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CMA Final · Corporate Financial Reporting · Accounting Policies, Changes in Accounting Estimates and Errors (Ind AS 8)

Kaveri Foods Ltd states that its accounting policies are 'the specific principles, bases, conventions, rules and practices applied in preparing and presenting financial statements'. Which of the following items is an accounting policy rather than an accounting estimate?

Choosing the weighted average cost formula for inventory is an accounting policy because it is a basis or practice applied in preparing financial statements. The doubtful receivables allowance, useful life and fair value of an unquoted investment are estimates subject to measurement uncertainty.

  1. AThe ₹4,00,000 allowance for doubtful receivables at year end
  2. BThe expected useful life of a packaging machine, taken as 8 years
  3. CMeasuring inventory using the weighted average cost formulaCorrect
  4. DThe fair value assigned to an unquoted investment at the reporting date

Explanation

The choice of weighted average as the cost formula is a basis or practice applied in preparing statements, so it is a policy. The allowance, useful life and fair value are monetary amounts or inputs subject to measurement uncertainty, hence estimates.

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