclosure additional information in order for the actual value of the reporting to meet the 100% reliability criterion.

In the event that a company encounters insurmountable obstacles in retrospective changes, there is an assumption that it is possible not to make changes to past data, providing subsequent reporting with the necessary additions on this issue. Thus, the future accounting policy consolidates the changes that completely eliminate the original error, and the new accounting policy applies to all data, events and conditions that arise after the time the changes were recognized.

Definition of accounting policy

An IFRS company must choose an accounting policy that will lead to the formation of reliable financial statements. Such reporting will be based on the principles of good faith and appropriateness, as well as contain comprehensive information required by reporting users. The accounting policy should be chosen in such a way as to ensure the sufficiency of data for making the full range of management decisions aimed at economic development the enterprise in question. At the same time, according to IFRS 8, companies are prohibited from allowing any (even insignificant) deviations from the truth for the mercenary purposes of demonstrating the company's finances and assets in a certain way.

Any report, according to the accounting policy, must be accessible and understandable to a wide range of interested parties who are able to draw the necessary conclusions based on the information that is at the disposal of the company. An entity must select and establish in its accounting policies rules that apply to all of the same information and transactions, unless it expressly states that a specific standard needs to be applied.

If the situation or transaction being considered as part of the preparation of financial statements goes beyond the scope of IAS 8 and is not reflected in other IFRS standards, then the management team of financial managers must use adequate own judgments to correctly recognize and reflect the information.

According to IFRS 8, the management of the company, admitted to the preparation of financial statements and work with them, should consist of qualified specialists interested in a detailed consideration of the financial statements on the merits. The information obtained through the work of the financial block should be:

• Sufficient and appropriate for management and economic use;
• Free from subjective opinion;
• Reliably demonstrate economic situation firms and be reliable.

First of all, the company must rely on the recommendations of IAS 8 and other standards when working with any kind of financial statements. But in the event of an objective need or impossibility to apply the provisions of the international standard, companies are allowed to use normative documents, literature and market practices that do not contradict the provisions of IFRS.

Making changes to the accounting policy

Changes to an approved accounting policy are allowed only when changes in accounting policies are required by the requirements of any IFRS or a new accounting policy will provide a more objective and reliable composition of information about the financial events and conditions, results and cash of the enterprise. IFRS 8 requires recipients of financial statements to be able to consistently compare similar data for different periods the performance of the company in order to draw reasonable conclusions about the financial position of the company and its economic performance. The company must explain to the recipients of the statements the controversial and transitional provisions that have arisen as a result of the transition to the new accounting policy of the enterprise.

If changes in accounting policies are applied retrospectively, the company must adjust the values ​​of the indicator for each and the earliest of the periods reflected in the financial statements so that the new values ​​reflect the real values ​​of the value of assets, balances and other financial indicators.

Making changes to accounting estimates

Due to the specifics of information exchange and the speed with which management decisions are usually made in the company's business activities, a number of reporting items cannot be accurately assessed from the very beginning. Many items are calculated approximately and indicatively based on the most complete information available at the time of recognition and evaluation. Often such approximate initial evaluation indicators of the value of assets and liabilities, terms of expected use, the amount of expected economic benefits, debts, guarantees and other obligations are exposed. Because accounting estimates are effectively the only option available at initial recognition, IAS 8 allows reporting to be based on such information.

Subsequently, such an estimate, as more information becomes available, may be revised in order to improve reporting data. To improve does not mean to embellish them or increase their performance, but to bring them to a more objective value. Changes in accounting estimates may be made retrospectively and recognized in adjustments to the carrying amounts of assets, equity or liabilities in the period in which the changes are applied. When using the prospective revision method of an accounting estimate, depending on the characteristics financial instrument the changes will apply only for the current period or for all subsequent periods, for example, if there is a change in the estimated useful life of an asset.

Information disclosure

1. The company is obliged to convey to the recipients of reporting data on the amount and nature of changes that have occurred in the accounting. estimates, as well as assess the impact of these changes on the current and future periods.

2. The company must disclose in its financial statements information about the changes it has made in the field of accounting policies, including data (if any), on the basis of which provisions of which IFRS the changes were made. If the company has made changes in the accounting policy, it needs to disclose the full nature and specifics of the changes, describe the changes and transitional provisions, as well as indicate the errors on the basis of which the changes were made to the MP and what reliable information was obtained as a result of the changes. Supplements to the disclosure of the company should indicate the reasons and consequences according to which the new accounting policy will provide more reliable system financial accounting in the company.

