IFRS – IAS 8: Accounting policies, changes in accounting estimates and errors

The International Accounting Standards Committee (IASC) released International Accounting Standard 8 (IAS 8) to address the topic of how to deal with changes in accounting policy, changes in accounting estimates, and correcting errors.

Each one of these can impact the financial position of a company in a material way and should be communicated to the users of the financial statements. For example, when a company changes the way in which they account for inventory, it will have an impact on the financials and the way in which the company is perceived. Also, if the company had a large error last year and the financial statements were incorrect, then the shareholders will need to know about what the true financial position of the firm is.

IAS are principles based standards, rather than strict rules based standards that govern international accounting. IAS standards differ from IFRS standards in that they were introduced prior to 2001, whereas IFRS were produced after this date by the IASB, or the International Accounting Standards Board. When determining the hierarchy of these, the IAS is considered to be the building blocks in which the newer and more relevant IFRS are founded and therefore IFRS is more authoritative when these conflict.

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