Ind AS 8 Disclosures and Comparison with IAS 8

Understand Disclosures and Comparison with IAS 8

Key rules to remember

Voluntary change in accounting policy: disclosures

Nature of change + reasons why new policy is reliable and more relevant + adjustment for each line item (current and each prior period presented) + basic and diluted EPS + adjustment for periods before those presented

All amounts are 'to the extent practicable'. If retrospective application is impracticable, disclose the circumstances and how and from when the policy was applied.

Change in policy on initial application of an Ind AS: disclosures

Title of the Ind AS + that the change follows its transitional provisions (if so) + nature of change + description of transitional provisions + transitional provisions that may affect future periods + line-item and EPS adjustments + adjustment for earlier periods

A voluntary change requires reasons for the new policy. An Ind AS-driven change requires the transitional-provision details. Do not mix them up.

Change in accounting estimate: disclosures

Nature of the change + amount of the effect on the current period + amount of the effect on future periods (unless impracticable to estimate)

If the future effect is not disclosed because it is impracticable to estimate, you must state that fact.

Prior period error: disclosures

Nature of the error + correction for each line item per prior period presented + basic and diluted EPS correction + correction at the start of the earliest prior period presented

If restatement for a particular prior period is impracticable, disclose the circumstances and how and from when the error was corrected. Later statements need not repeat these disclosures.

Ind AS issued but not yet effective

That the Ind AS is not applied + known or reasonably estimable information on its possible impact + title + nature of the change + date required + date planned to apply + expected impact, or a statement that it is not known or not reasonably estimable

This applies when the entity has not applied a new Ind AS that has been issued but is not yet effective.

Ind AS 8 vs IAS 8

Same core requirements; references to IFRS and the IASB framework are replaced by Ind AS and the Indian framework

No significant carve-out in the core disclosure requirements. Verify specific differences against ICAI material.

How to solve Disclosures and Comparison with IAS 8 questions

1. 1Classify the item first: a policy change (voluntary or driven by an Ind AS), a change in estimate, or a prior period error. The disclosure list depends on this.
2. 2Recall the treatment: retrospective for policy changes and errors, prospective for estimates. This tells you whether line-item and EPS adjustments are needed.
3. 3List the disclosures in a fixed order: nature, reason (for a voluntary policy change), current-period effect, prior-period effects by line item, EPS, and the amount for periods before those presented.
4. 4Compute the amounts the question gives you: restated profit, line items, EPS (restated profit ÷ weighted average shares) and opening balances.
5. 5Check the practicability test. If the effect cannot be determined, write the impracticability disclosure instead of a number.
6. 6Check whether the question involves an Ind AS issued but not yet effective. If so, add the fact, title, nature, dates and expected impact.
7. 7Conclude in one line: state what must be disclosed and that later statements need not repeat it.

Quickest way: Nature-Reason-Numbers-Practicable checklist

Common mistakes in Disclosures and Comparison with IAS 8

• Asking for restated prior period figures when there is a change in estimate.

  Students link every 'change' to restatement.

  Fix: Estimates are prospective. Disclose the nature and amount of the change and its future effect, with no restatement.

• Leaving out the EPS adjustment when disclosing a policy change or error.

  Students focus on balance sheet and profit line items.

  Fix: Add basic and diluted EPS to the list, where Ind AS 33 applies to the entity.

• Giving 'reasons why the new policy is more relevant' for a change forced by a new Ind AS.

  Students merge the two policy-change lists.

  Fix: For a voluntary change give the reasons. For an Ind AS-driven change give the title, transitional provisions and whether the change follows them.

• Showing made-up prior period amounts when restatement is impracticable.

  Students think a number is always better than a statement.

  Fix: Disclose the circumstances and how and from when the change or correction was applied.

• Forgetting the disclosure for Ind AS issued but not yet effective.

  It looks like a presentation note rather than an accounting rule.

  Fix: State that the Ind AS is not applied, its title, nature, effective date, planned date and expected impact, or that the impact is not known or not reasonably estimable.

• Claiming big carve-outs in Ind AS 8 versus IAS 8.

  Students over-generalise from standards that do have carve-outs.

  Fix: Say that the core requirements are aligned and the differences are mainly terminology and references. Check ICAI's list before writing more.

Worked examples