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

Kaveri Engineering Ltd's management observes that a certain figure in its financial statements is a monetary amount affected by measurement uncertainty, namely the estimated amount of warranty obligation on goods sold. A colleague argues that because the figure is derived using a technique and inputs, it should be called an accounting policy. Which statement is consistent with the definitions in Ind AS 8?

The warranty obligation figure is an accounting estimate. Ind AS 8 defines accounting estimates as monetary amounts in financial statements subject to measurement uncertainty. An accounting policy is a principle, basis, convention, rule or practice, not an amount, so using a technique to compute the figure does not turn it into a policy.

1. AThe figure is an accounting policy because techniques are involved in deriving it
2. BThe figure is an accounting estimate because it is a monetary amount subject to measurement uncertaintyCorrect
3. CThe figure is a prior period error because it is uncertain
4. DThe figure is neither a policy nor an estimate