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ACCA Strategic Professional · Strategic Business Reporting (International) · Other reporting issues

Delta plc, a listed group, changes its accounting policy for inventory valuation in the second quarter of its financial year, with the change permitted by IAS 2 and IAS 8 criteria. It reports quarterly. How should the change be reflected in the interim reports?

Delta must apply the new policy retrospectively, restating earlier interim periods of the current year and comparatives where practicable, and disclose the nature and effect. IAS 34 follows IAS 8, so prospective application from Q2 or taking the effect to OCI is wrong.

  1. AApply prospectively from Q2 only, leaving Q1 as originally reported
  2. BApply the change in Q4 to align with the annual statements
  3. CRestate prior interim periods of the current year and comparatives retrospectively, unless impracticable, and disclose the nature and effectCorrect
  4. DRecognise the cumulative effect in other comprehensive income in Q2

Explanation

IAS 34 requires a change in accounting policy to be reflected by restating the financial statements of prior interim periods of the current financial year and comparable interim periods of prior years, where practicable, consistent with IAS 8. Prospective application or recognition in OCI is not permitted for a voluntary policy change.

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