Application restrictions

Past period errors are always adjusted retrospectively for as many periods in the past as practicable. In the event that the detected error does not have a significant impact or it is practically impossible to correct it due to the lack of sufficient information, such an error is corrected in the period in which there is enough information for correct changes. Any prior period errors are disclosed in supplements to the accounts for users of IFRS 8 who need a complete picture of a company's financial information.

Conclusions and conclusion

We reviewed the main provisions of IFRS IAS 8, which is used by all companies operating in accordance with international standards. Today, any changes leave an imprint on the business of companies, which in turn is expressed in the need to implement changes in financial statements. It must be remembered that the reliability of IFRS information is the key to success in interpreting financial statements and working with them. In this context, IAS 8 is a set of applied tools and recommendations that can help any company that is faced with the need to make changes to financial statements. Changes and adjustments are a common occurrence in any area that requires accuracy, so working to improve a company's financial information is a critical step towards a productive and efficient business that develops according to the laws of reality.

IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors

Analogues in Russia: PBU 1/2008

"Accounting policy of the organization",

PBU 22/2010 "Correction of errors in accounting and reporting".

The company must apply present standard for annual periods beginning on or after January 1, 2005.

The purpose of IFRS 8 is to provide criteria for selecting and changing accounting policies, as well as accounting for and disclosing changes in accounting policies, changes in accounting estimates and corrections of errors.

Compliance with the requirements of the standard ensures the comparability of the company's financial statements over time and with the financial statements of other companies.

According to IFRS 8 "Accounting Policies, Changes in Accounting Estimates and Errors" must meet the following requirements: consistency, relevance, reliability, fair presentation of the company's results, reflect economic content events, and not just their legal form, neutrality, prudence and completeness.

Definitions

Accounting policy(accounting policies) - These are the specific principles, methods, procedures, rules and practices adopted by the company for the preparation and presentation of financial statements.

A change in an accounting estimate is an adjustment book value an asset or a liability, or the amount of periodic consumption of an asset that arises from an assessment of the current state of the assets and liabilities and the expected future benefits and liabilities associated with the assets and liabilities. Changes in accounting estimates arise as a result of new information or developments and, therefore, are not adjustments for errors.

One of the most important principles in relation to the construction of accounting policies is the principle of consistency.

Definition

The consistency of accounting policies means the need to maintain the selected accounting methods from one reporting period to another.

You should not change the classification and content of individual articles of reporting forms, the methodology for accounting and evaluating various reporting indicators without need and serious justification. Unmotivated changes in accounting policies are also undesirable. The standard provides

the following reasons for changes in the sequence of financial statements:

• - Significant changes in the nature of the company's operations;
• - major acquisitions during the reporting period or, conversely, a significant disposal of property, changes in policies related to the attraction of borrowed sources of financing;
• - a conclusion based on analytical studies on the possibility of better and more comprehensive presentation of information on performance and financial position in the amended, regrouped statements;
• - changes prescribed by the newly introduced IFRS. In this case, the requirements of national standards can be taken into account only when the change in financial statements does not contradict IFRS.

The standard emphasizes that comparative information should be disclosed in relation to the prior period for all numerical information in the financial statements, except as specifically provided in IFRS. In the financial statements, it is necessary for each item and each indicator to reflect numerical values ​​in a comparable form, at least for the reporting period and the same period preceding it. The Standard does not prohibit the presentation of comparative data for more than one prior period. It can be data for several previous periods.

Accounting policies must be selected and applied so that all financial statements comply, in all material respects, with the requirements of each International Financial Reporting Standard applicable to the entity. IFRS financial statements should be prepared on the assumption that the entity will continue as a going concern for the foreseeable future, but not less than 12 months after the reporting date. If the administration has no reason to terminate the activity, it must declare this in the notes.

The accrual method must be applied in the preparation and presentation of financial statements. The exception to this rule applies only to the cash flow statement. The cash flow statement reflects real cash flows, including cash equivalents, that occurred during the reporting period. That is the nature of this report.

According to the accrual method, for example, the fact of sale is reflected in the accounting registers and statements at the moment when the transaction is completed, the terms of the contract are fulfilled, and the ownership of the goods and responsibility for its safety are transferred (transferred) to the buyer. Interest on credit obligations is reflected in the reporting period in which the organization used borrowed funds, even if they (interest) turned out to be unpaid during this reporting period.

