The Philippine Accounting Standard (PAS) 8, "Accounting Policies, Changes in

Accounting Estimates, and Errors," specifies the criteria for selecting, applying, and changing
accounting policies, as well as the accounting and disclosure of changes in accounting policies,
changes in accounting estimates, and correction of prior period errors. It is based on the
International Accounting Standard (IAS) 8 issued by the International Accounting Standards
Board (IASB).

Changes in Accounting Policies employ Retrospective Application, in which you will

presume that the number, computation, and presentation are the same as they were at the start,
because that is the notion of retrospective application. Thus, if that is the interpretation, there
will be significant changes in financial statements since you would change it by presuming that
is how it was computed and presented at the beginning.

For example, in leases, there were previously two standards: financial and operating lease.
Now, there is only one standard: financial lease. What if a company applied operating lease in
2022, but since there is only one standard now, which is financial lease; they have no choice but
to change it to financial lease. What will happen is that because we will use retrospective
application, we will restate the 2022 financial statements wherein the assumption is financial
lease. Because accounting policy has changed.

Changes in accounting estimates, on the other hand, employ Prospective application,

which means that you will only begin implementing the accounting policy from today onward. If
the change impacts both the current and future periods, the effect of the adjustment is reflected
in the profit or loss for the present and future periods.

For example, the company assumed a 10 year life for the machine using the straight line
method in the first phase, but in the fifth year of the machine, the company noticed that the
machine was slowly eroding, so instead of continuing the remaining 5 years, the company will
now make it as 2 years to be depreciated.

Lastly, correction of prior period error occurs when there is a purposeful or unintentional
misapplication of concepts, misreading of data, or mathematical errors. It also makes advantage
of Retrospective Restatement.
 The Philippine Accounting Standard (PAS) 10, "Events after the Reporting Period,"
prescribes: (a) when an entity should adjust its financial statements for events after the reporting
period; and (b) the disclosures that an entity should make about the date when the financial
statements were authorized for issue and about events after the reporting period. It is based on
the International Accounting Standard (IAS) 10 issued by the International Accounting
Standards Board (IASB).

Because there are events that occurred after the reporting period, there is a possibility that
they will affect the financial statements of one's organization, whether they are beneficial or bad.
Certain occurrences may have a major impact on financial statements, even if they occur
beyond the reporting period.

Pas 10 does not require the adjustment of all events that occurred after the reporting period.
Thus, there are two categories of Events after the Reporting Period: Adjusting Events and Non-
adjusting Events.

Adjusting events are those that offer proof of conditions that existed at the end of the
reporting period. It is the events that occurred previously but you only discovered about them
just recently, or that occurrence existed prior to the reporting period but was only discovered
and confirmed during the reporting period.

For example, at this date an accident occurred in one of your employees due to lapses in
your company's safety protocols, so the company now had a liability, that employee now filed a
case against your company, now there's a court decision on this date that your company is
guilty in that liability against the employee, so there's a need now for compensation for the
employee's damages because it is a negligence of your company. As a result, because such
conditions existed at the end of the reporting period, adjustments will be required.

Non-adjusting, on the other hand, are those that are suggestive of conditions that occurred
after the reporting period. These are the events that occurred during or after the reporting period
of the previous issuance, thus no modifications are required. Non-adjustment is just
transparency.