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

Kaveri Foods Ltd's finance head lists four items. Which one is an 'accounting estimate' as defined in Ind AS 8, being a monetary amount in financial statements subject to measurement uncertainty?

The allowance for expected credit losses of ₹4,50,000 is an accounting estimate because it is a monetary amount subject to measurement uncertainty. Inventory valuation method, expense presentation basis and borrowing cost capitalisation rule are principles or practices, so they are accounting policies.

  1. AThe convention of valuing inventory using the weighted average method
  2. BThe practice of presenting expenses by function rather than by nature
  3. CThe allowance for expected credit losses of ₹4,50,000 on trade receivablesCorrect
  4. DThe rule that borrowing costs are capitalised on qualifying assets

Explanation

An accounting estimate is a monetary amount subject to measurement uncertainty. The credit loss allowance is a monetary amount that must be estimated. The other three are principles, conventions or practices, so they are accounting policies.

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