Expenses are recognized when related income arises in accounting. In the absence of income, the expenses incurred are reflected in budgetary and regulatory items as deferred expenses or expenses carried over to the next period for work in progress or the creation of inventories. This is how the principle of matching expenses with income works. However, carry-over balances should not be allowed for items that do not meet other established criteria for determining assets or liabilities. For example, the costs of paying fines for violations of business contracts do not generate income, but they cannot be considered as passing expenses and reflected in the asset of the reporting balance sheet. They should be written off to reduce the profit of the reporting period in which they were recognized as expenses.

The standard specifies that each material item must be presented separately in the financial statements. Insignificant amounts should be aggregated with amounts of a similar nature or purpose and not presented separately. When compiling reports, one should proceed from the fact that it should not be clogged with irrelevant articles, thereby making it difficult for users to perceive and understand. Even when IFRS require specific disclosure of certain aspects and indicators, in the context of materiality, they should not be followed if the disclosed information turns out to be immaterial. Articles exceeding 5% total for this report should be recognized as material. Qualitatively, information is considered material if its absence or lack of disclosure could influence the decisions users make on the basis of the financial statements. Remains of unsold finished products usually combined with other current tangible assets in the balance sheet item "Stocks".

Items of assets and liabilities, income and expenses are not subject to offset and are reflected in the financial statements as separate items in cases where they are significant. Mutual offset is possible only in cases where:

• - IFRS require or permit set-off;
• - items of assets, liabilities, profits, losses, related expenses are defined as insignificant.

It is important to understand that offsetting items in the financial statements reduce the understanding of users of the transactions carried out by the organization, reduce their ability to predict future cash flows, performance and financial condition of the organization.

The standard contains some hints and clarifications that limit the application of the standard's guidance on offsetting individual items. The balance sheet items are reflected in the net valuation. In the notes to the financial statements, the amounts of accrued reserves should be disclosed and the balance sheet items presented in it at residual value should not be offset.

Important!

The accounting policy must follow the principle of matching expenses with income, while if operations do not bring a certain income, expenses on them are reflected in the reporting period in which these operations were performed by offsetting any income with expenses.

The results of transactions for the sale of long-term assets, as well as short-term investments and other current assets presented in the financial statements net of total amount proceeds from the sale of the carrying amount of the disposed asset and expenses incurred in the course of the sale.

Costs reimbursed under the terms of a contract with a third party must be offset by reducing the corresponding reimbursement. Thus, income from a sublease is recognized by reducing the rental expense accordingly. Part payment utilities by a sublessee is reflected as a reduction of the related expenses of the lessee.

Profits and losses on similar transactions of the same name (for example, positive and negative exchange rate differences) are presented in the financial statements by offsetting and determining the net indicator. However, their size, origin, characteristics and other features may exclude the use of a net indicator, and the profits and losses on these operations themselves should be reflected in the financial statements in detail.

Important!

IFRS 8 describes three possible ways reflect changes in accounting policies:

• - retrospective;
• -current;
• -perspective.

With a retrospective approach, adjustments are required to the data of all financial statements for previous periods. Prior period accounts should be restated in accordance with the new accounting policy.

The current approach is characterized by adjustments to the cumulative effect of changes in accounting policies (displayed as a separate line item in the current year's statement of comprehensive income).

The forward-looking approach means that there is no need to restate previous financial statements and there is no need to restate the cumulative effect of changes in accounting policies in the statement of comprehensive income for the current period. A change in accounting policy only affects the financial statements of the current or future reporting periods.

When forming an accounting policy, it is important to take into account the principle of materiality. Omissions or misstatements of items are considered material if, individually or in the aggregate, they could affect economic decisions users accepted on the basis of financial statements.

Prior period errors are omissions or misstatements in an entity's financial statements for one or more periods that result from the failure or misuse of reliable information.

Estimates are often used in the preparation of financial statements. Thus, accountants cannot predict with certainty the value of the liquidation value of an asset, its service life, as well as other parameters that are significantly influenced by environmental factors. Accordingly, obtaining new information leads to the need to revise previously made estimates.

Definition

Accounting estimates are approximations and may need to be revised as more information becomes available.

Accounting policies are subject to the retrospective rule.

Definition

Retrospection means applying an accounting policy to transactions, other events and conditions as if those accounting policies had always been applied.

Retrospective application of an accounting policy is the application of a new accounting policy to transactions, other events and conditions as if that accounting policy had always been used in the past.

