ACCA Applied Skills · Financial Reporting · Regulatory framework
A transaction arises that is not specifically addressed by any IFRS Accounting Standard. Under IAS 8, management must use judgement to develop an accounting policy. Which sequence correctly reflects the hierarchy management must consider?
Management first looks to IFRS standards dealing with similar and related issues and to the Conceptual Framework's definitions and recognition criteria. Only then may it consider recent pronouncements of other standard-setters with similar frameworks and accepted industry practice. Cost is not a criterion.
- AFirst, the requirements in standards dealing with similar and related issues and the Conceptual Framework definitions and recognition criteria; then, if permitted, recent pronouncements of other standard-setters with a similar frameworkCorrect
- BFirst, the most recent pronouncements of other standard-setters; then IFRS standards dealing with similar issues
- CFirst, industry practice in the same sector; then the Conceptual Framework
- DFirst, the lowest-cost treatment; then IFRS standards dealing with similar issues
Explanation
IAS 8 directs management first to standards dealing with similar and related issues, then to the Conceptual Framework definitions, recognition criteria and measurement concepts. Management may then consider other standard-setters' recent pronouncements, other literature and accepted industry practice, if consistent with these sources. Other standard-setters are therefore not the first source.
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