AL-Ahliyya Amman University

Faculty of Business/Accounting Department

IFRS: Assignment 1 ( IAS8) On-Line submission

Student Name: Time: Due Next lecture

1. In which two of the following situations can a change in accounting policy be made by an entity
(IAS8) ?
a. If a new accounting policy would show more favorable results
b. If a new accounting policy results in a more reliable and relevant presentation of events or
transactions
c. If the change is required by an IFRS
d. If the company thinks a new accounting policy would be easier to report.
2. Which one of these changes would be classified as a ‘change in accounting policy’ as determined
by IAS 8?
a. Increased the allowance for doubtful debts from 6% to 8% of outstanding debts
b. Changed the method of valuing inventory from weighted average cost to first in first out
c. Changed the depreciation of plant and equipment from reducing balance to straight line
depreciation on cost
d. Changed the useful economic life of its plant and equipment from six years to eight years.

3. Which of the following about the selection of accounting policies according to IAS 8 is the most
correct?
a. Where no specific IFRS requirements exist, management should rely on the IFRIC for
guidance.
b. After management has selected their appropriate accounting policies, they should link
these to applicable IFRSs.
c. Management can refer to the implementation guidance associated with the relevant IFRS,
however this is not mandatory.
d. Management should first determine the applicability of IFRSs before selecting accounting
policies appropriate for their entity.

4. Records of the property, plant and equipment of Mount Ltd showed the following at 1 July
2008:

In the past the company accounted for depreciation at 20% per annum using the reducing balance
method. However, at a meeting of the board of directors during 2009, it was decided that from the
beginning of the reporting period ending 30 June 2009, machinery would be depreciated on the straight-
line method. The total useful life of the machinery had originally been estimated as 7 years. (It may be
assumed that this estimate is still correct). All the machinery was acquired at the beginning of the
applicable financial period.

REQUIRED: a) Calculate the following amounts for inclusion in the financial statement of Mount
Ltd for the reporting period ending 30 June:

• Depreciation for the current period (2009)

• Depreciation for 2010 and 2011.

B) Disclose the above change in accounting estimate in the notes to the financial statements for the

reporting period ended 30 June 2009 so as to comply with IFRS’s and the Companies Act. The tax rate is
29%.