Retrospective restatement - is an adjustment to the recognition, measurement and disclosure of the amounts of the elements of the financial statements as if the prior period error had never occurred.

IFRS 8 allows you to reflect the change from the earliest period for which the company's management considers it appropriate.

EXAMPLE 2.4

Conditions: The company's 2010 financial statements contained the following figures.

Arrival of NMA 1250 USD

Depreciation of intangible assets (650) USD

Table 2.21

Table 2.22

Exercise: An adjustment to the 2011 statement of comprehensive income is required, subject to retrospective application of the accounting policy.

For reference: The balance of intangible assets as of January 1, 2010 and the inflow of intangible assets for 2010 and 2011. relate to the costs of developing a new type of activity, there were no other intangible assets on the balance sheet.

Solution: The costs of developing a new activity should have been expensed as incurred. Since they were accounted for as part of intangible assets, it is necessary to reset the intangible assets item and adjust the costs in the income statement and the amount of accumulated profit in the statement of changes in equity. Let's calculate the amounts of the required adjustments (Tables 2.23, 2.24).

Table 2.23

Extract from the statement of comprehensive income, USD

Table 2.24

Extract from the statement of changes in equity, USD

1) Intangible assets for 2010 (original cost minus depreciation): $1250 - $650 = $600

Including intangible assets in the composition of costs: $600 + $450 = $1050

There is no need to adjust the costs for the amount of accrued depreciation, since it was already charged to expense at the time of accrual;

2) adjustments include the amount 1) and the balance of intangible assets at the beginning of the previous year: $1,500 + $600 = $2,100

In the balance sheet, the intangible assets item is reset to zero, the accumulated profit item is adjusted by $2,100.

If it is necessary to transform Russian financial statements into financial statements prepared in accordance with IFRS, it is necessary to have the skills of professionally compiling an accounting policy that meets, in all material respects, the requirements of international standards applied by the company. Due to the fact that the preparatory stage of the transformation of reporting requires an accounting policy in accordance with IFRS, two accounting policies appear in the company's statements: for Russian and for international accounting. Comparison and analysis of accounting policies prepared in accordance with IFRS with accounting policies prepared in accordance with the requirements of Russian Accounting Standards helps to identify the main differences in accounting and calculation of adjustment entries. At the same time, when drawing up an accounting policy, one can follow the path of maximum convergence of accounting methods that are acceptable both in Russian accounting and accounting according to IFRS rules, thereby optimizing accounting and reporting.

Disclosure Requirements

An entity shall disclose the nature of a prior period error to the extent practicable for each affected line item in the financial statements. These disclosures do not need to be repeated for subsequent periods.

The purpose of IAS 8 is to prescribe the criteria for selecting and changing accounting policies, as well as the accounting for and disclosure of changes in accounting policies, changes in accounting estimates and corrections of errors. IAS 8 is designed to enhance the significance and reliability of an entity's financial statements, and the comparability of those financial statements over time and with the financial statements of other entities.

Accounting policy are the specific principles, bases, conventions, rules and practices that a company uses to prepare and present its financial statements.

When a particular IFRS is applied to a transaction, other event or condition, the accounting policy or its provisions applicable to that item shall be determined by applying this IFRS.

In the absence of a specific IFRS applicable to a transaction, other event or condition, management must use its judgment in developing and applying accounting policies to generate information that:

relevant to the needs of users in making economic decisions;

2) reliable in the sense that the related financial statements:

truly represents financial condition, financial performance and cash flow of the company;

reflects the economic content of events and operations, and not just their legal form;

neutral, i.e. free from bias;

prudent;

is complete in all material respects.

A company is only required to change its accounting policy when the change:

1) is required by any IFRS, or

2) results in the financial statements providing reliable and more meaningful information about the effects of transactions, other events or conditions on the entity's financial position, financial performance or cash flows.

A change in accounting policy should be applied retrospectively, unless it is impracticable to determine either the effect of the change in a particular period or its cumulative effect. In this case, the company is obliged to adjust the opening balance of each affected component equity for the earliest period presented and other related amounts disclosed for each prior period presented, as if the new accounting policy had always been applied.

Change in accounting estimate is an adjustment to the carrying amount of an asset or liability, or the amount of periodic consumption of an asset, that results from an assessment of the current position of assets and liabilities and their expected future benefits and obligations. Changes in accounting estimates are the result of new information or new circumstances and, accordingly, do not constitute corrections of errors.

