Chapter 7: Disclosures

Changes in accounting policies, accounting estimates and correction of prior period errors

IAS 8 contains disclosure requirements for changes in accounting policies (including initial application of the standard, and voluntary changes in accounting policies), changes in accounting estimates, and correction of prior period errors.

An entity does not repeat the disclosures on changes in accounting policies and correction of prior period errors in subsequent years’ financial statements.

Where an entity has retrospectively applied an accounting policy, or restated or reclassified items in its financial statements, and this has a material effect on the information in the balance sheet at the beginning of the preceding period, it presents that balance sheet. However, the entity is not required to disclose the notes related to the additional balance sheet.

The additional balance sheet is given as at the beginning of the preceding period, regardless of whether an entity’s financial statements present comparative information for earlier periods.

IAS 34 contains an additional disclosure requirement on changes in estimates. Where there is a significant change of an estimated amount reported in an interim period during the final interim period of the financial year and an entity does not publish a separate financial report for that final interim period, an entity should disclose the nature and amount of that change in estimate in a note to the annual financial statement for that financial year.

New or revised accounting standards not yet effective.

Where a new standard or interpretation has been published but has not yet come into effect, entities make certain disclosures if they have not early applied the standard or interpretation. The disclosures aim to enable the user to assess the possible effect of the new accounting pronouncement on the entity’s financial statements.

Management will need to apply judgement in determining whether a new accounting pronouncement is expected to have a material effect for disclosure purposes.

The assessment of materiality should consider the effect both on previous transactions and financial position and on reasonably foreseeable future transactions. Some new pronouncements provide options that could have an effect on the entity. Management should disclose its expectation on the use of option.

Entities should consider these disclosures, even if the new accounting pronouncement is issued after the balance sheet date but before the date of authorisation of the financial statements. Detailed disclosure requirements are set out in paragraph 31 of IAS 8.