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Corporate Financial Reporting · Accounting Policies, Changes in Accounting Estimates and Errors (Ind AS 8)

Ind AS 8 Objective and Scope: Key Definitions Explained

Updated 10 October 2026 · Fact-checked

Ind AS 8 sets the criteria for selecting and changing accounting policies and prescribes the accounting and disclosure for policy changes, changes in accounting estimates and prior period errors. Its aim is relevant, reliable, comparable financial statements. To solve questions, classify the item first: policy, estimate or error. Then apply the matching treatment.

Understand Objective and Scope of Ind AS 8

Ind AS 8 answers one question: when something in the financial statements changes or turns out wrong, how do you treat it so that users can still compare one period with another? The standard is titled Accounting Policies, Changes in Accounting Estimates and Errors.

The objective has two parts. First, it prescribes the criteria for selecting and changing accounting policies. Second, it prescribes the accounting treatment and disclosure for changes in policies, changes in estimates and corrections of prior period errors. The purpose is to improve relevance and reliability of the statements and to make them comparable over time and with other entities.

The scope is the following. You apply Ind AS 8 when you select and apply accounting policies, and when you account for changes in policies, changes in estimates and corrections of prior period errors. Where an Ind AS specifically applies to a transaction, that Ind AS governs the policy for it. Ind AS 8 is used where no Ind AS covers the item. The tax effects of correcting prior period errors and of retrospective adjustments are dealt with under Ind AS 12.

The definitions drive every exam question, so learn them closely:

  • Accounting policies: the specific principles, bases, conventions, rules and practices an entity applies in preparing and presenting financial statements.
  • Change in accounting estimate: an adjustment of the carrying amount of an asset or a liability, or the amount of the periodic consumption of an asset, that results from the assessment of the present status of, and expected future benefits and obligations associated with, assets and liabilities. Changes in accounting estimates result from new information or new developments and, accordingly, are not corrections of errors.
  • Accounting estimates: monetary amounts in financial statements that are subject to measurement uncertainty.
  • Prior period errors: omissions from, and misstatements in, the financial statements for one or more prior periods, arising from failure to use, or misuse of, reliable information that was available when those statements were approved for issue and could reasonably be expected to have been obtained and taken into account. Examples include mathematical mistakes, mistakes in applying policies, oversights and misinterpretation of facts.
  • Material: omissions or misstatements are material if they could, individually or collectively, influence decisions users make on the basis of the financial statements.
  • Impracticable: applying a requirement is impracticable when the entity cannot apply it after making every reasonable effort to do so.

Applying a requirement retrospectively, or restating retrospectively, is impracticable when the effects cannot be determined after reasonable effort. This usually arises where the entity cannot determine the period-specific effects, or would need assumptions about management intent in a past period, or significant estimates that cannot be made without hindsight.

Key rules to remember

Objective of Ind AS 8
Select and change policies by criteria + prescribe treatment and disclosure for policy changes, estimate changes and prior period errors
Purpose: relevance, reliability and comparability over time and between entities.
Classification rule
Policy change → retrospective; Estimate change → prospective; Prior period error → retrospective restatement
The standard is applied in order: decide the category first, then apply the treatment. Retrospective treatment is subject to the impracticability exception.
Definition of impracticable
Impracticable = cannot apply the requirement after making every reasonable effort
Not the same as difficult, costly or time-consuming. Hindsight cannot be used to establish effects.
Error test
Error = failure to use, or misuse of, reliable information that was available and could reasonably have been obtained when the prior statements were approved
If the information only became available later, it is an estimate change, not an error.
Hierarchy where no Ind AS applies
Management judgement → consider (a) Ind AS dealing with similar issues, (b) Conceptual Framework definitions and recognition criteria
Management may also consider recent pronouncements of other standard-setters using a similar framework, other literature and accepted industry practice, if consistent with the first two.

How to solve Objective and Scope of Ind AS 8 questions

Use this method for any theory or case question on the objective, scope and definitions of Ind AS 8.

  1. 1Read the facts and identify the item: a policy, a measurement basis, an estimate, or a past mistake.
  2. 2Check whether a specific Ind AS applies to the transaction. If yes, that Ind AS decides the policy; if not, Ind AS 8 guides management judgement.
  3. 3Classify the item using the definitions: policy (principle or basis), estimate (monetary amount with measurement uncertainty), or prior period error (misuse or omission of reliable information that was available).
  4. 4Ask the timing question for suspected errors: was the information available and obtainable when the earlier statements were approved? If not, it is an estimate change.
  5. 5Check whether a change in measurement basis is involved. A change in measurement basis is a change in accounting policy, not in estimate.
  6. 6State the matching treatment briefly: retrospective for policy changes, prospective for estimate changes, retrospective restatement for errors.
  7. 7Test impracticability if full retrospective treatment is required, and note that it must be after every reasonable effort.
  8. 8Close with the disclosure or presentation consequence if the question asks for it, and give a clear conclusion.

Quickest way: Three-bucket sort

When to use it: For 2-mark MCQs and short case-based questions asking you to identify the nature of an item.

  1. Principle or basis chosen by the entity (for example, FIFO to weighted average): policy.
  2. Monetary amount revised on new information (useful life, provision, bad debt): estimate.
  3. Earlier statements were wrong given information then available: prior period error.
  4. If a measurement basis changed, call it a policy change.
  5. If a requirement cannot be applied despite every reasonable effort, call it impracticable.