As a result of the uncertainties inherent in business activities, many financial statement items cannot be accurately calculated, but can only be estimated. Evaluation involves judgments based on the latest available, reliable information. For example, you may need to evaluate:

bad debts;

inventory obsolescence;

fair value financial assets or financial obligations;

useful lives or the expected pattern of obtaining economic benefits from depreciable assets;

warranty obligations.

The use of sound accounting estimates is an important part of the preparation of financial statements and does not make them less reliable.

The effect of a change in an accounting estimate shall be recognized prospectively by including it in profit or loss:

– in the period in which the change occurred, if it only affects that period, or

- in the period when the change occurred, and in future periods if it affects both.

Errors of previous periods are omissions or misstatements in an entity's financial statements for one or more prior periods that result from the failure or misuse of reliable information that:

was available when the financial statements for those periods were authorized for issue, and

is such that it could reasonably be expected to be obtained and taken into account in the preparation and presentation of these financial statements.

Such errors include the consequences of inaccuracies in calculations, errors in the application of accounting policies, underestimation or misinterpretation of facts, and fraud.

The Company is required to correct material prior period errors retrospectively, unless it is impracticable to determine either the effect of that error on a particular period or its cumulative effect. Errors are corrected in the first set of financial statements authorized for issue after they are discovered by:

the restatement of comparative amounts for the prior period(s) presented in which the error occurred, or

recalculation of opening balances of assets, liabilities and equity for the earliest prior period presented where the error occurred before the earliest prior period presented.

Accounting is always associated with changes, from minor adjustments to individual entries to major changes in accounting policies. Consider the main provisions of the IAS 8 standard, which is devoted to these changes in accounting.

Every company, probably, at least once had to change something in their accounts and financial statements.

Often these changes are small so you don't worry about them and make adjustments as you go. But sometimes this change can greatly affect the company's accounting and reporting. For instance:

• You are adapting to the new IFRS.
• You forgot to revalue your assets last year.
• You have made some capital investments and, as a result, your assets have a longer useful life than you currently use to depreciate.
• You recognized an impairment loss for your building, but a year later you found a buyer at a much higher price than you expected.
• You've lost a hopeless lawsuit, but the amount of compensation you need to pay is slightly below your reserves.

In such situations, questions arise:

How to justify the correction? Do I need to recalculate financial reports for the previous year? Or can you just make changes or corrections in the current year?

To approach this problem systematically, you need to decide whether you are dealing with a change in accounting policy or a change in an accounting estimate or a correction of an error. And for this you need to go to IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors.

What is the purpose of IAS 8?

IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors prescribes:

• How to choose and apply accounting policies;
• How to account for changes in accounting policies;
• How to account for changes in accounting estimates; as well as
• How to correct mistakes made in the previous reporting periods.

First, let's try to explain what accounting policies, accounting estimates and errors are, and the basic rules that apply to them. We then focus on explaining the main differences between accounting policies and accounting estimates.

What is an accounting policy?

Accounting policy- a set of rules, guidelines, conventions, principles and similar standards adopted and used by companies for the preparation of financial statements.

It should be emphasized here that IAS 8 specifically states that the basis of accounting (especially the basis of measurement) is an accounting policy and not an accounting estimate.

Therefore, be careful: whether you use historical cost or fair value for valuation, this is not just an accounting estimate, but a choice of accounting basis - accounting policy.

How to choose an accounting policy?

To answer this question, you need to determine if there is any IAS / IFRS standard or IFRIC / SIC clarification that applies to your particular transaction or situation.

If there is any standard or clarification, you just apply it. For example, when you account for your new machines, you should obviously apply IAS 16 Property, Plant and Equipment.

If there is NO specific standard or clarification relating to the transaction in question, the accountant should resort to judgment or develop their own policy, but with care as the policy should provide information that is as reliable and relevant as possible.

An example is the accounting for works of art: such accounting is not covered by specific standards, and in many cases the accountant needs to develop his own accounting policies.

How to develop your own accounting policy?

Firstly , you need to look at IFRS and IFRIC/SIC interpretations that deal with similar or related matters.

For example, if you choose your accounting policy for works of art, then perhaps IAS 16 “Fixed assets” or IAS 40 “ Investment property” will be standards dealing with similar matters.

Secondly , you need to apply concepts from Conceptual foundations financial reporting (Conceptual Framework for Financial Reporting).

