What is professional judgement

Here are some basics to help you refresh yourself with GPFR in Xero

Accounting is not just following a set of accounting rules or procedures.

Sometimes accountants are often called upon to make a professional judgement.

This means they need to apply professional knowledge and skills to make decisions and solve problems.

For example, accountants have a choice of using cost or fair value to measure property, plant and equipment. Even when a particular transaction or event is covered by a specific accounting standard, accountants often still need to exercise professional judgement in applying the standard.

Accountants may need to exercise professional judgement in deciding how to measure an asset or a liability where the relevant accounting standard permits choice, or in the estimation of expected inflows or outflows used in the measurement of assets and liabilities.

For example, this is often disclosed in financial reports:

"Management made a number of judgements and applied estimates of future events"