AF5141Topic01PreparationofFinancialStatements教程.ppt

Changes in Accounting Estimates Examples of items requiring estimates Useful life of non-current assets Allowance for bad debt Revision in estimates is needed because of changed circumstances Treatment No retrospective revision, i.e. adjust in the current / future period Separate disclosure if effect is material * Prior Period Errors Nature Errors in previous year’s financial statements that could have been avoided given the information available during their preparation Treatment To restate opening balance of affected asset, liability, equity items and comparative amounts Disclosure Nature Amount of correction in current and prior periods Amount of correction for periods prior to comparative period That comparative figures have been restated or impracticable to do so * Impracticability Meaning After making every reasonable effort, the entity cannot apply a requirement Three situations Indeterminable amount Assumptions about management’s intent in a prior period required Significant estimates required, but for which objective information not available * Choice of Accounting Policies Compliance with applicable accounting standards General rules Relevance (making a difference in decision) Reliability: Faithful representation Substance over form Neutrality (free from bias) Prudence Completeness (in material aspects) Consistency of accounting policies * Changes in Accounting Policies Allowed circumstances HKFRS requirement Reliable and more relevant information produced Adoption of new accounting standard With transitional arrangement: either prospectively or retrospectively Without transitional arrangement: retrospectively * Changes in Accounting Policies Other cases Retrospective change Adjust the opening balance of affected equity and other item(s) Adjust the comparative information Prospective change, if the past amount could not determined * Changes in Accounting Policies If effect material, disclose Reason for the change Amount of adjustment in current and pri