Multiple choice questions on Errors and Changes in Accounting Policies – IAS 08

Financial Accounting and Reporting 1

Ahmed Raza Mir, FCA

1. What is the scope of IAS 8?

A) Only for presenting financial statements
B) Only for correcting errors
C) For selecting and applying accounting policies, changes in accounting policies,
accounting estimates, and corrections of errors
D) For determining financial statement formats
Solution: C) For selecting and applying accounting policies, changes in accounting policies,
accounting estimates, and corrections of errors

2. What constitutes a change in accounting estimate according to IAS 8?

A) A change due to the revaluation of fixed assets
B) A change resulting from new information or developments
C) A change in the financial statement presentation format
D) A voluntary change in accounting policies
Solution: B) A change resulting from new information or developments

3. How should an entity account for changes in accounting policies?

A) Prospectively
B) Retrospectively
C) By ignoring the change
D) By immediate recognition in profit or loss
Solution: B) Retrospectively

4. What is retrospective application?

A) Applying a new accounting policy to transactions in the current period only
B) Applying changes in accounting estimates to future periods only
C) Applying a new accounting policy as if it had always been applied
D) Correcting errors in the current period only
Solution: C) Applying a new accounting policy as if it had always been applied

5. Under IAS 8, when is it impracticable to apply a change retrospectively?

A) When the entity chooses to apply changes prospectively
B) When applying the change would not affect financial statements
C) When the entity cannot determine the effects of the change or error on prior periods
D) When the change does not materially affect the financial statements
Solution: C) When the entity cannot determine the effects of the change or error on prior
periods

6. IAS 8 requires disclosure of what information regarding changes in accounting policies?

A) The effect of changes on current period's earnings per share only
B) The nature and effect of changes on current and prior periods
C) Only the titles of the IFRSs that require the change
D) The financial impact on future periods exclusively
Solution: B) The nature and effect of changes on current and prior periods
7. How are errors corrected under IAS 8?
A) By restating the comparative amounts for the prior period(s)
B) By adjusting the opening balances of assets, liabilities, and equity for the earliest prior
period presented
C) Both A and B are correct
D) By providing a footnote explaining the error
Solution: C) Both A and B are correct

8. What is the treatment for prior period errors discovered after the financial statements are
authorized for issue?
A) They are ignored as the financial statements have already been issued
B) They are corrected in the next period's financial statements
C) They are disclosed in the notes to the financial statements only
D) They are corrected by restating the financial statements of the previous period
Solution: D) They are corrected by restating the financial statements of the previous period

9. What does a change in accounting estimate affect?

A) Only the current period
B) Only future periods
C) Both the current and future periods
D) The current, future, and prior periods
Solution: C) Both the current and future periods

10. What does IAS 8 state about the consistency of accounting policies?
A) Policies must change every reporting period to reflect economic realities
B) Policies must remain unchanged unless a significant improvement can be made
C) Policies should change in response to changes in accounting standards
D) Policies must be applied consistently unless a change is required by an IFRS or provides
more relevant and reliable information
Solution: D) Policies must be applied consistently unless a change is required by an IFRS or
provides more relevant and reliable information

11. Under IAS 8, a voluntary change in accounting policy should be made only if it results in:
A) A simpler set of financial statements
B) Financial statements providing reliable and more relevant information
C) Reduced profit for the period –
D) Less operational costs
Solution: B) Financial statements providing reliable and more relevant information

12. The correction of prior period errors according to IAS 8 is done:

A) Prospectively
B) By restating prior periods only if they affect the current period
C) By restating the comparative amounts for the prior period(s) as if the error had never
occurred
D) Ignoring the errors as immaterial
Solution: C) By restating the comparative amounts for the prior period(s) as if the error had
never occurred
13. What is the key principle for correcting errors under IAS 8?
A) Correcting errors in the period they are discovered
B) Correcting errors by adjusting future financial statements
C) Retrospective restatement of errors
D) Prospective adjustment for errors
Solution: C) Retrospective restatement of errors

14. Which of the following is not considered a change in accounting policy under IAS 8?
A) Change due to adoption of a new IFRS
B) Application of an accounting policy for transactions that did not occur previously
C) Change from cost model to revaluation model for property, plant, and equipment
D) Voluntary changes by management to improve the relevance and reliability of financial
statements
Solution: B) Application of an accounting policy for transactions that did not occur
previously

15. IAS 8 requires disclosure of the effect of a change in accounting policy on:
A) The current period only
B) Future periods only
C) The current and prior periods
D) None of the above
Solution: C) The current and prior periods

16. What approach does IAS 8 advocate for when a change in accounting estimate is required?
A) Retroactive adjustment
B) Prospective recognition in profit or loss
C) Immediate recognition in equity
D) Correction through a restatement of prior periods
Solution: B) Prospective recognition in profit or loss

17. Under IAS 8, impracticability in retrospective application of a change in accounting policy or

correction of an error refers to:
A) The inability to apply a change due to the lack of necessary data
B) The excessive cost involved in applying a change
C) Situations where the entity opts not to apply the change retrospectively
D) The absence of any significant impact on the financial statements
Solution: A) The inability to apply a change due to the lack of necessary data

18. Which of the following best describes 'retrospective restatement' as per IAS 8?
A) Adjusting future financial statements to reflect a change
B) Correcting errors as if they had never occurred by restating the comparative amounts
C) Recognition of changes in the current period's financial statements only
D) Adjusting the financial statements of the future period only
Solution: B) Correcting errors as if they had never occurred by restating the comparative
amounts

19. IAS 8 requires that changes in accounting estimates should be:

 A) Applied retrospectively
B) Applied prospectively
C) Disclosed in the notes only
D) Ignored if immaterial
Solution: B) Applied prospectively

20. Disclosure requirements for a change in accounting policy under IAS 8 do not include:
A) The title of the IFRS requiring the change
B) The nature of the change in accounting policy
C) The financial impact of the change on future periods only
D) The reasons why the new accounting policy provides reliable and more relevant
information
Solution: C) The financial impact of the change on future periods only