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

Kaveri Foods Ltd lists the following items in its notes: (i) the method of valuing inventory, (ii) the monetary amount of the allowance for expected credit loss on receivables, (iii) the convention of recognising revenue on a particular basis, (iv) the useful life assigned to a machine. Which of these items is, by definition in Ind AS 8, an accounting estimate rather than an accounting policy?

The expected credit loss allowance and the useful life of a machine are accounting estimates, because they are monetary amounts subject to measurement uncertainty. The inventory valuation method and the revenue recognition convention are accounting policies, being specific principles, bases, conventions, rules and practices applied in preparing financial statements.

  1. AItem (i) only
  2. BItem (iii) only
  3. CItems (ii) and (iv)Correct
  4. DItems (i) and (iii)

Explanation

Accounting policies are the specific principles, bases, conventions, rules and practices applied in preparing financial statements; inventory valuation method and revenue recognition convention fit this. Accounting estimates are monetary amounts subject to measurement uncertainty; the ECL allowance and the useful life assigned fit this. Hence (ii) and (iv) are estimates.

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