Common mistakes in Objective and Scope of Ind AS 8

  • Treating a change in measurement basis as a change in estimate.

    Both involve changed numbers, so they look similar.

    Fix: Remember that a change in measurement basis (such as a move from cost to fair value for investment property under Ind AS 40) is a policy change. Estimates revise amounts under an existing basis. A change in cost formula, such as FIFO to weighted average, is also a change in accounting policy. Note that the first adoption of the revaluation model under Ind AS 16 or Ind AS 38 is treated as a revaluation under those standards, not as a policy change under Ind AS 8.

  • Calling every incorrect past figure a prior period error.

    Students forget the test of information available and obtainable at approval date.

    Fix: If the figure was reasonable on the information then available and new facts later changed it, it is an estimate change, applied prospectively.

  • Defining impracticable as costly or time-consuming.

    Everyday meaning of the word is borrowed.

    Fix: Write that it means the entity cannot apply the requirement after making every reasonable effort.

  • Applying Ind AS 8 policy hierarchy even when a specific Ind AS covers the item.

    Students over-apply the standard.

    Fix: State first that a specific Ind AS prevails. Use the hierarchy only where none applies.

  • Treating a new policy for a transaction that differs from earlier ones as a change in policy.

    Any new policy looks like a change.

    Fix: Adopting a policy for events or transactions that differ in substance from earlier ones, or that did not occur before, is not a change in accounting policy.

  • Assuming immaterial items allow any treatment, or that immaterial errors are not errors.

    Students memorise that materiality matters but not how far it goes.

    Fix: Ind AS policies need not be applied to immaterial items, but an entity must not make or leave uncorrected immaterial departures deliberately to achieve a particular presentation. Material prior period errors are corrected retrospectively.

Worked examples

Example 1

Classify each as a change in accounting policy, a change in accounting estimate or a prior period error: (a) Sunrise Ltd changes its inventory cost formula from FIFO to weighted average cost; (b) Kaveri Ltd revises the useful life of a machine from 10 years to 8 years after a technology review; (c) Ganga Ltd finds that last year's depreciation on a vehicle was omitted by oversight although all details were available.

Show the solution
  1. (a) The cost formula is a principle or basis chosen by the entity. Moving from FIFO to weighted average is therefore a change in accounting policy.
  2. (b) Useful life is a monetary-related judgement revised on new information (technology review). It adjusts the periodic consumption of an asset. It is a change in accounting estimate.
  3. (c) Details were available when the earlier statements were approved and the depreciation was omitted by oversight. This is an omission arising from failure to use reliable information, so it is a prior period error.

Answer: (a) Change in accounting policy; (b) change in accounting estimate; (c) prior period error.

Example 2

Explain the scope of Ind AS 8 and state what 'impracticable' means. Under what circumstance is applying a requirement retrospectively impracticable?

Show the solution
  1. Scope: Ind AS 8 applies in selecting and applying accounting policies, and in accounting for changes in policies, changes in estimates and corrections of prior period errors.
  2. Where an Ind AS specifically applies to a transaction, event or condition, that Ind AS decides the policy. Ind AS 8 guides management judgement only where none applies.
  3. Tax effects of correcting errors and retrospective adjustments are dealt with under Ind AS 12.
  4. Impracticable: applying a requirement is impracticable when the entity cannot apply it after making every reasonable effort to do so.
  5. Retrospective application or restatement is impracticable when, for example, the effects cannot be determined, or it needs assumptions about management intent in a prior period, or significant estimates that cannot be made without hindsight.
  6. Mere cost or inconvenience does not make it impracticable.

Answer: Ind AS 8 covers policy selection, policy changes, estimate changes and error corrections, subject to specific Ind AS taking priority. Impracticable means the requirement cannot be applied after every reasonable effort, for instance when period-specific effects cannot be determined without hindsight.

Exam tips

  • Write definitions in the standard's own wording. Marks in short notes depend on key phrases such as measurement uncertainty and every reasonable effort.
  • In case-based MCQs, classify the item first. The answer options usually differ only in treatment.
  • Always test an alleged error against availability of information at approval date.
  • For scope questions, mention that a specific Ind AS overrides Ind AS 8 and that tax effects go to Ind AS 12.
  • Present your answer as item, category, treatment, conclusion so the examiner can award stepwise marks.

Practice questions from Accounting Policies, Changes in Accounting Estimates and Errors (Ind AS 8)

Objective and Scope of Ind AS 8: frequently asked questions

What is the objective of Ind AS 8?

It prescribes the criteria for selecting and changing accounting policies, together with the accounting treatment and disclosure for policy changes, estimate changes and prior period errors. The aim is relevance, reliability and comparability of financial statements over time and between entities.

What does impracticable mean in Ind AS 8?

Applying a requirement is impracticable when the entity cannot apply it after making every reasonable effort. Examples include being unable to determine period-specific effects or needing hindsight-based estimates. Cost or inconvenience alone does not qualify.

How is a change in estimate different from a prior period error?

A change in estimate comes from new information or developments and is applied prospectively. A prior period error arises from misuse or omission of information that was available and obtainable when the earlier statements were approved, and is corrected retrospectively.

Is a change in measurement basis a change in policy or in estimate?

It is a change in accounting policy. Estimates revise amounts under an existing basis, while a change of basis alters the principle itself.