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CA Final · Financial Reporting · Ind AS 8 Accounting Policies, Changes in Accounting Estimates and Errors

An audit associate at Mehra & Co. is reviewing Ind AS 8 for a client, Vihaan Pharma Ltd. A colleague claims that Ind AS 8 contains its own percentage-based test for deciding when an item is 'material'. According to the text of Ind AS 8, which statement is correct?

Ind AS 8 gives 'Material' the same meaning as in paragraph 7 of Ind AS 1. It does not set its own percentage test, nor does it use Schedule III thresholds or auditing standards. So the colleague's claim of a separate percentage-based test in Ind AS 8 is wrong.

  1. AInd AS 8 gives the term 'Material' the same meaning as assigned to it in paragraph 7 of Ind AS 1Correct
  2. BInd AS 8 defines 'Material' as any item exceeding 5 per cent of profit before tax
  3. CInd AS 8 defines 'Material' by reference to the thresholds in Schedule III to the Companies Act, 2013
  4. DInd AS 8 leaves 'Material' undefined and relies on the Standards on Auditing

Explanation

Ind AS 8 states that the term 'Material' has the same meaning as assigned to it in paragraph 7 of Ind AS 1. It contains no fixed percentage test, and it does not rely on Schedule III thresholds or auditing standards for the meaning.

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