In addition, you may want to consult with other standards-issuing bodies (such as the FASB) to study their rules or standards and use them as a guide when developing accounting policies. Many companies do this regularly.

For instance, Accounts IFRS accounting software companies often relied on US GAAP for the recognition of revenue from software projects because IAS 18 Revenue was not specific. Although, after the entry into force of IFRS 15 “Revenue from contracts with customers”, the situation has changed, since the IFRS 15 standard is largely similar to US GAAP in terms of revenue recognition.

It should also be added that you must apply each accounting policy sequentially to all transactions of the same category or type. In some cases, IFRS allow you to classify your transactions - in which case you can apply different accounting policies for different categories.

When and how should you change your accounting policy?

The economic environment and activities of the company are subject to change, and therefore sometimes the company has to change its accounting policies.

In what cases can you change the accounting policy?

Only under two circumstances:

• When required by other IFRSs. This is usually associated with the release of a new IFRS that replaces the old standard. And such a change in accounting policy is usually mandatory.
• When a new accounting policy provides better, more reliable and relevant information. In this case, you voluntarily apply the new accounting policy.

How to change the accounting policy?

If you are applying a new IFRS and that standard contains some transitional guidance, then you are simply following the rules of those transitional provisions. The new IFRS will explain to you exactly how to change accounting policies.

However, if there is no guide for switching to new standard, or you own initiative change your accounting policy, then you must apply it retrospectively (with some exceptions).

"Retrospectively" (retrospectively) means going back to previous reporting periods and restating each component of equity as if the new policy had always been applied. Be careful because you need to recalculate comparative data too!

What are accounting estimates?

An accounting estimate is not defined by IAS 8 directly, but indirectly - as changes in accounting estimates ("change in accounting estimate").

When you change an accounting estimate, you change some amount of either an asset or a liability, or change the model of its consumption (write-off / redemption) both in the current and in the future reporting period.

Consider also the following:

• If these changes are related to some new information, a trend, or development, then these are changes in accounting estimates.
• If these changes are due to some error, such as miscalculation or misapplication of accounting policies, then they are NOT changes in accounting estimates. These are errors and should be counted as errors.

Typical examples of changes in accounting estimates are:

• Reserve bad debt,
• Depreciation rates and useful lives of your assets,
• Reserve for warranty repair etc.

How can you justify a change in an accounting estimate?

Unlike changes in accounting policies, accounting estimates needs to be changed prospectively:

• In the current reporting period in the form of a so-called "forward correction";
• Both in the current reporting period and in a future reporting period if the change affects both periods (for example, a change in useful life affects depreciation charges in both the current and future reporting periods).

"Prospectively" (prospectively) means that you do NOT restate comparatives and equity. You are NOT concerned with financial statements for previous reporting periods. You simply adjust the calculations in the current and future reporting periods.

The difference between accounting policies and accounting estimates.

Sometimes it is very difficult to assess whether we are dealing with an accounting policy or an accounting estimate.

What are the main differences?

• While an accounting policy is a principle or rule or basis for an estimate, an accounting estimate is an amount determined based on a chosen approach or a specific pattern of future consumption of an asset.
  For example: choice fair value instead of original cost is an accounting policy choice, but a change in some provisions as a result of a change in fair value is a change in an accounting estimate.
• Changes in accounting policies are reflected retrospectively, while changes in accounting estimates are reflected prospectively.

Just be very careful and understand if the change is due to principles or certain calculations. If you make a mistake, this can lead to significant accounting distortions!

Accounting errors.

Prior period errors are some omissions (that is, when you forget something) or misstatements in the financial statements as a result of ignoring or misusing information in the preparation of these financial statements.

It doesn't really matter why the error occurred - whether it was intentional (fraud) or unintentional, you still need to fix it if it's significant.

The question is, is the error significant?

The concept of materiality is explained in IAS 1 Presentation of Financial Statements, but to keep things simple, anything that can affect the decisions of users of financial statements is material. In other words, something important.

Remember that something can be significant not only because of its size, but also because of its nature: for example, bonuses paid to your management are always significant, whether they are in the tens or millions of dollars.

Let's get back to accounting errors:

• If the error is NOT material, you can correct it in the current reporting period. Remember that if the error is NOT material, your financial statements may still be reliable and relevant.
• If the error is material, you always correct it retrospectively., returning and recalculating figures in previous periods.

Fix example accounting error associated with an erroneous estimate of the useful life of fixed assets, .