IAS 8
The objective of IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors is to prescribe the criteria for selecting and changing accounting policies, together with the accounting treatment and disclosure of changes in accounting policies, changes in accounting estimates and corrections of errors.
Accounting policies are defined as the specific principles, bases, conventions, rules and practices applied by an entity in preparing and presenting financial statements.
Entities must adopt accounting policies that are in accordance with Accounting Standards, even where choice is provided.
The selection of accounting policies becomes a matter of professional judgement for the entity and its governing body.
According to IAS 8, the fundamental guiding principle when selecting accounting policies is to:
- Reflect the substance of the transaction,
- Rather than its form.
Although accounting policies should be applied consistently over time and from period to period, an entity can sometimes change its accounting policies.
A good question to ask is "Will it present more relevant and reliable information?".
Who cares?
You, as our system has default accounting policies, the questions are:
- Do they apply to the client
- And
- Does anyone really care?