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

Godavari Foods Ltd. is classifying items for Ind AS 8 purposes. Which of the following is an accounting estimate as defined in the standard?

The warranty provision amount is an accounting estimate, because Ind AS 8 defines estimates as monetary amounts in financial statements subject to measurement uncertainty. Measuring assets at cost, presenting expenses by function and recognising revenue on transfer of control are principles, conventions or practices, so they are accounting policies.

  1. AThe convention of measuring property, plant and equipment at cost less depreciation and impairment
  2. BThe practice of presenting expenses by function in the Statement of profit and loss
  3. CThe monetary amount of provision for warranty claims, which is uncertain in measurementCorrect
  4. DThe principle of recognising revenue when control transfers

Explanation

Accounting estimates are monetary amounts in financial statements subject to measurement uncertainty. A warranty provision amount fits this definition. The other options are conventions, practices or principles applied in preparing financial statements, so they are accounting policies.

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