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

Gomti Steels Ltd is reviewing which items in its financial statements are 'monetary amounts subject to measurement uncertainty' under Ind AS 8, and which are 'accounting policies'. Which item is correctly identified as an accounting policy rather than an accounting estimate?

Measuring inventories using the weighted average cost formula is an accounting policy because it is a specific convention or practice applied in preparing financial statements. Doubtful receivable allowances, unquoted investment fair values and warranty provisions are monetary amounts subject to measurement uncertainty, so they are accounting estimates.

  1. AThe amount of allowance for doubtful trade receivables at year end
  2. BThe specific convention of measuring inventories using the weighted average cost formulaCorrect
  3. CThe fair value amount of an unquoted investment at year end
  4. DThe monetary amount of warranty provision at year end

Explanation

An accounting policy is a specific principle, basis, convention, rule or practice applied in preparing financial statements, so choosing the weighted average cost formula is a policy. The other three are monetary amounts subject to measurement uncertainty, which are accounting estimates.

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