CONCEPTUAL FRAMEWORK

&
ACCOUNTING STANDARDS

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PAS 8 Accounting Policies, Changes in
Accounting Estimates and Errors

Learning Objectives
• Define the following and give examples: (1) Change in
accounting policy, (2) Change in accounting estimate, and (3)
Error.
• Differentiate between the accounting treatments of the
following: change in accounting policy, change in accounting
estimate, and correction of prior period error.

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Objective and Scope

• PAS 8 prescribes the criteria for selecting, applying, and

changing accounting policies and the accounting and
disclosure of changes in accounting policies, changes in
accounting estimates and correction of prior period
errors.

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Accounting policies

• Accounting policies are “the specific principles,

bases, conventions, rules and practices applied
by an entity in preparing and presenting
financial statements.” (PAS 8.5)
• Accounting policies are the relevant PFRSs
adopted by an entity in preparing and presenting
its financial statements
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PFRSs

• Philippine Financial Reporting Standards (PFRSs) are

Standards and Interpretations adopted by the Financial
Reporting Standards Council (FRSC). They comprise the
following:
1. Philippine Financial Reporting Standards (PFRSs);
2. Philippine Accounting Standards (PASs); and
3. Interpretations

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 Conceptual Framework & Acctg.
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Standards (by: Zeus Vernon B. Millan)
• When it is difficult to distinguish a change in accounting
policy from a change in accounting estimate, the change is
treated as a change in an accounting estimate.

• An entity shall change an accounting policy only if the change:

1. is required by a PFRS; or
2. results to a more relevant and reliable information
about an entity’s financial position, performance, and
cash flows.

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Examples of changes in accounting policy
1. Change from FIFO cost formula for inventories to the Average cost
formula.
2. Change in the method of recognizing revenue from long-term
construction contracts.
3. Change to a new policy resulting from the requirement of a new PFRS.
4. Change in financial reporting framework, such as from PFRS for SMEs
to full PFRSs.
5. Initial adoption of the revaluation model for property, plant, and
equipment and intangible assets.
6. Change from the cost model to the fair value model of measuring
investment property.
7. Change in business model for classifying financial assets resulting to
reclassification between financial asset categories.

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Examples of changes in accounting estimate

1. Change in depreciation or amortization methods

2. Change in estimated useful lives of depreciable assets
3. Change in estimated residual values of depreciable assets
4. Change in required allowances for impairment losses and
uncollectible accounts
5. Changes in fair values less cost to sell of non-current assets held for
sale and biological assets

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Errors

• Errors include the effects of:

1. Mathematical mistakes
2. Mistakes in applying accounting policies
3. Oversights or misinterpretations of facts; and
4. Fraud

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 APPLICATION OF
CONCEPTS
PROBLEM 2: FOR CLASSROOM DISCUSSION

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 QUESTIONS????
 REACTIONS!!!!!

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END
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